You'll Fail When Selecting Technology With A Gartner Magic Quadrant: Part 1

When it comes time to look for procurement technology, many people look no further than the top right section of the Gartner Magic Quadrant (MQ) before engaging vendors. Without understanding what the MQ shows, and what it doesn’t, those who simply select the vendors in the upper-right quadrant without much due diligence can miss the opportunity to find a best-fit provider, and potentially hinder their company’s efforts to implement a new Procurement solution.

This is part one of a weekly four-part series focusing on the latest MQ for Strategic Sourcing. This week, we’ll go over how vendors secure their spot on the MQ. Part Two will look at the inherent biases that Gartner doesn’t tell you about. Part Three will examine a top-scoring vendor on the MQ and some of their downsides that aren’t clear when looking at the Magic Quadrant. Part Four will talk about the proper way to utilize the Magic Quadrant.

Part I: How does Gartner pick their vendors for a Magic Quadrant?

Let's start with a basic question: Why are these vendors on the Magic Quadrant? Many people would assume that a company needs to be one of the best in categories such as features, functionality, or ease of use just to get on there, but that is not necessarily true. Gartner publishes their exact standards for inclusion on a MQ. For Strategic Sourcing, none of those criteria require the software to be intuitive, usable, or capable of providing any actual ROI.

Just to be included in the Strategic Sourcing Magic Quadrant, let alone scored, a vendor must meet seven separate guidelines. The first one makes sense, it requires a vendor to have modules for spend analysis, e-sourcing, contract management, and supply base management; the others, however, all leave certain vendors needlessly excluded. For inclusion on the Strategic Sourcing Gartner Magic Quadrant, vendors must . . .

·        Earn a minimum of $12 million in revenue in 2017 from the related Strategic Sourcing modules

·        Earn 20% of their revenue from customers on a different continent than the vendor's headquarters

·        Have their own offices on multiple continents

·        Have 30+ clients with revenue or operating budget over $1 billion using the modules

·        Have added at least five billion-dollar-plus clients last year

·        Actively market and sell the suite cross-industry in multiple distinct industry verticals

If a vendor misses even one guideline, such as having less than 20% of their revenue on another continent, they are not eligible to be included in the Strategic Sourcing MQ.

You can already see the big issue: Many companies looking for strategic sourcing software likely don't care about some of these criteria. A company with $500 million in revenue working solely in the United States and Canada is indifferent to the number of multi-billion dollar companies a specific vendor has as clients, or that the vendor makes a fifth of its revenue in another hemisphere.

So what’s the problem? There are dozens of strategic sourcing vendors that could be the right fit for you, but they haven't made the Magic Quadrant for one reason or another. There are vendors who specialize in hotels, construction, and possibly your industry, that will never be on the Magic Quadrant because they don't "[a]ctively market and sell the suite cross-industry". New entrants who may have a fantastic product won’t be on there yet, neither will those who focus on mid-market customers (revenues $100 million to $1 billion) rather than the multi-national enterprise space.

The MQ likely excludes vendors that you should be looking at; we can help you find the procurement technology vendor you need, not one that is shoehorned into a chart.

Next up: Gartner doesn't do Pay-to-Play, at least not directly