We’re awarding an HfS bravery medal to ISG analyst Stanton Jones for pointing a nuclear missile at the credibility of Gartner’s recent Magic Quadrant for Managed Hosting. Stanton doesn’t mince words as he declares:
“Did you know that of the companies listed on the Managed Hosting Magic Quadrant referenced above, less than half would be capable of supporting a transformational infrastructure sourcing initiative with a multinational company, or that only 10 percent could support the same for a global company?”
Stanton then seizes the opportunity to pitch his firm’s own capabilities: “ISG is comfortable (and confident) in making this statement because we’re on the ground every day with both buyers and sellers of IT services. This unique position gives us unprecedented insight into what suppliers are really capable of delivering to clients — clients that trust us to help them vet providers in a fair, transparent way to make sure the vendor will help them solve their ultimate business problem.”
While I have no doubt that Stanton’s knowledge of providers’ IT sourcing capabilities is top-notch (I have always been impressed by the caliber and culture ISG’s people), I think we need to look at this accusation in a broader context:
1) ISG lives in a world where it’s all about outsourcing – how about the other 72% of enterprises? Our recent studies show that only 28% of large enterprise rely predominantly on an outsourced model for IT infrastructure. While Stanton correctly states that ”less than half of these providers would be capable of transformational infrastructure sourcing initiatives”, he conveniently ignores that fact that most of Gartner’s clients – and the majority of large enterprises, probably don’t care too much about these capabilities. They may just want a quick no-nonsense glance at managed hosting providers. I’m sure Gartner’s clients who do care about “transformative sourcing cababilities” would call them up to find out more.
2) ISG makes the vast majority of its income facilitating and negotiating outsourcing transactions – doesn’t this bias its research? I can speak from personal experience that it’s really tough trying to produce “unbiased” research when working for a company that makes most of its money from clients undertaking outsourcing engagements. The bottom-line is your firm is vested in the success of outsourcing, and your research will always be pressured to advocate the benefits of outsourcing. At the end of the day, the consultants want to wave research in front of their clients that supports the case for doing an outsourcing transaction, because that’s how they get paid. However, for those companies who’ve already made the decision to outsource, or are renegotiating existing outsourcing contracts, ISG’s research is likely to be highly pertinent and relevant.
3) All quality consultants conduct good research and thought-leadership, but they’re not trying to badge themselves as research companies. In sourcing, some of the best research comes from the likes of PwC, KPMG, AT Kearney, Deloitte etc – in fact, we even showcase some of it at our BPO Resource Center. However, they do research to enhance their eminence and consultative credibility, and they make every effort to make it widely available and accessible to enterprise decision makers. I don’t think I have ever read a detailed piece of ISG (or TPI) research in my entire career beyond their quarterly index calls. I am sure it’s great, but it’s not easily accessible or widely available to the industry at large. If they truly want to become a research firm, then let’s have a gander at some and we can all form our own opinions.
The Bottom-line: Outsourcing specialists need to base their business models more broadly than solely on outsourcing if they want to take on the traditional analysts
Love them or loath them, Gartner serves the vast majority of IT buyers, whether or not they outsource. Moreover, Gartner is predominantly a research firm and IT strategy advisor, who I haven’t ever seen facilitate an IT outsourcing deal (I’ve seen them dabble in it in the past, but they never really got anywhere). ISG is a great outsourcing consultant, and has consistently been the industry-leader for facilitating IT outsourcing transactions for the last couple of decades.
Stanton Jones is Analyst, Emerging Technology at ISG
While Gartner could clearly do a better job researching the sourcing transformational capabilities of providers, ISG could similarly do a better job producing research for the 72% of enterprises who haven’t done a lot of IT outsourcing. If I’m a CIO and need some unbiased validation of my overarching IT strategy, I’ll be likely to call Gartner (among others) for an independent viewpoint. If I was doing an outsourcing deal and needed specific advice and data around how to do my transaction and develop my shortlist, ISG will surely be on my list of experts to call.
As we have painfully laid out here time and time again… it’s not all about outsourcing!
Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services, Outsourcing Advisors
Phil,
You can’t have your cake and eat it too. You’re either an analyst firm or a consulting firm – the two are like oil and water,
Gordon Bailey
Stanton has a good point about the MQ – too many Gartner analysts are disconnected from reality and sitting in their ivory towers.
Hi Phil – thanks for the HfS medal for bravery. I’m humbled by this honor. 🙂
A few points of clarification on the context you are setting:
“ISG lives in a world where it’s all about outsourcing – how about the other 72% of enterprises?” Disagree with you here. More than 40% of G2000 firms use outsourcing, and this climbs to more than 70% for the top 500 enterprises. Also, given our new combined capabilities under a single ISG brand, we’re focused on operational effectiveness, not just outsourcing (see next point).
“ISG makes the vast majority of its income facilitating and negotiating outsourcing transactions – doesn’t this bias its research?” You are correct that a transaction focus is the current market perception of ISG; however, it’s one we’re working to change. We’ve broadened our portfolio considerably over the past 24 months, both through new product development (like Governance Services and Program Management) and via the Compass acquisition. The net result: less than 1/3 of ISG engagements are outsourcing transaction related.
“All quality consultants conduct good research and thought-leadership, but they’re not trying to badge themselves as research companies.” Agree with you here. We think there is a need for a different perspective in the market – one that provides the practitioner’s point of view. Who better to provide this advice than ISG consultants who are at the tip of the spear? In our opinion, there is a lot of white space in quadrant analyses which leaves clients wanting for deeper insights to help them through their decisions. We think our insights will help clients fill in these gaps.
Also, keep in mind that towards the end of the post, I made it clear that both deal experience AND vendor insights are important: “ISG knows that both transaction experience and vendor insights are critical for solving complex business support challenges.” I also said, “As usual, this Magic Quadrant (MQ) is thorough and well thought out.”
So, this is not a nuclear missile pointed at Gartner – it’s a message to buyers that they should use a broad set of tools to make buying decisions, and that real-world, “boots on the ground” experience oftentimes provides a very different result than survey-based research.
SJ
@Stanton: Full marks for highlighting the deficiencies of this particular Gartner MQ. It is, quite frankly, a common issue with all their MQs relating to services. I personally feel these MQs are much more suited to software products, where their analysts can take measured approaches to evaluating software apps and tools, based on extensive buyer interviews. However, when you’re evaluating providers, you really should include a whole host of other aspects, such as transformation and transition competency, ability to leverage best practices from other clients, delivery culture, ability to bridge tech and process, and so on.
But when you want to use highlight these deficiencies for a shameless sales pitch, of course we are going to give you a hard time 🙂
I would also like to emphasize that the 28% number for IT infrastructure outsourcing is based across recent surveys where we spoke to 700 $1bn+ organizations, where buyers declared that outsourcing was their “predominant” delivery model, so while your 40% number for F1000 maybe accurate, we tend to focus on where outsourcing is the principal model for delivery (even though there are some instances where clients do some discreet outsourcing to augment their overall delivery).
Anyway, thanks for being a good sport – we’d like to offer you an open invitation to submit a guest post at HfS when you would like to discuss some future industry dynamics,
Cheers,
PF
I read the whole article and I would tend to agree (mostly) to what Phil pointed out. Although to be fair to Phil and his readers, I must say it is a matter of perspective. Dealing with ISG/TPI, Traditional Consulting firms (ala Big 4), Strategy firms –yes we ran in them too (McK, BCG, RolandBerger etc)
My experience within the European context consulting CFO/CIOs within the European context.
I’ll just state a few cases and will not mention any names of my clients and will leave the readers to judge for themselves.
Case 1: World’s leading strategy consulting firm comes in from the top with great research material and starts conducting its sourcing study. Soon it is realized by the senior management that sourcing is a lot more than just numbers and CxO blessings. Its about people, processes, technology and in-depth understanding of the vendor ecosystem (behavior, pattern, client-account model), locations, emerging/emergent models. And this changes rather rapidly. It’s quite a people’s game and very intensive.
Problem: Lack of in-depth sourcing expertise
Result: We eventually came in and guided the client with the sourcing journey.
Case 2: Large bank advised by Gartner. The whole research, magic quadrant etc all woes senior management and eventually the whole process blows off as the consultant avoided the people aspect and client is back to square one.
Problem: lack of Change management skills by consultant
Case 3: Large player advised by Deloitte. Huge research and fancy material. Massive report of several hundred pages. Huge disconnect of real expertise is seen and they were kicked out.
Problem: Lack of specific sourcing domain expertise.
There are some 70+ cases where we have been asked to come in to either review/analyse/do parallel research/completely take-over. I can go on and on about this. To also be fair, CIOs have continued to also choose likes of Gartner while seeing the real difference of quality but were more comfortable with the one’s who they worked with.
I can only conclude this:
Yes. It is easier for big 4 and even strategy firms to come in and woo the CxOs away with huge brand, cool collateral and fancy research but clients who are facing real challenges are very quick to see the problem and are boldly asking the consultants to either show the real meat of take a walk.
All in all I have noticed that they big 4, analyst firms, strategy firms and even the likes of ISG severely have this challenge:
– Engagement model is (mostly) flawed: Partner comes in and tries to get the best consultants to run the show but is himself/herself quite disconnected with the realities of the technology-, vendor- and sourcing.
– Great in PPT but disconnected in technology: All claim that they have a technology background, even niche consulting firms say this trying to create differentiation, but seriously they are quite disconnected from it. CIOs are quite frustrated about that fact. Especially now as Cloud (Internet as a Platform) is slowly becoming reality.
– CIOs are quite concerned about the neutrality of the sourcing firms and that is one of the main reasons they ask likes of Gartner’s to do the initial sourcing strategy etc. Many CIOs have told me this.
– Quite inflexible : No matter what they say, CIOs have known to become very frustrated as they have found arrogance as a main factor.
– Pricey: Many sourcing boutique shops and large consulting outfits must pay attention to this. CIOs/CFOs have shown me various pricing models and I must tell you that some are still dreaming of getting a premium while the economic climate is changing drastically.
In closing: Buyers will continue to buy services and they will do so at their own peril. Strong and experienced CIO, professional sourcing office and well aligned business-IT orgs are in a favorable position to make an informed decision.
[…] I caught an interesting Horses for Sources blog post via Twitter — Phil Fersht of HfS called out a blog post of ISG’s Stanton Jones discussing the Gartner Magic Quadrant for Managed Hosting that […]
Phil, great piece, but I think in all fairness you should disclose you placed all of your wife’s IRA in ISG stock at $4.
As the author of that Magic Quadrant report, I’ll tell you that looking at it to find vendors who are going to do transformational infrastructure sourcing initiatives is just plain wrong — just as wrong as, say, looking at a MQ for Social CRM when you’re trying to buy a general-purpose CRM solution. Managed hosters don’t really do transformation projects; for that, you want our Data Center Outsourcing MQ, and quite possibly a discussion with a strategic sourcing analyst. It’s not an MQ deficiency, because the MQ is explicitly intended to be used for a specific and fairly narrowly-defined set of tactical hosting needs. In fact, if you were a Gartner client and called/wrote to our client services organization (our customer helpdesk) and said, hey, I’m looking to do a transformational infrastructure sourcing initiative, and I’ve been looking at this managed hosting MQ, you would be promptly told, hey, you’re looking at the wrong set of documents, look at these things instead and talk to an analyst covering that kind of initiative.
The rest of @Stanton’s commentary is just plain wrong. Analysts at end-user-focused research firms deal with customers sourcing stuff every day, for hours every day. More detail in my blogged reply: http://bit.ly/Kha9i9
[…] I caught an interesting Horses for Sources blog post via Twitter — Phil Fersht of HfS called out a blog post of ISG’s Stanton Jones discussing the Gartner Magic Quadrant for Managed Hosting […]
I am going to wade in here
I have worked in the IT industry for nearly 25 years – and have run/sat on the board of services and product companies.
Over this period I have had quite a few dealings with Gartner.
My overall experience has been:-
1. Gartner are focused on making money (as you would expect) and at times manage badly the conflict of interest between being “analysts” and selling products and services to IT companies. There is a perception (at times strong) in the industry that if as an IT supplier you ‘throw money’ at Gartner you will get better coverage in the likes of their Magic Quadrants.
2. The quality of their research is mixed. I have had dealings with a number of consultants that are very opinionated and in my opinion fail to take a really objective view of a technology space. IT suppliers tend to treat them with kid gloves as they do not want to upset an analyst. This can lead to big egos and pronouncements which are not balanced or well researched
3. The IT industry, including Gartner makes money when people change the way they do things. Eg new desktop devices or outsourcing contracts. At times I feel Gartner overplays the importance of new technology/services offerings. I fear this is because they will make more money if people pick up on this.
Having said that they are not alone in the analyst world. And I have come across some really good people who work for them.
How would I rate them out of ten? On their ability to execute to end user customers I’d give them 4 out of 10. For their completeness of vision 5.
I applaud @Lydia’s participation here and in her blog; it’s not common practice at Gartner to engage like this and I think it’s great. However, here’s why it’s probably not common practice. Her answer raises as many questions as it answers. @Phil, I was going to challenge you on the assertion that the MQ “process” is better for software products than services because you can do extensive interviews on products. Well, as Lydia candidly acknowledges (implicitly if not explicitly), most of Gartner’s analyst “interviews” are actually client inquiries. Their day is spent fielding all these calls which, in my opinion, actually gives them a biased view of the world. I’m not saying that they’re biased in any direction — and @John, I think the notion of big spender favorability, of vendor favorability, is actually nuanced and not inherently related to “focused on making money” — but because they don’t leave the analysts much time to do real research and instead must focus on client service/inquiries, they get an inherently incomplete picture of the world. In all my years as an analyst, I never once had a client call me up and say “you know, xyz’s product is just great and I’m thrilled they’re my vendor.” You get a self-selecting perspective of the market when you rely only on client inquiries and you don’t necessarily or even often get the feedback on how a particular implementation went unless the client calls back with another inquiry. It’s like that whole allegory of people trying to figure out what an elephant is by touching various parts of it. Depending on where you touch, you get a very different impression. Depending on who inquires about what, analysts get a very different perspective. And again, Lydia points out that the call center actually makes some significant determinations in who gets to see what inquiries. The least-trained and experienced people in the organization have significant influence over the experience set of the analysts. That’s a whole other discussion: how the move to a centralized call center at Gartner (in probably about 1995, when I was still there) has changed the nature of the analyst’s information flow. But how do you get from the 15 or so analysts when I joined Gartner in 1987 to the thousands now? By having analysts who know more and more about less and less until they know everything about nothing. Have at it, folks. 🙂
As a former TPI/ISG guy, and presently purveyor of Managed Hosting (and it’s successor, IaaS/Cloud) Services … I can’t resist in offering a reply.
To be candid, NONE of the sourcing Advisory firms spend anywhere close to the time understanding, analyzing, and evaluating the credentials of market offerings as the leading Research firms.
All of the leading, reputable Researchers utilize experienced people, structured methods, and demanding proof points in evaluating the worthiness of market offerings. Yes, some of the names that appear on their lists can be “head-scratchers” but there’s usually some contextual explaination worth hearing.
Conversely, the leading Advisory firms tend to conduct only broad and superficial market evaluations and, instead, rely on discrete observations framed by a specific sourcing evaluation. Now, the evaluation of an offering through a competitive sourcing evaluation is relevant, but hardly indicative of broad market offerings evaluated in a consistent manner. These evaluations are relative to unique requirements, whereas the Researchers evaluate against broad market demands.
Both communities bring value in educating buyers, but in very different ways.
Stanton’s observations regarding the recent MQ are merely reflective of the fact that Gartner cast a wide net in assessing a specific class of market offerings. Buyers don’t select a provider (outsourcing, managed services, or otherwise) based on such assessments. Rather, they serve to educate the buyers in valuable ways.
Tally ho.
Peter
As a current ISG/TPI who has an oversight role on our IT work in the Americas, I will tell you that there is a wide gap between represented value propositions and demonstrated value propositions in the marketplace.
That is – when the rubber hits the road, many Service Provider firms struggle to actually implement what was represented in a contract or a sales pitch. Understanding that gap and helping clients mitigate the risk associated in a complex service agreement is at the heart of our firms value proposition. It is in this dimension that we are different from Gartner.
If Gartner sells jungle maps, we have jungle guides. Our guides know what part of the map is not accurate and what part of the map has critical missing information.
While we are not as large as Gartner – especially in the research area, the research we do have usually includes the field experince of our jungle guides that is often missing in broad market research from firms like Gartner.
Thomas Young
ISG – Partner, Americas
Having been a Gartner analyst myself and having liaised with the likes of TPI (now ISG) extensively in the course of my “marketing” job, I believe industry researchers like Gartner and deal advisors like TPI, both are part of the outsourcing ecosystem and add their own value and have their own nuisance potential too, when they try to step on the other’s turf.
Industry researchers like Gartner, Forrester, IDC track larger market forces and educate decision makers on the buy & sell side of technology and outsourced services about changing market scenarios. They even go to the extent of creating provider / vendor SWOTs and documents like Magic Quadrant, but scarcely do any buyers base their decisions only on these reports. They are at-best good reference material to begin with since someone has already invested a lot of time and effort in putting together that report which the buy-side can directly use. Gartner /Forrester / IDCs of the world sit in that space.
Deal advisors like TPI/ISG, Everest Group, etc are the people buyers go to when they have decided on WHAT to invest in based on researcher’s (Gartner / Forrester / IDC) reports and trust these advisors (TPI / Everest etc) on WHOM to go to for their requirements.
Buyers are smart and know whom to go to for what and trying to get across the rather THICK line only ends up in confusing buyers about your own value to them.