- 15 min read
- DEBBIE WILSON
Introduction
Selecting a vendor in the vibrant, dynamic contract lifecycle management (CLM) market is challenging, given the wide variety of vendors in the space. It’s hard to get good data on which vendors to evaluate using traditional means.
In the quest to find the best solution, enterprise leaders often get bogged down evaluating vendors that don’t offer a strong value proposition and aren’t a good match for their business. Worse yet, it’s easy to completely miss the vendors that are the strongest candidates.
How can you quickly and effectively assess the market and compile a list of suitable vendors? You can consult independent analyst research reports.
The market has many different kinds of analyst reports, but the Gartner® Magic Quadrant™ is arguably the most famous and widely adopted vendor assessment report for the technology industry.
In this article, we’ll look at the Gartner Magic Quadrant in more detail and give you actionable steps on how to read the report to inform your CLM – or any platform for that matter – purchasing decisions.
What is the Gartner Magic Quadrant?
The Gartner Magic Quadrant is a research report that identifies and assesses the 10-12 leading players in a specific global market using standard rating criteria purpose-built for evaluating technology goods and services. The vendors that the report typically covers are in their earlier phases of maturity (when solutions are reasonably comparable and interchangeable).
By evaluating the top vendors in a neutral environment, Gartner’s reports assess the direction and maturity of a market. This provides its target audience of enterprise buyers (large and mid-sized end-user organizations) with actionable tips for purchasing solutions.
What Does the Magic Quadrant Measure and How is it Portrayed?
Gartner lays out its final analysis in a two-by-two matrix that rates vendors in terms of completeness of vision on the x-axis and ability to execute on the y-axis. Here’s how these two criteria break down:
- Vision – Standard criteria include market understanding and product offering strategy.
- Execution – Assessed through attributes such as financial viability and customer experience.
Analysts formulate their ratings using market intelligence gained through Gartner end-user client interactions, customer surveys, reference checking, and public financial reports.
Gartner also tailors the standard assessment tool to each specific market through attribute weighting, market definition, and inclusion criteria – all to ensure that the vendors they assess are suitable for enterprise buyers. For example, analysts may require a vendor to earn at least US$10 million in revenue the prior year to be eligible for inclusion.
Additionally, Gartner strongly encourages vendors to provide reference customers, recorded demos, and product data to inform the rating process. If a vendor that qualifies for the report doesn’t actively participate in the process, Gartner analysts will assess them with the data they have to present as complete a picture as possible to prospective buyers.
Why is the Magic Quadrant Important?
When a market is new or immature, solutions are too highly differentiated to substitute one for another, and prospective buyers likely have dozens of options. Prospective buyers in immature markets expect to acquire unique, evolving solutions. So, a vendor comparison document isn’t logical.
In mature markets, prospective buyers already know the leading players, and there are usually only a handful. As a result, prospective buyers don’t need a lot of help. For example, a business leader considering an on-premise ERP likely already knows that the market leaders are Infor, Microsoft, Oracle, Sage, and SAP.
The prospective buyer in an early-maturity market, such as Contract Lifecycle Management solutions, is in a completely different situation. Early-maturity markets have a high prevalence of newer, specialty vendors with solutions purpose-built to deliver innovation. These innovators are often the best solution because they drive new value into the market.
As a result, it isn’t obvious who the main players are, and the typical sources of intelligence don’t work.
- Google searches yield paid placements and random vendors.
- Colleague recommendations fall short because solutions are not widely adopted.
- Trusted systems integration partner recommendations aren’t reliable because many early-maturity market vendors don’t go to market with service partners.
These examples are why assessment documents such as the Gartner® Magic Quadrant™ are so popular. They provide the third-party research enterprise buyers crave and need to inform their decision-making.
How Reliable is Gartner Magic Quadrant?
Prospective buyers recognize that third-party research must be unbiased. Gartner maintains a robust set of policies on how and when analysts can evaluate markets.
It does not require a vendor to be a customer to be rated, and it maintains an independent ombudsman’s office to resolve vendors’ complaints and ensure impartiality. The Gartner® Magic Quadrant™ has been challenged in the US court systems only twice, and neither case prevailed.
While other rating reports are available from analysts at Forrester, The Hackett Group, IDC, and SpendMatters, the Magic Quadrant unquestionably holds the place of the most respected technology rating document due to Gartner’s size and reach.
In 2022, Gartner published Magic Quadrants in over 100 technology markets, evaluating more than 1000 vendors. Its analysts tap into insights from 15,000+ enterprise clients in 90 countries for vendor ratings.
How Should Prospective Buyers Interpret the Magic Quadrant?
Step 1: Determine relevancy. The first section of every Magic Quadrant is the “Market Definition/Description.” Here, you’ll find details on what the goods or services should do. Make sure that the definition here aligns with your needs and expectations.
Step 2: Review the four quadrants. If the market definition meets your needs, move on to the Magic Quadrant graphic. Vendor ratings are grouped into four quadrants: leaders, visionaries, challengers, and niche players.
- Leaders excel in market understanding, innovation, product capabilities, and viability. Leaders are who other providers in the space benchmark themselves against.
- Visionaries are ahead of most competitors in delivering innovative products and/or delivery models. They are often smaller vendors or newer entrants that are shaping or will shape the market.
- Challengers have met customers’ expectations in terms of functionality and customer experience. They are a good option for organizations that value execution over vision and leading-edge functionality.
- Niche players often specialize in geography, industry orientation, or product breadth. They are usually a good choice for their companies to work with vendors with specific specialties related to their target market.
Step 3: Read individual vendor evaluations. The body of the Magic Quadrant contains concise write-ups on each rated vendor. The write-ups offer general information on each vendor and its customer base and list everyone’s top three strengths and weaknesses. Pay close attention to this section to inform your particular use case, for example, sales contracts versus procurement agreements.
Looking for a specific vendor not listed?
In a highly fragmented and evolving market such as CLM, prospective buyers may be surprised to find a vendor they are interested in missing from the Magic Quadrant graphic.
In this scenario, read on to the inclusion criteria and honorable mentions section (if there is one, as it is optional) for hints on why. The missing vendor may be too small, lacking critical functionality, or too regional. There are risks to selecting a second-tier vendor, so consider the lack of coverage in a relevant Magic Quadrant in your decision-making.
Overall, the Magic Quadrant contains additional information on the market and its direction, assessment criteria, and recommendations for a successful deployment. Make sure to read the full report to gain maximum insight.
How Does the Magic Quadrant Work to Inform Solution Selection
Prospective buyers appreciate the Magic Quadrant most for insight into which vendors to include on their “long list” of consideration.
Our #1 Tip: When building your long list, do not make the common mistake of evaluating only those vendors that make the “Leaders” quadrant. Others in the report may be the best fit for you.
Gartner also produces companion reports to supplement Magic Quadrants.
- The Gartner Critical Capabilities report details the major features of the solutions and rates vendors on each.
- Gartner Peer Insights Customer’s Choice Reports digs into customer feedback, presenting user experience without analyst interpretation.
Use these supplementary reports to deepen your understanding of prospective vendors. Then, create your “short list” of no more than five vendors. If your organization is a Gartner client, you may be able to set up a phone call with an analyst, maybe even with one who wrote the Magic Quadrant, to get feedback on your shortlist.
These are the vendors to invite to submit proposals.
The Magic Quadrant and the Critical Capabilities reports are great resources for creating an RFP. You can use the capability descriptions in your requirements section. This information helps set expectations with your internal stakeholders on what a prospective CLM solution can do for your organization.
Start Evaluating Contract Lifecycle Management Solutions with the Magic Quadrant
The enduring popularity over many decades of the Gartner Magic Quadrant proves that prospective technology buyers in early-maturity markets need and value independent research to inform solution selection. You can dramatically decrease the chance of a mediocre or failed initiative by arming yourself with relevant, complete market data.
Top Points:
- The Magic Quadrant provides unbiased vendor insight for early-maturity technology markets such as CLM.
- Use the Magic Quadrant to create your long list of prospective vendors.
- Use the Magic Quadrant and supplementary reports to create your RFP and set stakeholder expectations.
- If you want a market-leading solution, beware of selecting vendors NOT in a relevant Magic Quadrant.
So, when you’re ready to start evaluating CLM solutions, lean on the most recent Magic Quadrant report to steer you in the right direction.
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Debbie Wilson has delivered market-driven insights, strategic vision, and expert guidance to leading enterprises around the world for more than three decades. As Gartner’s lead analyst covering procurement and CLM technologies, and later as group leader for procurement, finance, and ERP, Debbie became widely recognized as one of the industry’s most respected thought leaders in procurement technology innovation, adoption best practices, vendor selection, and automation strategy. Her mission is to share her knowledge, passion, and experience to help enterprises identify and deploy the right CLM solutions to transform their contracting.
Additional Resources
14 Contract Negotiation Strategies and Tips to Empower Teams
How to Implement a Contract Management System & Win as a Team
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