What are Vendor Ratings? What are the Vendor Rating Definitions? What is the Vendor Rating Methodology?

What are Vendor Ratings? Gartner uses a well-defined methodology to rate IT vendors — large, small, public or private. It is particularly useful for investment professionals because it provides a single, focused perspective on a vendor and its major products. These vendor ratings represent our overall view of a vendor and its initiatives, much like the financial industry's use of "buy, sell and hold" recommendations. Our research rates a vendor's strengths and challenges, thereby giving investors a clearer sense of a vendor's overall "fitness." Gartner's ratings also indicate to investors what advice we are giving to IT users, which may have a strong impact on the health of a product or a vendor. Gartner's vendor ratings are used to rate vendors as entities; however, they are also used to rate different aspects of a vendor, such as its strategy, organization, products, technology, marketing, financials or support. Vendors with a clear focus, solid products and an advantageous market position may be rated "positive" or "strong positive." Vendors or product lines that lack these qualities may be rated "caution" or "strong negative." Vendors that have potential, but which we believe should be very carefully evaluated, are rated "promising." Additionally, vendors that are rated a "strong negative" are put on a vendor alert list, while vendors that are rated a "strong positive" are put on a vendor opportunity list. These vendors, in particular, will be closely monitored. Gartner does not take vendor ratings lightly. Many vendors that were not rated high in the past subsequently corrected their problems and we updated their status. Conversely, we have seen vendors with strong potential falter. A vendor's ratings are periodically revised to reflect our change in judgment when a significant internal or external event directly affects the vendor. We encourage investors to check Vendor Ratings regularly, because we continuously track market, technological and organizational changes that may have an impact on a vendor.

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What are the Vendor Rating Definitions? Gartner uses the following five definitions when rating vendors:

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What is the Vendor Rating Methodology? As industries have moved through their natural evolution, there have always been periods of vendor shakeout — from vendors that fail to keep pace with the demand during the rush to the "Peak of Inflated Expectations" to the consolidation that occurs during the decreased buying associated with the "Trough of Disillusionment." Enterprises are most vulnerable to vendor problems during these times. During the hyper-growth phase of an industry, quality of delivery and service are often the major problems. During periods of decline, lower purchase volumes threaten the viability of suppliers and consolidation takes hold. In all of these cases, the IT investments that enterprises have made are threatened. Gartner's vendor ratings are focused on providing enterprises with a single, focused source for finding out Gartner's opinion of a given company. Vendor ratings provide insight, analysis and advice on key indicators of a vendor's overall status and the status of initiatives such as strategy, organization, products, technology, marketing, financials and support. Gartner's ratings research methodology is structured around a consistent and broad view of a vendor: Corporate Viability   Strategy    Financial    Marketing    Organization Product/Services/Technologies    Product/Service    Technology    Pricing Customer Service/Product Support    Sales/Distribution    Support Services We use these categories to rate vendors or product entities. Vendors with a clear focus, solid products and an advantageous market position may be rated "positive" or "strong positive." Vendors or product lines that lack these qualities may be rated "caution" or "strong negative." Vendors that have potential, but we believe should be carefully evaluated, will be rated "promising." Strategy When evaluating strategic soundness, Gartner looks mainly at three factors: Soundness: A corporate or product line strategy must be reasonable and sound in today's business environment. A solid strategy should have defined endurance, and it must be relevant in the present as well as forward-looking. Clarity: Goals must be clear and shared at every level of the enterprise. All of the vendor’s employees must understand what it does and, perhaps more importantly, does not need to do to achieve those goals. For example, a vendor must know which customers and markets to pursue and which ones not to pursue. Commitment: Employees at every level must be committed to the enterprise's overall strategy. Failure to commit wholeheartedly will result in duplication of effort, turf wars and other forms of wasted energy. Gartner determines if the corporate strategy is well-defined and congruent with customer needs and market trends. For example: Is the vendor's strategy well-articulated to its current/potential customers? How well is the strategy demonstrated throughout the company? How willing or able is the vendor to distinguish between the businesses and customers it should pursue from businesses and customers it should not pursue? Financial Gartner evaluates a vendor’s overall financial position based on official financial filings, Gartner Dataquest reports and other financial reports or briefings. A key criterion for evaluation is a measure of profitability. Is this vendor profitable or at least demonstrating growth that tracks toward profitability? Other possible considerations include consistent revenue growth, cash position and R&D investment. Gartner evaluates: How well does the vendor's revenue stream (from products, services and subscriptions) match or support its strategy? Is the vendor reporting stable, growing or declining revenue? What is the vendor's cash position? Marketing A vendor's marketing tactics should grow directly out of its overall strategy. A vendor must carefully evaluate all of its potential markets, communicate with potential customers within those markets and realistically approach those markets that are most likely to yield profitable sales. A vendor must ensure that it is speaking to potential customers with a single voice based on its corporate and development strategies. This means communicating a clear product vision, what position that product occupies in the marketplace and how it is different from comparable products. Gartner evaluates: How does the vendor's marketing plan reflect its overall corporate strategy? How is the vendor communicating with its target market(s), and are its messages in line with corporate and development strategies? Does the vendor's target market understand the vendor's vision, position and differentiation? Is the vendor's marketing translating into market visibility? Organization If a vendor's organizational structure isn't appropriate to its corporate strategy, its chances of success are slim. A successful vendor needs strong senior management, and key divisions must be committed to the vendor's long-term goals. The vendor's organizational structure must allow for future growth, and its workforce must have the necessary skills to fulfill the vendor's strategic ambitions. Gartner evaluates: How well-run and defined are the vendor's organization and divisional structures Has the organization been defined to enable growth, or is it fragmented and disjointed? How well-equipped is the vendor's senior management able to lead the company? Does the vendor's senior management have the breadth and depth to provide leadership? Does the vendor have the "people architecture" (skill sets and best practices) to fulfill its strategic ambitions? Product/Service Gartner looks into the major product lines and how the vendor delivers, supports and markets its major products. Vendors may provide products (for example, hardware, software and networking) and services (for example, implementation, consulting and integration). Products Vendor ratings consider various factors regarding vendor products. Some are as simple as whether Gartner has heard of success with or complaints about a vendor’s products from Gartner clients. We also consider how well a product fits into a vendor's overall strategy, and whether it is "complete" — that is, whether there are holes in the depth and breadth of offerings. Support is also an important issue. Services If the vendor offering is a service, ratings will consider whether the vendor is recognized for delivering high-quality services and whether the vendor is clearly positioned in the services market. Other considerations are whether the vendor has demonstrated the ability to manage IT assets and deliver consistent technology performance through outsourcing. Does the vendor have a track record of delivering projects on time and on budget? A successful vendor generally invests in and manages its services with specific objectives for performance, business outcome and quality. To evaluate how well a vendor measures these objectives, vendor ratings will consider what type of metrics the vendor employs. Technology Technology considerations are based on whether a vendor is being proactive or reactive with regard to technology in its products. Gartner evaluates: Is the vendor offering new technology solutions or is it just reacting to marketing hype? Is the vendor's technology architecture contemporary? Is the vendor's technology truly innovative? Is the vendor leveraging R&D toward its products' growth? If the vendor's product is a suite, is it based on a common architecture? Is the vendor tied to specific applications or technologies, and does it allow its customers to build their own solutions using best-of-breed technologies? Is the technology extendible and flexible to be able to adapt to changing environments? Pricing Pricing considerations include basic components of competitiveness and fairness. Prices should be fair, and pricing policies should be made public, with clear terms and conditions. We will note a vendor's established pricing practices and discounting policies. We will also consider whether a vendor is trying to buy its business (for example, engaging in pricing practices that it cannot sustain in the future). Low prices do a customer little good if the vendor's pricing strategies are endangering the vendor's long-term financial health. Without sufficient profit margins on products and services, customers may go to a vendor for support to find out that the vendor is no longer there or that its ability to support its products has deteriorated to the point of uselessness. Sales/Distribution Successful vendors will have sales channels that are specifically focused on a vendor's target, with partnerships that are strong enough to sustain profitable relationships. The sales strategy will minimize channel conflict while providing enough diversity through original equipment manufacturer agreements, value-added resellers, and direct and online sales. Gartner evaluates the impact of partnerships on sales strategies. We also consider whether a vendor's offerings are tailored specifically toward enterprises of a specific size or vertical market, or whether the vendor is taking a "one-size-fits-all" approach. Support Services Vendors must have the ability to support their legacy products and new products. Vendors must also be sufficiently familiar with their partners' products to have them step in when necessary. Enterprises should pay particular attention to links between product support and development, and whether a vendor has the depth of skills to support a new product line. We report on issues that Gartner clients have had with vendors concerning support of specific products or services. Another important consideration with regard to support is whether a vendor uses services to grow its business as opposed to using services to support its business. For example, does the vendor have service customers who are not customers of its product divisions?

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