NetScout sues Gartner over Magic Quadrant ratings

Network quality assurance company NetScout has filed a civil lawsuit against analyst firm Gartner, alleging that Gartner’s highly vaunted Magic Quadrant ratings system is a pay-for-play arrangement rather than an unbiased evaluation of the best companies in a given sector.
NetScout filed the lawsuit in state court in Connecticut, accusing Gartner of violations of the state’s unfair trade practices law as well as corporate defamation.
“Gartner is not independent, objective or unbiased, and its business model is extortionate by its very nature,” NetScout claimed in its complaint. “Its substantial success is due to the worst kept secret in the IT industry: Gartner has a ‘pay-to-play’ business model that by its design rewards Gartner clients who spend substantial sums on its various services by ranking them favorably in its influential Magic Quadrant research reports … and punishes technology companies that choose not to spend substantial sums on Gartner services.”
Gartner representatives could not be immediately reached for comment.
NetScout went on to say that a good Magic Quadrant rating can make or break an IT company and that Gartner sells consulting services “informing companies that, if they pay for Gartner’s ‘consulting’ services, the companies will enhance their relationships with Gartner analysts, an obvious means of improving their prospects in the Magic Quadrant report.”
NetScout also cited past enforcement of similar arrangements by financial analysts — rather that technology analysts — by the Securities and Exchange Commission, that resulted in a settlement of more than $1 billion involving 10 Wall Street firms. However, NetScout noted, the SEC does not regulate Gartner’s practices.
NetScout said that its annual revenues of about $400 million make it the largest player in its market sector and that its services are deployed by 92 out of the Fortune 100 companies but that because it has not engaged Gartner for consulting services in the past five years, it was ranked as a “challenger” in a March 2014 Gartner report on network performance monitoring and diagnostics. The report categorized NetScout as “currently struggling to deal with new technical demands and rising expectations,” and the company said that Gartner’s assertions that it has “only a hardware-based deployment model” and a “limited ability to expand beyond its network management heritage” were both false and defamatory.
Meanwhile, NetScout said, the other three companies that were ranked as leaders in the report spend “a significant amount on Gartner’s services and who do not deserve to be ranked ahead of NetScout, by any measure.” In particular, NetScout noted that it grew its annual revenue by $50 million between fiscal 2013 and 2014 and that those three competitors achieved less than $50 million in revenue growth combined.
NetScout said it had received a pre-publication draft of the report and notified Gartner of both the factual errors and “disparaging statements,” but that the report was published anyway. NetScout claimed that the importance of the report cannot be denied and that its ranking had harmed the business.
“Companies seeking to purchase IT equipment sometimes refuse even to consider making technology purchases from companies that are not Leaders in Gartner’s Magic Quadrant research reports,” NetScout said, and noted that in some countries, bidding is limited to listed leaders.
The complaint goes on to describe Gartner’s processes and opportunities for analyst interactions and other recorded instances of individuals commenting about the pay-for-play model, as well as a statement from Gartner founder Gideon Gartner that the Magic Quadrant is “misused and abused” and has the potential to taint the company’s objectivity because of the pressure created by the reports and the fact that Gartner has large contracts with the companies that it ranks.