From Dennis Howlett at ZD Net:
Gartner in the dock over Magic Quadrant
Friday October 23rd will see Gartner argue a motion to dismiss a complaint by ZL Technologies Inc about the famed Gartner Magic Quadrant. According to court papers, Gartner will argue to dismiss based on First Amendment rights citing that the Magic Quadrant is not meant to represent statements of fact but is based on pure opinion…
I also was sent a copy of that press release which you can read on the flip side of the universe.
ZL Technologies Press Release
ZL Technologies, a San Jose-based IT company specializing in cutting-edge enterprise software solutions for e-mail and file archiving, is challenging Gartner Group and the legitimacy of Gartner’s “Magic Quadrant.” In a complaint filed on May 29, 2009, ZL claims that Gartner’s use of their proprietary “Magic Quadrant” is misleading and favors large vendors with large sales and marketing budgets over smaller innovators such as ZL that have developed higher performing products. The complaint alleges: defamation; trade libel; false advertising; unfair competition; and negligent interference with prospective economic advantage.
This Friday, Oct. 23, there will be a hearing on Gartner’s motion to dismiss ZL’s complaint on First Amendment grounds. Though Gartner claims that its research is “objective, defensible and credible,” its court filings say that its research reports are “pure opinion,” i.e., opinions not based on fact. ZL believes this is clearly misleading to enterprises which expect better from Gartner than merely opinions-not-based-on-fact to resolve serious IT problems.
The lawsuit and related court documents may be viewed at: ZL v. Gartner Court Documents | ZL Technologies
Regardless of how the court may decide the First Amendment arguments, ZL hopes to achieve the following through legal, political and other means:
- Fair Disclosure on Conflicts of Interest – Gartner generates its revenues from payments made by the same vendors whose products it evaluates. Similar to the new rules now being imposed on financial ratings agencies on Wall Street, Gartner should be required to disclose the revenues received from the vendors it ranks.
- Fair Disclosure on Evaluation Scores – The tech industry would benefit if Gartner were required to disclose more data in its evaluation process and disclose component scores so vendors know exactly where they are lacking and by how much and take corrective action. Currently, there is zero disclosure, which can lead to arbitrary placement, with no recourse and no basis for appeal.
- Better Oversight – Gartner currently has an employee act as ombudsman to handle disagreements. The conflict of interest is self-evident in the way ZL’s concerns were summarily dismissed with little supporting evidence. There is a crying need to establish an impartial ombudsman similar to those found in public media, in order to ensure purchasers that they are receiving impartial analysis.
ZL believes that Gartner’s immense heft and power in the marketplace necessitate careful checks and balances against abuse of power. ZL believes that if IT innovation is to remain a driver for the U.S. economy, there must be assurances that ratings agencies such as Gartner do not subvert the competitive forces which drive innovation.
The time to act is now. Ratings agencies have impact. If left unchecked, the consequences can be dire, as we recently witnessed with poorly rated financial instruments wreaking havoc on our financial institutions. The SEC has seen fit to impose new rules on the ratings agencies involved. Surely it is time for similar rules to ensure that Gartner’s overwhelming power in the enterprise does not result in restricting competition, choking U.S. innovation and saddling enterprises with inferior products.
