Security Bytes

Oct 22 2009   3:23PM GMT

Email archiving vendor sues Gartner, doesn’t see magic in quadrant

Robert Westervelt Robert Westervelt Profile: Robert Westervelt

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ZL Technologies is seeking $1.7 billion in damages from Gartner Inc. Analyst firm dismisses claims.

ZL Technologies Inc., an email archiving vendor is suing analyst firm Gartner for eroding its market presence by consistently ranking it in the lower quadrant of its popular Magic Quadrant as a niche player in the market analysis report.

The ZL lawsuit was filed in May. Gartner filed a motion to dismiss the case citing the First Amendment. The lawsuit is continuing this month as both parties argue whether the case should be dismissed.

ZL Technologies CEO Kon Leong said Gartner’s Magic Quadrant consistently ranks vendors with big marketing and sales budgets at the top of its Magic Quadrant. ZL Technologies also sells compliance and encryption products. Leong says his company’s eDiscovery capabilities consistently beat large vendor products, such as Symantec, but XL Technologies gets poor marks for its sales and marketing budget.

Despite low investments in sales and marketing, Leong said his firm has a proven track record and has survived for 10 years.

“We’ve sustained profitability,” Leong said in an interview. “We’ve garnered enough resources to launch challenge against Gartner without affecting our business.”

Still, the firm’s bad Magic Quadrant standing has resulted in losing customers and is making it difficult for the firm to increase sales, Leong said. In the interview, Leong cited a customer win in Asia where the customer was pressured by management to pull out of the deal as a result of the Gartner report. In other cases, the company is being immediately dismissed despite being praised in the report for its features and core capabilities.

“We can go head-to-head with the big guys, but now we’re not being invited to the party in first place because of Gartner and that hurts the most,” Leong said.

My colleague Beth Pariseau wrote a blog entry at Storage Soup detailing the ZL Technologies lawsuit. In it, Beth asks readers: Does ZL have a point about the weight being given to a subjective report in technical purchasing decisions? Or is this a case of impugning an evaluative process because of a disliked outcome?

Michael Krigsman, CEO of software consultancy Asuret, Inc., wrote in a blog entry that the lawsuit does call into question the ties analyst firms have with vendors. Still, Gartner’s analysis could be subjective, he said.

Analyst research and reporting is not an exact science, which does lead to real or perceived conflicts of interest. The analyst industry can reduce potential conflicts by improving transparency around how it forms opinions and makes recommendations. … To increase transparency, analyst firms should also disclose their revenue relationships with vendors.

Unfortunately that could open a big can of worms. It’s a slippery slope that some say could erode the First Amendment. Increasing transparency by disclosing revenue relationships with vendors somewhat would erode the integrity of the product by saying that the analyst who wrote the report could be somehow persuaded to give a firm positive play for its investment in the analyst firm. I don’t doubt that there are some bad apples out there who cave into pressures to alter their opinion on a product or service, but I’m willing to bet that the vast majority of industry analysts (many of whom I know are experts in their field) want to protect the integrity of their work and stay away from the financial side of the company they work for. After all, the quality and integrity of their analysis is how they gain respect.

Earlier this month Gartner analyst Thomas Bittman addressed the issue of analyst integrity in a blog entry appropriately titled: A Rant – My Integrity as an Analyst. Bittman, a vice president and distinguished analyst, has been with Gartner for more than 14 years.

I understand the impression in the marketplace that analyst firms can be bought. But that’s not where I work. My integrity is very important to me. I’m sure we’ll continue to make enemies of vendors, and bloggers who have a vested interest in one thing or another. Badge of honor! But my goal is to provide value to my clients, and to be proven right over time – priceless!

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