The due-diligence task of talking to a potential service provider’s existing clients for references on the provider’s capabilities is part of the first line of defense in trying to structure an outsourcing relationship for success.
But it’s somewhat like talking to the poison taster for a king – clients giving references are those who tasted the provider’s services and lived on to tell the tale.
Sure, finding out if the provider has successful past experience with a deal of the scope and complexity of the deal under consideration is of vital importance. Absolutely. But wouldn’t the potential buyer also benefit significantly from knowing what went wrong in the deals that encountered challenges – and even those that failed?
Client references might be more effective if there were “scar stories” – you know, like asking someone “How did you get that scar on your arm?” But in client references, the scars are usually hidden. So much so, in fact, that one individual’s comment to me about references really stood out. In contrast to the many customers who have told me in interviews that they provide references as a way to enhance the relationship or use them as leverage to get something they want from their provider, this particular customer stated, “But I actually tell the truth when I give references. I explain the things that went wrong and share how we worked them out.”
Why is this a rarity? I think it’s twofold. The provider may not want stories told that don’t speak of stellar performance, but the customer often has the same sentiment and does not want to tell stories about issues that arose where the customer’s actions (or lack thereof) were a contributing factor. After all, when the roles and responsibilities for tasks in an outsourcing relationship are divvied up during contract and governance negotiation, the customer ends up with significant portions of responsibility for ensuring the relationship works.
How do you gauge the value of client references? How critical are they? What’s the best way to get down to the true details of how a relationship has worked, including its downs as well as its ups?
Since 1998, freelance writer Kathleen Goolsby has studied outsourcing relationships’ successes, failures, trends, and best practices. She has interviewed more than 860 executives at buyer and service provider companies and is the author of “Critical Requirements for Building and Sustaining a Successful Outsourcing Relationship,” a chapter in Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships (December 2006, Gower Publishing). As a freelancer, she also currently serves as the Senior Writer for Outsourcing Center (whose parent company is sourcing advisory firm, Alsbridge) and has authored dozens of articles as well as white papers. In a past role, she was editor of Outsourcing Venture (a former print publication). You can contact Kathleen at ksgoolsby@gmail.com.
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The reference process for most service providers is broken. The problem goes well beyond the typical complaint that references are stale or overused. The real problem is that most references are just “You did a good job” testimonials. Buyers almost universally dismiss these references. What buyers need and want are references that specically support key elements of the service provider’s proposed solution and value proposition. References that discuss and support the effectiveness oif the technology platform they are implementing … or the methodology that will guide the reengineering of their processes .. .or the cost savings they are projecting … or the transition plan they are recommending … or the governance process they are proposing … or even the team that will be responsible for client service.
In the heat of the RFP battle, these are the type of granular references that make a difference … but few firms have.
Joe Vales
Senior Partner
Vales Consulting Group, LLC
jvales@valesconsulting.com