What is the Gartner Magic Quadrant for CPQ, and How Does Pricefx Think About it?
April 13th, 2023 | 12 min. read
What is the Gartner Magic Quadrant?
Gartner Magic Quadrant™ (also referred to a Magic Quadrant, MQ in the rest if this article) is a series of market research reports published by IT consulting firm Gartner that rely on proprietary qualitative data analysis methods to demonstrate market trends, such as direction, maturity, and participants. Their analyses are conducted for several specific technology industries and are updated every 1–2 years: once an updated report has been published its predecessor is “retired”.
“A Magic Quadrant is not intended to be an exhaustive analysis of every vendor in a market, but rather a focused analysis… criteria help narrow the scope of the research to those vendors that Gartner considers to be the most important — or best-suited to the evolving needs of Gartner’s clients as buyers in the market.” Gartner.com
Over the years, we’ve seen Gartner’s evaluation criteria and measurement of value continue to diverge significantly from what we see the market demand, and what our customers ultimately select and buy us for. While the Magic Quadrant is a valuable tool for understanding the landscape of established players in a marketplace, we believe the methodology and scoring criteria fail to accurately capture the value of our innovations and impact on the current marketplace.
Thus, we hope to help prospective buyers learn how to best utilize this research report, and how to understand Pricefx in the context of both the marketplace and the Magic Quadrant.
What does the Magic Quadrant evaluate?
Gartner rates vendors upon two criteria:
- Completeness of Vision – completeness of vision reflects the vendor’s innovation, and whether the vendor drives or follows the market, and how well they map to Gartner’s view of the market.
- Ability to Execute – Gartner analysts evaluate vendors on the quality and efficacy of the processes, systems, methods or procedures that enable IT provider performance to be competitive, efficient and effective, and to positively impact revenue, retention and reputation within Gartner’s view of the market.
What do the Magic Quadrants mean?
The Magic Quadrant positions providers in one of four quadrants based on their evaluation of vision and execution:
Vendors in the Leaders quadrant have the highest composite scores for their Completeness of Vision and Ability to Execute. A vendor in the Leaders quadrant has the market share, credibility, and marketing & sales capabilities needed to drive the acceptance of new technologies. These vendors demonstrate a clear understanding of market needs, they are innovators and thought leaders, and they have well-articulated plans that customers and prospects can use when designing their infrastructures and strategies. In addition, they have a presence in the five major geographical regions, consistent financial performance, and broad platform support.
A vendor in the Challengers quadrant participates in the market and executes well enough to be a serious threat to vendors in the Leaders quadrant. They have strong products, as well as sufficiently credible market position and resources to sustain continued growth. Financial viability is not an issue for vendors in the Challengers quadrant, but they lack the size and influence of vendors in the Leaders quadrant.
A vendor in the Visionaries quadrant delivers innovative products that address operationally or financially important end-user problems at a broad scale but has not yet demonstrated the ability to capture market share or sustainable profitability. Visionary vendors are frequently privately held companies and acquisition targets for larger, established companies. The likelihood of acquisition often reduces the risks associated with installing their systems.
Vendors in the Niche Players quadrant are often narrowly focused on specific market or vertical segments. This quadrant may also include vendors that are adapting their existing products to enter the market under consideration, or larger vendors having difficulty developing and executing on their vision.
How To Use (And Not Use) the Magic Quadrant in Evaluating Pricing Software
Gartner’s Magic Quadrant is a substantial and informative tool for understanding the vendor landscape in a particular genre of software, but it should not be considered definitive. Gartner clearly states their analyses are “pure opinion”, and while their analyses are highly informed and well researched, they are, none the less, the opinions of a small team of people.
It can be easy to read the magic quadrant as a hierarchical ranking, where companies in the top right are “best”, and those in the lower left are “worst”. This reading misunderstands the intent of the research and could skew your decision-making process by focusing you on only those companies in the top right, overlooking companies with “niche” and unique or “challenging” and disruptive capabilities. The Magic Quadrant is best used as an orienteering map of a particular area of solutions providers, rather than a hierarchical ranking of “best to worst”. It should be used to familiarize you with the range of solution providers in the category, and to provide a framework for evaluating companies of various sizes and capabilities in the context of each other.
Gartner’s recommendation on how to use their Magic Quadrant: “Keep in mind that focusing on the leaders’ quadrant isn’t always the best course of action. There are good reasons to consider market challengers. And a niche player may support your needs better than a market leader. It all depends on how the provider aligns with your business goals.”
It is also important to note again that the Magic Quadrant doesn’t specifically evaluate pure software features and functions, but rather the individual company’s overall position in the marketplace, and that company’s ability to execute in a range of business (not software) capabilities.
When using the Magic Quadrant as a part of your vendor selection process, take the time to understand what criteria are being evaluated, and question why those criteria were chosen for the evaluation.
- How many of these factors are meaningful to our business situation?
- What features matter to us that aren’t measured by this assessment?
- If we did this evaluation, how would we weight the importance of the evaluation categories?
- How recently were these evaluations updated? Do they reflect the marketplace realities today?
- Use the Magic Quadrant to get to know the main participants in a market category
- Take time to understand the evaluation criteria and the meaning of each quadrant
- Compare specific assessments of individual companies to each other.
- Develop and clearly state your own business needs and use cases in comparison to what the Magic Quadrant is evaluating
- Consider the Magic Quadrant as a valuable tool in your vendor evaluation
- If you’re a Gartner client, consult with the analyst through inquiry to share your specific situation and gather feedback from the analyst
- Read the Magic Quadrant as “top right = ‘strong’ / bottom left = ‘weak’”
- Assume Gartner’s assessments are facts or definitive – Gartner’s reports are purely the opinion of Gartner analysts
- Assume the “Niche” or “Challenger” ranked companies don’t offer complete and valuable capabilities
- Take for granted that Gartner’s evaluation criteria reflect the realities of your market or your business needs
- Make the Magic Quadrant your only source for vendor selection, or the central basis for your decision criteria
How to Weigh Gartner Versus Other Sources
You should consider the Magic Quadrant as one of many inputs to your decision-making process, and as with any important enterprise buying decision, you should factor and weight a variety of types of information.
Among research firms offering paid analysis of marketplace offerings, Gartner holds one of the highest reputations alongside Forrester, IDC, G2 and Capterra, among others.
Increasingly in today’s complex, specialized, and rapidly evolving marketplace, the opinions of peers, competitors, and real-world users are considered as or more valuable than the perspectives of analysts, whom some consider to be academic in their approach. Considering real world use cases and testimonials from current Customers and users can often provide more trustworthy and actionable guidance than industry reporting.
Why Does Gartner Rank Pricefx Where They Do in the Magic Quadrant?
Pricefx is an innovative and disruptive SaaS pricing software – we set out to fundamentally change the way pricing software drives impact for large enterprise by making it faster, more flexible, and easier to use. Because of this, our focus has not been on developing every single potential CPQ feature, but rather developing a versatile CPQ that is complimented and enhanced by a full featured pricing management and pricing optimization capability. Our belief is that the “p” in CPQ is what matters, and we aim to put a capital “P” in CPQ.
Gartner places us in the “Niche” quadrant of their Magic Quadrant – which is probably the correct assessment of us in the context of their evaluation criteria and their view of the marketplace. We offer several unique features and complimentary capabilities that other offerings don’t and because CPQ is part of our fully integrated price optimization and management suite, we’re not the CPQ for everyone.
What Does the Gartner Evaluation Miss or Leave Out of Their Evaluation?
As we’ve mentioned, Gartner’s Magic Quadrant is great for providing an overview of the spectrum of solutions providers who comprise the main competitive landscape of the sector. For this reason, the research doesn’t do a great job of considering disruptive innovation. Many of the capabilities our customers select Pricefx CPQ for are either not considered important to the Magic Quadrant or are not considered at all. This highlights a key limitation of the reporting – we are often selected for features and capabilities that competitors don’t have, even while Gartner assesses those same competitors as more visionary or leading in the field. This underscores why it’s important for you to thoroughly understand not only Gartner’s methodology, but also to know your own business use cases and what capabilities will really matter for your success.
What Does Pricefx Think of This Year’s Magic Quadrant?
Over the years, we’ve seen Gartner’s evaluation criteria and measurement of value continue to diverge significantly from what we see the market demand, and what our customers ultimately select and buy us for, including:
- Optimization focus including negotiation guidance, product recommendations, and end to end price waterfall optimization
- Breadth of capabilities including deal planning for large, non-transactional deals as well as Sales Compensation to drive the right seller behaviors in real-time
- Flexibility for our software to adapt to your existing or future-state business processes
- easy integration with CRM systems like SF, SAP, MS Dynamics.
- full transparency of the quote because rebates and promotions are included.
We continue to develop CPQ features, supporting capabilities, and integrations based on the direct input from our customers. We’ve been innovating with capabilities that we believe drive the most value, hint: it’s about interconnected capabilities that drive more value from CPQ, not over-indexing on the C in CPQ that most companies in the market don’t need.
Innovation areas include:
- Optimization for CPQ and Sales Intelligence
- Negotiation Guidance (using Multi-agent AI)
- Product recommendations (upsell / cross-sell)
- Simulation and impact analysis
- Predicted churn analysis
- Win/loss analytics (coming in January 2023)
- Quoting benchmarks
- Price realization
- Quote velocity
- Quotes outside approval guidelines
- Average number of approval steps
- Deal Planning (for large deals that are more about solution/value selling instead of transactional CPQ)
- Customer agreement management (A&P) for long term deals
- Promotions, rebates, and claim management that connects with CPQ
- Sales compensation that helps drive better behaviors when using CPQ
- Out of the box in-line sales intelligence (analytics)
- Actionable Insights – links from quoting to analytics on transactions to help evaluate deal effectiveness
We continue to be selected in highly competitive evaluations based on some of the exact features and capabilities that Garter doesn’t consider us for in their scoring, including:
- Seamless integration between price management, pricing analytics and quoting capabilities
- High configurability of the CPQ capability for the individual business case
- Integration of both analytics and optimization capabilities into the CPQ functionality
- Unique CPQ features such as Sales Compensation, Deal Planning, AI Negotiation Guidance
- And other…
CPQ is an important tool in the toolbox, but companies need to be able to address all parts of their business in one platform that allows them to have one source of truth and drive better effectiveness between departments and better efficiency within a department. That means they’ll need CPQ for their spot/short term contract business, agreements for long term, deal planning for large, million or multi-million deals, sales compensation for all types of contracts, with analytics, optimization, promo/rebate/claim management used throughout. Our vision based on our customers’ needs is for a holistic pricing, revenue and profit management platform which drives, on average, 260 basis points of margin improvement for our customers and 470 basis point of margin improvement for our top quartile of customers.
Choosing the Right Software for Your Needs
While Gartner can be helpful in giving you a broad overview of noteworthy software vendors on the market, it is not always the best option if you want to choose the best software for your needs. For this you will want to hear from people who have used the software on your shortlist and understand the pain you want to solve. Check out the latest G2 reviews to see what buyers like you have to say about leading pricing software on the market,
We’ve also found that when buying software, there are some points that buyers overlook such as culture and technology fit. Check out our article on how to choose the right pricing software.
Gartner Magic Quadrant is based on opinions of Gartner’s research organization and isn’t necessarily based on the criteria that individuals need to make the right decisions.