Blinded by the Lighthouse
Among companies that agree to link their name to a vendor, some have more value as references than others. These are the giants, the companies people instantly recognise, the brands they trust. A short jaunt through any vendor's annual report, conference line-up or Web site makes it clear which customers are so-called lighthouse accounts: Procter & Gamble and Nestle for SAP; Charles Schwab and Deutsche Telekom for Siebel; Dell and Home Depot for i2 Technologies.
These lighthouses can help vendors gain legitimacy, sell products and boost shareholder confidence by proving that the vendor has a steady paycheque from a company with deep, well-constructed pockets. But they can also break their vendors, by talking up a project and then pulling back on it. Last February, for example, TheStreet.com reported that Manugistics' stock price fell 18.5 per cent reportedly after a research analyst said that one of Manugistics' lighthouse customers, Ford Motor, had put some IT projects on hold. Manugistics' CFO Raj Rajaji had to assure nervous investors that Lloyd Hansen, Ford's vice president of revenue management, was speaking at an upcoming user conference - proof that the partnership was still strong.
How Happy Talk Works
A reference may sound good, but it's rarely an accurate representation of reality. Companies that agree to serve as references are self-selected, happy customers, with a vested interest in the vendor leading a long, productive life. "You want your vendor to be successful and gain resources and clout so that they can improve their software," says Wendy Close, an analyst for Gartner (US). This is one incentive for a CIO to become a reference - but it's also an incentive for a CIO to be a positive reference.
References also use their position to influence the direction of the technology. "If I do things for [vendors], I end up having some influence on them in terms of the future direction I'd like them to take," says the CIO of a retail company who spoke on condition of anonymity. When asked if that makes him less valuable as a reference, there's a long pause. "An average customer would have to think that customers like me have their best interest in mind," he says finally, noting that most prospects don't ask about his relationship with the vendor.
It's worth taking the time to understand that relationship. In some cases, a company may form such a strong bond with a vendor that the company becomes something more than a customer if something less than a partner. But you have to dig to find that out for yourself - vendors won't spell it out for you.
Consider, for example, Charles Schwab's affiliation with Siebel. The brokerage has long been prominent in Siebel's marketing materials. And a casual visitor to its Web site would assume that Schwab is nothing more than a good customer. But the CEO of Schwab has been on Siebel's board of directors since 1994, and back in 1996 the brokerage accounted for fully 23 per cent of Siebel's revenue, according to an SEC filing. In other words, assuming that Schwab's experiences with Siebel will predict yours would require an imaginative leap.
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