Friday, August 02, 2002

Whom do you trust? With the spotlight shining on accounting firms and securities analysts for conflicts of interest, let’s talk about another potential area of conflict: software vendor references. Although references play a crucial role in the software selection process, companies often do not recognize the incentives that vendors give to clients in order to secure them as references. Vendor incentives can be indirect benefits--such as first-class treatment, special consideration on product development--or they can be direct paybacks, such as license discounts, free services, free admission to vendor conferences, or even a check in the mail. In some cases the incentive is explicit, with the vendor actually stipulating in the contract that the client must take a certain number of reference calls in return for certain discounts or other concessions.

With such potential for conflicts of interest, what should a software buyer do when looking for references? First, although it may take some effort, get as many back-door references as possible so that you do not have to rely solely on vendor provided references. In the case of vendor provided references, feel free to ask about what the client is receiving in return for serving as a reference. And in all cases, go beyond perfunctory questioning to dig more deeply into vendor performance. Finally, if possible, supplement the traditional CIO-to-CIO reference with user-to-user and programmer-to-programmer contacts, where there might be more candor on the real situation.

CIO Magazine has a good article on the subject.

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