Why Customer References Are Good for Business

These types of relationships can result in win-win situations. In my opinion, leveraging discounts on new or relatively unproven technology in exchange for a reference is just smart business. It helps start-up vendors, and it benefits the early adopters.

We often take the same approach with larger and more established companies. Do I think I deserve a deep discount or special support attention for being an early adopter of a new and substantial upgrade or release? Of course. Am I willing to be a reference if it all works out well? Why not? The benefit applies both ways. Such an arrangement helps me achieve business value at a reduced cost, and I am happy to brag about it if it works.

When providing references, I would also be clear that special attention was received throughout the upgrade and would disclose any snags we hit along the way.

Advisory relationships and their effect on references should also be monitored very closely because of the naturally biased opinions of advisory board members. For example, I retained a telecommunications cost management company to audit past telecom bills, renegotiate telecom contracts, and manage the communications billing and reconciliation process. I began my relationship with this company on a very limited basis, but over time I became impressed with its business model and ability to save me money. When the CEO of the company decided to form a technology advisory board, he asked me to serve as a member. Because of my belief that aiding the company in this capacity could ultimately enable it to serve us better, I accepted the invitation (after receiving approval from our CFO). Although this is an uncompensated position, I now feel obligated to inform all references of my relationship as an adviser prior to giving feedback. I've yet to run into anyone who felt I was misleading them for personal gain.

The Importance of Full Disclosure

CIOs interviewing references should always ask the question: What is your or your company's relationship with the vendor, and have you or your company been compensated or given preferential treatment in return for this reference? Additionally, you should ask about the reference's business relationship with the ­vendor. Is a partnership in place that would provide incentive for an embellished reference such as a reseller or OEM arrangement? That is, does additional business for the referenced company directly or indirectly benefit your company?

I recently visited with salespeople for a chip manufacturer who were touting the company's improvements in internal productivity and reduction in IT support costs due to its aggressive internal PC refresh program. I was naturally a bit sceptical. After all, the more a company refreshes PC technology, the more chips it sells, right? It is absolutely important to understand the motive of the individual providing the reference. I'm certainly not accusing the chip maker of spreading untruths; I'm simply putting the feedback in context.

I've noticed that since the dotcom meltdown, reporters on financial news TV shows seem to make a point of asking analysts about their relationship with the companies they are recommending. In hindsight, it seems like it should have always been an obvious question, doesn't it? CIOs, in my opinion, have an obligation to each other to provide truthful references while being honest about the nature of their business relationships. Whether the vendor is an established business partner or a venture-funded start-up, CIOs should never compromise what should be considered among the core values of the profession.

Robert Urwiler can be reached at cio@macromedia.com