Netscout unwisely sues Gartner for “Pay for Play”

Netscout Gartner

Yesterday a Boston Globe website reported Netscout’s case against Gartner, making public the allegations that Gartner’s research harmed Netscout’s reputation in retribution for Netscout’s refusal to increase its investment in Gartner services. While the case is not a re-run of ZL Technology‘s ill-fated case against Gartner, it is unlikely to win in court, change Gartner or improve Netscout’s ability to generate sales recommendations from analysts. Netscout investors should counsel the firm to drop the case.

In a nutshell, Netscout’s complaint is that Gartner punished it, by making it a Challenger rather than a Leader in the 2014 Magic Quadrant For Network Performance Monitoring and Diagnostics (reprint here), after deciding not to buy Gartner services. Netscout claims that Gartner defamed it, for example by failing to act when Netscout’s review comments pointed out an inaccurate statement that Netscout’s solution was hardware only. The complaint is similar to ZL Technology’s claim on those points (which failed because of the First Amendment right to freedom of opinion) but potentially has a better chance in Connecticut than in California, where ZL Technology filed its case. Furthermore, Netscout moves onto broader ground saying that Gartner salespeople pressure vendors by claiming that clients get better placement. They make a more interesting comparison with the 2003 actions that separated investment banks’ research operations from their core business: The silver lining to the case is that this issue will get some discussion.

First Amendment right are strong: as a result, Gartner’s position seems also strong. Of course the real court for this case is the court of public opinion, since the case will (if they are smart) be used by Netscout’s sales people to counter objections based on the Magic Quadrant.

While it is often the case that Gartner salespeople claim that clients get better placement in its research, there’s very little to really back that up: the buyer should beware such unethical claims, which are driven by the salesperson’s self-interest. Gartner analysts are quite unconcerned about who is a client, as Richard Stiennon (a former employee who has written MQs) explains in his useful book Up and to the Right. Gartner’s growing client base mean that it should be able to ensure that sales people don’t use immoral tactics to grow revenues from vendors.

That said, it’s certainly the case that there’s a moral hazard for Gartner: although its research is not “pay for play”, and we certainly defend the analysts from these claims, the firm’s leadership seems to be failing to stop all its salespeople from pretending they are collectors for a protection racket. Certainly some Gartner clients find that account managers sometimes become make similar claims to the ones Netscout reports and become obstructive of access to analysts if spending falls below certain levels. They are creating a risk for Gartner’s reputation, and that of the whole industry. As one analyst commented to me “If account managers are making those claims, and it is properly documented, then I don’t think it matters how clean the individual analyst’s hands are”. This case produces opportunities, not only for Gartner CEO Gene Hall to change the way it sells, but also for the industry to start a discussion about how both firms, and individuals, can avoid such hazards.

If that is the case, why do we counsel against such court actions if they can arm salespeople and shine a light on real issues? We do so because it does nothing to help Netscout’s long-term brand equity. Of course a firm of Netscout’s size was not short of skilled AR and PR professionals with experience of larger firms that have faced similar, or worse, problems with Gartner and its competitors (although there has been a change in leadership of the analyst relations, with a senior marketing director recently hired). The action against Gartner obviously derails the relationship between the two firms, and could have a chilling affect on other analyst relationships.

Were I an analyst at Gartner or elsewhere I would simply try, as much as possible, to not mention or interact with Netscout to avoid the risk of such aggressive escalations. No vendor has such a unique offer that a substitute cannot be recommended.

That’s unfortunate for Netscout because, if it’s claims are true, it would have been able to eventually turn around the views of Gartner analysts by politely and consistently showing how their solution did not have the weaknesses described (even if they had to announce a fake upgrade to allow Gartner to save face). Its complaint details several attempts to do exactly that and, if its suggested corrections were well-founded, Gartner should be explaining (not only to the vendor community but also to its other clients) why the feedback was not used. But, at the end of the day, Netscout needs to put its shareholders’ interests before the community interest of improving Gartner. The firm must now much more effort into its communications with other analysts, and consider ways that its channel partners can be encouraged to develop their relationships with Gartner to keep Netscout on the radar.

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