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Customer Reference "Rebates"
Vendors have long asked their happier customers to serve as customer references, but now there's a twist: Some vendors are offering compensation for these references. ITSMA's Hurley says the council advises its vendors to keep the remuneration low enough "so it wouldn't be seen as a bribe" and yet high enough so customers have the incentive to help sell the product. He advises vendors not to offer anything that's personally beneficial, like a set of golf clubs; instead, he suggests something that benefits the CIO's company, like a small discount on the company's next purchase.
One company, EMC Corp., has institutionalized a rewards program for Documentum customers who give references for the company's enterprise content management products. The program is called Studio D and invites customers on its Web site to "Score some high-quality goods!" According to the site, Documentum customers who serve as marketing references win points that can be used for discounts, training credits or "gift certificates at the e-store of your choice." (The points can also be donated to a charity.)
Marshall is critical of such programs because the vendor is, in essence, buying those customer references. He says the program should highlight that fact when it gives out lists of references. The CIOs interviewed for this story were appalled at the idea of trading their references for any sort of compensation, even when the benefit accrues to their company. "If you do a good job, we'll be happy to give you a reference," De Brino says, noting that "I think that would be unethical, selling your reference."
Turner says that if vendors want to offer a discount, they shouldn't tie it to references. "I wouldn't trade my reference for money," she says. "That doesn't sit well with me personally, professionally or ethically." Knowing that such programs now exist, several CIOs said they will make a point of asking future references if they have received any compensation.
Responding via e-mail to the idea that it was buying references, Documentum said that the Studio D program "is not so lucrative (for the individual) that customers would take time to give a reference purely for the points." The company added that many of its references never join the program. And Documentum is up front about giving points in return for references; the practice is outlined on Studio D's Web site.
Bribe or "Perk"?
Rather than fending off bribes, some purchasing officers have been known to solicit them. Moreno of Herbalife has heard of this happening where large contracts are involved. "You know if you ask for something, most vendors will cough up. You hear it from your peers," he says. "They think it's part of the perks of the job."
De Brino's company, Compass Health, owns a technology vendor called Advances in Technology, which De Brino also oversees. That means he sometimes wears the vendor's hat. He says that in two instances to date, potential customers have hinted that "a little extra something" would sweeten the deal and make them more likely to sign.
He's afraid to confront them because he would hate to insult a potential customer if he's wrong. Instead, he plays dumb. When they say they want extras, he offers more train-ing. When they say they'd like a little more, he offers even more training. "That's the best way to handle that. If I'm wrong, there's no harm done. They just think I'm stupid," De Brino says. In both cases, De Brino's company didn't get the contract, he notes.
Ethics experts like Marshall say companies are better off with such policies than without them. But in the end, policies don't keep deals ethical, people do. "It's almost like SOX," says MSA's Plut, referring to Sarbanes-Oxley Act regulations. "You can have a bottom line; but at the end of the day, people can circumvent it. You just have to have ethical people who work for you. Actions speak louder than words."
Joan Indiana Rigdon was a contributing writer for CIO Decisions. To comment on this story, email editor@ciodecisions.com.
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