You have probably heard of industry analysts, however, do you know what they do? Industry analysts carry out market research within an industry such as information technology, consulting or insurance. Their role is to evaluate sector trends, market size, prepare forecasts, and develop industry models and benchmarks while providing a wide range of services, from advising practitioners to measuring market penetration and producing best practice guidance. Many companies working with technology gain great value from engaging with analysts. The wide spectrum of existing technologies can be very confusing for many buyers, and the analysts’ role is to lead these buyers out of the fog, offering them resources and guidance to the most valuable technology for them. Today, a community greater than740 analyst firms span the world with well-known global organizations such as Gartner Inc, IDC, ARC Advisory, Forrester or Mc Kinsey & Co to name few.
Today, let’s focus on Magic Quadrants. As we are on a digital edge, I decided to ask Siri to define it:
“Magic Quadrant (MQ) refers to a series published by IT analyst firm Gartner of market research reports that rely on proprietary qualitative data analysis methods to demonstrate market trends, such as direction, maturity and participants. Their analyses are conducted for several specific technology industries and are updated every 1–2 years”
Position and Rate Software Vendors
Magic Quadrants are research documents that position and rate software vendors. Gartner rates vendors upon two criteria:
- Completeness of vision: Vendor’s ability to innovate its marketing, sales and product strategies, and its market understanding. Gartner also promotes innovators that match their own vision of the future.
- Ability to execute: Vendor’s ability to build, sell and deliver its vision as well as its overall viability, and its market responsiveness. A key assessment criteria for Ability to Execute is the customers experience and how a vendor is perceived by its customers. To execute this, Gartner performs detailed questionnaires with 20 customers of each vendor.
These component scores lead to a vendor position in one of four quadrants – Niche Players, Visionaries, Challengers and Leaders:
- Niche Players – do well in a segment of a market but cannot outperform other vendors in the wider market or they have a limited ability to innovate. Niche Players usually focus on a particular functionality, geographic region or could be new entrants that adapt their existing products to the market. This quadrant may also include large vendors that have difficulty developing and executing their vision.
- Visionaries – have awareness of how the market will evolve, but their ability to deliver against that vision is less proven. Normal for businesses in growing markets, but visionaries in more mature markets are usually either smaller vendors trying to compete, or larger vendors trying to get out of the rut. Visionaries become Challengers or Leaders depending on customers accepting new technology or if the vendors can develop partnerships that complement their strengths.
- Challengers –have a strong Ability to Execute but may lack strong Vision. They have strong products, sufficiently credible market position and resources to sustain continued growth. Challengers tend to be larger vendors in mature markets who do not want to disrupt their current plan to minimize risk. Over time, large companies may fluctuate between the Challengers and Leaders quadrants as their product cycles and market needs shift.
- Leaders –have the highest score on both Ability to Execute and Completeness of Visions. Leader vendors tend to be large organization that had the market share, visibility and financial strength to enable them to lead and affect the market’s overall directions. However, they may fail to meet the specific needs of vertical markets or other more specialized segments.
Source: Gartner (January 2016)
Every Category Have Their Own Strengths and Weaknesses
While it may seem as though the companies in the “Leaders” quadrant are always the best option, Gartner advises companies to investigate the four quadrants since vendors in every category have their own unique strengths and weaknesses that should be taken into consideration. For example, a vendor in the Niche Players quadrant could offer functions that are ideally suited to your needs, but may cost less than a Leader offers. Another example is if you want to make a strategic investment in a technology, then a vendor’s viability will be critical. Therefore, you weigh a vendor’s ability to execute more heavily than its Completeness of Vision, and evaluate Challengers before Visionaries. On the other hand, if you can gain a competitive advantage by investing in an emerging technology, then evaluate Visionaries before Challengers.
Gartner includes an average of 20 vendors in a Magic Quadrant. In the case of the Supply Chain Planning Magic Quadrant there is almost 30% vendor attrition from one publication to another. The Leader quadrant shows almost 50% vendor attrition… Magic Quadrant publications may include special mentions for those vendors that do not qualify for the quadrant.
Gartner Among Other Analysts
Magic Quadrants are designed to help companies refine a vendor search while not explicitly instructing the customer what vendor to choose. Like Gartner, I will not explicitly state which analysis firm to use, but would recommend that companies evaluate other analyst firms (with other vendor evaluation methodologies) such as IDC , ARC Advisory, TEC Advisor, Forrester or Nucleus Research before making their decision.