An e-mail archiving company, ZL Technologies, Inc., has sued, been dismissed, and re-sued Gartner – basically claiming that ZL’s placement in Gartner’s “Magic Quadrant” has caused the company damage – namely, that since Gartner places ZL in the “niche” spot, large customers don’t consider them, although the company contends their offerings are superior to those listed in a more prominent spot.  Gartner counter claims that the suit is without merit because the MQ represents opinion, and therefore there is no legal leg for ZL to stand on.

There are interesting things at play here.

First, the disclosures:

- ESG, the company I founded, is a Research, Analysis, and Strategy firm.  As such, in some ways we theoretically compete with Gartner.  In practicality, we don’t.

- A more honest disclosure of the above is that ESG doesn’t compete with Gartner, as we serve very different purposes.  A truly honest disclosure is that I am wildly impressed and completely jealous of Gartner’s ability to drive revenue the same way the mafia does – by veiled threat.  The difference is that the threat of the mafia (in a protection scheme) is physical while the threat of Gartner is market muscle/economic.  I would love to be that powerful – although if I were I’d like to believe I would not abuse the power – which in my opinion is the true crux of this issue.

- I have never met, nor heard of ZL Technologies until this lawsuit – although our analysts have.  I am told, that the company has some cool stuff, but is run by a lunatic.  I do not know if CEO Kon Leong is actually insane, or brilliant, or acting, or something else.  But I love the fact that he’s spending a lot of money on this issue keeping me entertained.

Here are the realities of the situation – IN MY OPINION (for those of you in the legal profession):

The laws of the land protect the opinion of people.  You can’t legislate what people think.  This, in essence, is Gartner’s defense, and ultimately why it will most likely prevail in this matter.

What is more interesting is that in its defense, Gartner exposes what everyone in the industry already knows, but are incapable of doing anything about – the fact that Gartner’s opinions are largely unqualified.  They market expertise and data – i.e., fact, but defend with opinion.

I can only speak about the Gartner I know – the IT Gartner that plays in the industry where I play.  For all I know the Gartner analysts, research, etc. in their other markets might be absolutely brilliant, and the value they bring to their customers and society in general unparalleled. Judging by what I see in their IT practice, I find it doubtful, but one never knows.

What Gartner is, but can never say, is a market “influencer,” to an envious degree.  What the Magic Quadrant is is an absolutely unscientific – but awesomely powerful – “tool” with no rhyme or reason, no scientific merit, and no disclosure.  It’s a self-interpretive slide that leaves the reader to judge the meaning of seemingly random dot placement.  Gartner does not defend (or contends it need not defend) the placement of those dots, for that placement is the opinion of the placee – namely the analyst responsible for said market analysis.

The problem, as I see it, is one for a much different court than a civil court.  It’s really about the FTC – because opinion isn’t the issue here.  I’m all for being able to toss your opinion around as one wishes.  The problem is one of deceptive business practices.

If you net out the whole issue it comes down to this:  Gartner has created a massively powerful perception of what I’ll term “qualified expertise” in the eyes of the mass market IT buyer (the people who write checks to vendors for billions of dollars).  Note:  They are absolutely brilliant at being able to accomplish this – and my guess is that at one time, that perception was merited.  As such, they wield incredible influence on companies that do business (or attempt to do so) within those market segments.  They have the power of business life and death sometimes.  They are the emperor – they can actually affect who wins, who loses, who lives, and who dies.

No rational person would look at the effective equivalent of a rorshach test (the MQ) and make any substantive decision based upon it, because there is no valid meaning in it.  It is subjective.  It, for all intents and purposes, may be thought provoking but it is by itself meaningless.

Further, if you were to look at an industry segmented Magic Quadrant that showed 10 companies or technologies with some clear winners and clear losers in an area that you were responsible for, you would put SOME level of merit into what the results/placement of the dots held – ranging from none to total belief.  The level of merit you place on that would depend on your TRUST of the expertise of those who present it.  If you have a trust relationship with a brand or a person then by default, the (perceived or real) credibility of that “data” or “input” is higher than those who have no such relationship.

For example, if you were investigating a major server purchase, you might very well look to see what Gartner says about the players in that market.  You would probably take a look at their MQ.  If that MQ showed vendor A up and to the right and vendor B down and to the left, you might reasonably assume that the brilliant experts at Gartner feel vendor A is superior to vendor B.  You might place a significant amount of credence on that assumption and it might truly influence your decision making.  If, however, you were to KNOW for a fact that the dots were placed by chimpanzees as part of a scientific experiment, you might not hold that “data” in such high esteem.  Since you don’t know that, you might be making a decision based solely on the perceptive expertise of the provider, with no actual insight into whether that perception is merited.  You simply ASSUME that the expertise behind the decision is valid and merits the result.

This, in my opinion (saying that a lot, aren’t I?) is the whole enchilada.  Is perpetuating and even actively attempting to foster the perception of expertise where little or none actually exists tantamount to fraud – or at least deceptive business practices?  I don’t know the law, but I know what a skunk smells like.

Allow me to say what most cannot or won’t – there is virtually no one within the IT industry itself that believes Gartner has any value outside of its market influence.  No one that I know pays Gartner for their expertise in any aspect of business.  There are no CEOs who call on Gartner for advice as to how to run their business.  There are no people in R&D calling on Gartner to determine what they should build into their next set of offerings.  There are no marketing big wigs calling Gartner to get help with messaging and positioning.  There are no market researchers who call on Gartner to sift through data for analysis as to why something will or will not happen, only that it did.  They use Gartner data if it makes them look good, and don’t if it doesn’t.  They use a quote if it makes them look good, and don’t if it doesn’t.  End of story.

Further, people in industry generally do not like dealing with Gartner – they don’t pay them for help, they pay them because they feel they have to.  They get no value generally, but the potential of garnering negative value is too great a risk for them to ignore.  In short, you pay Gartner to hope to end up in the top right of the quadrant.

I know this first hand – I was a customer of Gartner.  Virtually every ESG practitioner was also a customer of Gartner.  The stories are fairly universal – and they are the same stories told privately by most every executive of every vendor in the IT space.

This came from one of our analysts – and I think it’s a fair representation of many in our industry:

“In a prior vendor-side role, I was in ZL’s position – my company/product was consistently placed in the niche quadrant for a few years running without an interview or review by Gartner (no facts to base their opinion on).   I was able to prove (with a Gartner ombudsman) Gartner’s complete incompetence in constructing his (the analyst’s) MQ year-over-year as I had red-lined documents and an e-mail trail pointing out incorrect information in the previous years’ reports that he regurgitated year after year verbatim.  His response was that we should be happy we made the MQ at all (Gartner was giving us ink).  I lost all respect for Gartner after that.  The analyst (a very long time, very entrenched “name”) was “let go” soon after … no idea if it was related.  Still, the company I worked for had little recourse.  The worst that we could do was to drop our Gartner subscription.”

No one wants to pay protection money, yet they do.  Given a choice, they wouldn’t.  No one stands up to the mob, out of fear.

Allow me, at this point, to reaffirm my absolute unabashed jealousy of Gartner.  Who wouldn’t want to wield such power?   There are not many companies I can think of where the customer hates them, gets no value, and yet still gives them piles of money.  The only ones I can think of are monopolies – or governments.  Hmmm.  That is power.  Of course not all power is used for good – much is used for evil.

My problem with Gartner is simple – they simply do not live up to their perceptive level of expertise – at least in the markets where I live.  Their people are not practitioners of the art normally, which is why they can’t really bring any legitimate value to industry.  Their people simply have not stood in the shoes of the people who give them money.  That is not to say they don’t have very smart people – they do.  They also have a lot of complete and utter idiots.  The problem is that it’s very hard to tell where the “intelligence” comes from – unqualified idiot or brilliantly qualified person.

So the real question is,  if Gartner’s influence is based on an invalid perception of expertise, and Gartner knows it, does that equate to a deceptive business practice?  Since the result of this ends up in the case ZL is bringing – that Gartner is using an unqualified invalid perception of expertise to negatively influence the ability of ZL (and everyone else in that position) to conduct commerce.

What is the recourse for those affected by this practice?  Nothing really.  You could sue the mafia for shaking you down for protection money, but you would lose.  It’s your choice to give them your money.  You decide the value.  ZL is suing the mafia.  The judge will most likely say, sorry – you don’t have to pay them if you don’t want.  That’s the only recourse industry has – they can stop doing business with Gartner.  The reason they won’t is obvious – fear.  It’s the same reason they do business with them to begin with.

The really bad part of all of this is that Gartner doesn’t have to be doing things like this.  They could refill their ranks with qualified experts.  They could add logic, reason, and disclosures to their MQ choices.  They could legitimize themselves – and then they would deserve the influence they command.

The reality is that they probably won’t – and the reason why is simple: money.  They are public.  Idiots are cheaper than experts.  Plus, they don’t have to.  They are protected as long as their influence on the buyers exists.  There is no incentive for them to do anything except propagate the myth of expertise.  People are going to pay them because they don’t want a “labor dispute.”  It’s a cost of doing business.  Why add value if it doesn’t matter?  The only way this “family” is broken up is either through a massive industrial backlash (i.e., all the big guys band together and publicly call Gartner out) or a government intervention.  Otherwise, I’m afraid ZL and all the rest are hosed.

The only way ZL wins is if someone with enormous pockets, who cares less about Gartner, and who themselves wield huge power and influence in the market decide to join the party.  I’m thinking Larry Ellison would be perfect for this role.  Oracle and ZL have a relationship currently.  That would make things really interesting.