Vendors and Customers Together

By eweek  |  Posted 2003-11-07 Print this article Print

CIO Insight: Julie, Id like you to respond, and then, Pam, this would be a wonderful moment to get you in to the conversation.
Schwartz: I think you make some very good points, but what vendors have learned is that with very few exceptions they are not able to get the kind of partnership relationship with their customers that they would like, so that they could walk hand-in-hand with the customers through the process you describe of really understanding the change management that goes on in the organizations where their solutions are implemented. In many cases we dont know how. [Vendors] are engineers, and theyre very analytical, and they dont know how to deal with that kind of ambiguity. But I think its important to keep in mind that there are really two aspects of how vendors use the ROI. One is that theyre trying to make a compelling value proposition to get the CIOs attention. You know, you sit there, every week you get hundreds and hundreds of unsolicited e-mails and phone calls. And [vendors] need to find a way to get in so that they can tell you about their solutions. So one thing they are doing is trying to come up with the most compelling value proposition, and that might very well include ROI that looks like smoke and mirrors or vaporware to you.
The other reason they need to have ROI models is to help their clients and customers with an internal justification to build a business case. Some vendors are going to do this very well, and others are not going to do this very well at all. Theyre learning as well. But the most important thing is for the customers to really open [up] and say [to the vendors] well work with you so that we can collect the data, we can build the models, we can look at the assumptions, and do this in a consistent way so that you can do this with other customers, so that we can build a database so that we can track whats reasonable, so that we can start learning from our experience going forward so that we can make this a better tool. Its more of a process than an output.

Pamela Cohen Kalafut: I think that all makes sense. One of the things we get asked about the most is how this measure or others are going to help businesses get some sort of competitive advantage, which, as we all know, is almost impossible to sustain in the present economy, except through measures that might not always be recorded by businesses.

Fletcher: If I could just make a comment. It seems to me, if you start off with a premise that ROI is part of alignment and part of a corporate strategy, then its very difficult to expect the vendor to even have an understanding of what is going to drive the return on investment. For one thing, the discount rate that is used on the return on investment must reflect the capital costs of that company, not of the vendor. Thats the first weakness. Second, I dont know how a vendor could possibly understand all of those soft costs that Atti was talking about, the cultural costs. Theyre hard enough for internal corporate management to assess, let alone a vendor. I think the weakness, as I hear this conversation, of the approach is that when an outsider is looking at [ROI] theyre looking at a little box, but when you look at an ROI calculation to do it right, you have to look, as I said earlier, to the whole [set of costs], which really drives the responsibility of the ROI to internal management and not to the vendor.

Schwartz: The vendor is there to help in any way that they can, but they cannot do [the ROI calculations] for the customer. They can provide data: Have you thought of XYZ? Have you thought of ABC? Other customers we have worked with have done it this way. But they cant do it. In fact, we have done research with customers and asked who do you want to do your ROI calculations, and the majority say that theyre going to do it themselves, and a few are saying theyre going to do it with vendors helping them. But for the most part, theyre going to do it themselves.

Next Page: Trust at the C-level and in methodology.


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