Gartner has created one heck of a brand with its Gartner Magic Quadrant research. Hundreds of vendors scramble to qualify for the Magic Quadrant — which identifies top technology companies in dozens of different markets. CIOs, in turn, often use Gartner’s Magic Quadrant research to help select IT products and services. Sounds great — but some of Gartner’s Magic Quadrant Leader picks make me scratch my head. Here’s one example…
Gartner has placed CSC (Computer Sciences Corp.) in the “Leaders” quadrant of a new report called “Magic Quadrant for Communications Outsourcing and Professional Services.” The report apparently examines 19 vendors of IT services, and it includes coverage of the managed services market.
CSC issued a press release celebrating the Magic Quadrant Leader news. It quoted Nick Wilkinson, global president, market and product strategy, CSC Managed Services Sector. Wilkinson may be a sharp guy. And CSC may be making progress in the managed services market….
A Reality Check
… But am I the only guy who recalls CSC’s managed services mess — which triggered CSC earnings problems, shareholder angst, and management changes in 2011?
Check CSC’s SEC filings and you’ll see the company suffered key setbacks in its managed IT services business in 2011. The setbacks forced CSC to make management changes, basically sending the head of the company’s managed services business into early retirement.
In its Q2 2012 earnings results (announced Nov. 9, 2011), CSC CEO Michael Laphen mentioned numerous strong areas within the company. But he also conceded CSC’s problems in the managed services market. He said: “With respect to the bottom line, MSS [Managed Services Sector] is a turnaround story and as previously announced we have made several organization and process changes aimed at accelerating improvements.”
Gartner Applies Some Magic
Fast forward to the present, and Gartner is celebrating CSC’s IT services and managed services expertise.
I have not read the Magic Quadrant for Communications Outsourcing and Professional Services report. But to understand its true value in this case, simply read Gartner’s own disclaimer:
“About the Gartner Magic Quadrant: Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.”
Sounds like the Magic Quadrant is worth everything… and nothing.
CSC’s Updated Managed Services Performance
As for CSC — the company is set to announce Q3 results on February 8, 2012. Back in November 2011, it sounded like CSC was making real progress with the MSS (managed services sector) turnaround.
On the November 2011 earnings call, CSC CEO Michael Laphen said:
“As previously reported, MSS operating margin performance, although improved from the first quarter, continues to be a drag on the company’s performance and the primary contributor to the reduction in our guidance numbers. As part of our remediation plan to return to acceptable levels of margin performance, we put new leadership in charge of the MSS business, including a dedicated senior executive to focus exclusively on operations and delivery. To speed and ensure the remedy of the delivery issues occurring in the Nordics regions, we’ve assembled and insured a seasoned team into that region to manage necessary corrective plans and actions. MSS’s previously identified startup issue has progressed to a contract resolution. We anticipate that our collective remediation actions should result in operating margin improvement over the second half and into next fiscal year.
With respect to new business, the Managed Services segment had a strong quarter, with $2.6 billion in bookings. At the half, MSS recognized a 55% increase in bookings compared to the first half of fiscal year ’11. Key MSS awards in Q2 includes Ingalls Shipbuilding, ArcelorMittal and a global multi-brand products manufacturer, all of which are new logos for CSC.”
That sounds promising, but we’ll get the updated views in the February 8, 2012, earnings call.
The Bottom Line
Gartner suggests CSC is a leader in IT outsourcing and managed services. CSC concedes the company’s managed services business hit bumps and has been executing “remediation actions.”
So which view is more accurate?
Read More About This Topic
Share This Post
Posted In: Managed Services | Research and Markets
Tags: Computer Sciences Corp. | CSC | Gartner Magic Quadrant Research | IT outsourcing | Managed Services | Michael Laphen | Nick Wilkinson
Interact: Add a Comment | Trackback Link | Permalink
Subscribe: RSS Feed
Take a look at our 
Joe:
I am glad to see you tackle this issue. I have long questioned many of the placements I saw on various Magic Quadrant reports. Thanks for saying it like you see it.
Mitchell Cipriano
http://www.demandbydesign.com
Mitchell,
Thanks for reading. I think Gartner does a lot of good for the industry. I’m often impressed when Gartner, IDC and other research firms openly question IT product strategies at Microsoft, etc. But I think the Gartner Magic Quadrant strategy raises more questions than it answers.
-jp
I also agree with you @Joe. Gartner Magic Quadrant strategy is a really confusing one. It does answers some questions but it does not answers the questions raised by itself.
I once participated in a Gartner MQ where the final report was released 9 months after research was initiated. The final report reflected 9 month old research and not the current state of the business, a lot had changed in 9 months. A lot of time and effort goes into building those reports, especially one that involves 19 vendors, so by release date it’s likely a good number of the earliest investigated participants have had significant business change, looks like that may be the case in this instance.
Agree with most of what is in the article but I will take it a step further. I worked for a vendor that grew like a weed in the 1990′s but never made the Gartner MQ. In 2002, we dropped $75k on Gartner services. Low and behold, we were on the MQ that year!
Most people don’t know that Gartner makes a large chunk of its revenues from the vendors who purchase services from Gartner, like Gartner Connects. They think Gartner provides a truly independent view of vendors and the truth is they don’t. I remember a great article that mentions how Gartner was owned by Silverlake Partners, the VC firm that handled dough for Gates, Ellison, Dell, etc. Do you honestly think Gartner would say a bad word about Microsoft, Oracle, or Dell knowing their paychecks come from these people?
Anyway, great article. It’s about time more people recognized the truth about so-called “industry analysts.”
Ken@4: Nine months certainly is an eternity in high-tech.
Scott@5: Thanks for your insights. I know research firms and media firms (myself included) often get accused of taking vendor dollars to produce positive statements.
I think Gartner Magic Quadrant is a brilliant concept that ultimately spiraled out of control. I think Gartner got addicted to the concept and created more and more quadrants just to keep the momentum going. The end result? Questionable Magic Quadrant members…
-jp
I question any ‘analysis’ that (mainly) includes the analysing organisations customers. Where’s the real market research that for example spots an up and coming vendor with no funds to pay the large Analysts.
@David – Gartner does have a ‘Cool Vendors’ report that highlights up and comers – I have no idea how these vendors get recognized by Gartner; http://www.gartner.com/technology/research/cool-vendors/
If you have not read the report, as you claimed. How is it that you can express your opinion as an editorial journalist without all the facts. Yes I checked your credentials and you appear to be well informed which confused me more. You cite an analyst firm without looking at the methodology behind their analysis. You cite a company on their entire business not the part that the report covers. Also from the excepts you do pull it appears the issues are financial related not to the delivery permormance of the company. Am I missing something or did you just not include that in your blog.
Confused reader@9: You’re right, I should have read the report. But I know the following fact: Gartner is praising CSC’s managed services business, calling it a “leader.” Meanwhile, CSC suffered accounting and delivery issues in its managed services business. And CSC has conceded the issues/need for change multiple times. It’s all documented in SEC filings. Still, I welcome your constructive criticism and you’re right: I should have read that Gartner report.
-jp
Just had to chime in here, since this is really not accurate at all. As being someone who has actually gone through this methodology and can better explain why you may not agree with the analysis done here is some perspective.
The person writing the research selects the criteria and weight, this is partially written in the published research but not with exact numbers that go into the calculations and formulas. If the author doesn’t think that specific criteria are as important as you would then you have some disagreement with his harassment. We use many different tracking data sets during the process of which keep us honest as we are often challenged by vendors based on this research. This also keeps it as factual as possible.
We have a completely independent Ombudsman office who gets involved when there is unfairness according to the vendors (normally). Of course they try to work with out with the analyst, but sometimes they just don’t agree, and Ombudsman requires that you have clear factual evidence and has defend your research regardless of what it is (a mq or other written research). The Ombudman actually reports to the board via our legal council and is completely detached from other business units so they remain impartial.
Regardless of if you are a paying vendor client or not you will be put into research based on the analyst’s decision. When I was a Gartner client I would think the same thing as many of you have written, being on the other side of the fence this is completely false. The only thing that a vendor client gets which a non-vendor client doesn’t is more access to discuss strategy and get advice from the analyst. This may result in influence both ways, thus improving the vendors understanding with the analyst, and possibly them being pained in a favorable light. As most of us know there are always model customers and unhappy customers. The way that we get to speak to both is just by sheer numbers. Each analyst speaks to at least 300 (I speak to over double that number) clients in structured 30 minute phone conversations. This doesn’t include the vendors, trade shows, and other venues we speak to buyers and experts of the technologies we cover. We have a comprehensive understanding of markets that vendors want to hear about. This is why vendors want to be clients, and why we can offer them perspective and advice that are unparalleled.
Hope this helps, feel free to reach out to me @jkowall on twitter.
Johan,
I appreciate your time and constructive criticism but I tend to boil things down to very concise conclusions. In this case…
1. CSC has a managed services business that had major missteps, and the company conceded that business changes and management changes were necessary.
2. Gartner praised CSC in the areas of managed IT services.
That’s a major disconnect no matter how the Gartner analyst weighted the research metrics. I realize analysts spend a ton of time on the research. And I didn’t say there was a “pay for play” situation between CSC and Gartner.
I merely concluded that Gartner has stretched the Gartner Magic Quadrant model thin… announcing too many quadrants and packing too many vendors into the research. The result: Misses such as the CSC Magic Quadrant honor…
-jp