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Table of Contents

In The Headlines
The Heat Is On for Energy Management Outsourcing

Supplier Supplies Capital, Engineers to Save Energy and Money

Best Practice
Reference Checking in Seven Easy Steps

Everest Voice
How Suppliers Can Benefit From Working with an Outsourcing Consultant

Focus on Healthcare
No Room for So-So Performance

Focus on Sales
Maintaining a Competitive Edge Through Sales Outsourcing

Case Study
Barking Up The Right Tree

ASP FOCUS
Coping with Increased Development Cycles

Case Study
Getting Started on the Right Foot

Gain Control of Your Computing Environment

Outsourcing Information Design and Delivery

Outlook on Outsourcing in Wireless

One of the challenges in the Request for Proposal (RFP) process is to ensure that bidders responding to an RFP are actually capable of providing the services requested by the buyer. Not only is it important that any potential supplier not just "say" they can provide the services requested, but they must be able to prove that they are, in fact, providing the same services requested by the buyer to three or more clients.

To ensure this, the buyer should include reference checking as an integral part of the RFP process. There is no more powerful or effective way to measure a supplier's ability to provide service than to ask the supplier's customers.

Suppliers must provide names and contact information for accounts that are receiving services similar in scope to your RFP. You must interview these reference accounts to understand supplier suitability and determine how satisfied the reference account is with the supplier's services.

The result of the interview becomes one of the major evaluation factors in choosing a supplier. Everest uses a very rigorous approach to reference checking that ensures that supplier references will be on point. We make sure you ask the right questions and use the answers correctly to select a supplier.

Reference interviews are generally less than one hour and are conducted by the buyer. If the buyer is using a consultant, such as Everest, to assist with the RFP process, it is wise to have the consultant present during the interviews.

Step 1: Determining What Makes A Good Candidate

The first element of the process is to determine what makes a good candidate for reference checking. Here's my list.

Reference accounts should be:

• Similar in size, or larger, than the buyer.
• Receiving substantially similar services from the supplier.
• Have been utilizing the supplier's services for at least one year.
• In the same industry as the buyer. This is not always possible, so this one is more of an objective than a mandatory requirement.

Step 2: Start Early

Once you have defined these objectives, the next step is to initiate a methodology that allows you to perform reference check interviews as early in the RFP process as possible. Waiting until the bids come in wastes valuable time. Once the RFP is released, the buyer typically spends the next four weeks answering supplier questions. This is a perfect time to conduct the reference interviews.

These meetings give the buyer an opportunity to eliminate suppliers whose reference accounts do not support their continued inclusion, either because the supplier could not provide references or the results of the reference interviews were negative. There is no point proceeding with a supplier if it cannot demonstrate its suitability to provide the services requested in the RFP.

Inform the suppliers they must provide reference account information within one week of RFP release. There will be push back, but remain firm. You need to stay within the timetable to be able to parallel the reference checking process with the other RFP activities. A big benefit: buyers will be able to review both the supplier's response to the RFP and the results of the reference interviews at the same point in time.

Step 3: Using the Customer Reference Info Form

Buyers should include in the RFP a specialized form for collecting reference account information from the supplier. Here's an example from a buyer that was preparing to outsource its data warehousing operation:

Basic demographic information is at the top of the form. The bottom section contains detailed information on the kinds of services that any supplier seeking to provide data warehousing service must provide. Buyers need to know exactly what services the supplier is providing.

Step 4: Reject All Incomplete Forms

In order for a reference to be acceptable, the supplier must complete the entire form. Reject all incomplete forms. Buyers need this information to design the interview questionnaire (more about this later) in order to ask the right questions.

Some suppliers will want to give you the name of a marketing person for the reference account. Admonish them not to do that, since you have to call the marketing contact in order to schedule an interview. Threaten them with caning if necessary! Instruct your suppliers they must provide the name of the actual reference account person so you can schedule the interview easily.

Step 5: Introducing Yourself on the Phone

To gain cooperation, you must do the following:

• Identify yourself - Explain you are representing the buyer who is considering outsourcing end user support services in North America to [supplier name].
• Explain why you are calling - Your supplier has given your name as a reference and has indicated that you have agreed to accept an in-depth telephone interview call.
• Confirm that this is a good time to call, indicating that the call will take approximately 45 minutes. If this is not a good time, schedule a time to call back.
• Inform the reference that while we will inform the supplier that we have contacted him/her, we will not share his/her specific comments with the supplier. Promise you will only use their remarks to help the buyer make a decision about using the supplier.
• Verify the name, position and relationship between the reference and the service provider.

Step 6: Ask the Right Questions

Asking the right questions is one of the most important parts of the process. Ask the wrong questions and you get the wrong answers! Buyers want to know what the supplier is doing for the reference and the level of satisfaction with the service. An effective way to manage the question and answer process is to use a predefined interview guide that has enough white space to allow the interviewer(s) to record the answers to the questions in real time.

Our interview guide is broken down into multiple sections as follows:

• An introduction section that gets the parties talking. We use it to verify the services being provided by the supplier. No point asking questions about a service not being provided!

Here are the questions you should ask:

• How long have you been doing business with the supplier? Please describe your relationship with the supplier. Are you generally satisfied with these services?
• Are all your data warehouse services provided by this supplier?
• Is there a sub-contractor involved? If so, please describe nature of the relationship between the supplier, sub-contractor, and your company.
• What services is the supplier providing? (Fill in Yes/No in appropriate column) You can use information on the Reference Account Description Form, but verify it with interviewee.

This information will determine the number of question sections to be used in the interview.

Individual sections of this form center on the individual services provider; it is the quantitative part of the interview. The services are listed on the Customer Reference Form. The buyer, with assistance from his friendly Everest consultant, defines the question for each service.

If the buyer has a particular concern about some element of the service, this is the time to ensure that a supplier can meet those concerns by asking the right questions. For example, in our data warehousing example, if the buyer is concerned about Aggregation and Data Loading, there would be a question asking how long this supplier is taking to provide this service.

Here are some sample Aggregation and Data Loading questions:

• Describe the aggregation and data loading operations process performed by your supplier.
• Does your supplier perform and manage all aspects of these operations?
• What aggregation engine(s) and data loading software does your supplier utilize to load the data warehouses?
• What is your schedule for data loads to the data warehouse? Has your supplier consistently met or exceeded your targets?

One example of a qualitative question would ask about the supplier's capability to manage subcontractors. Here are some sample questions:

• Are you using multiple suppliers? If so, are they cooperating? Have you had significant outages that resulted from supplier "finger pointing"?
• Have you had any disputes with supplier? If so, are you satisfied with the method of resolution and the overall outcome?
• Are you generally satisfied with supplier services? If yes, why? If you are not satisfied, why not?
• Are you satisfied with the cost structure provided by the supplier?
• Do you use service levels to ensure satisfactory delivery of services to your company? Would you be willing to share them with us?

Step 7: Summary and Scoring

The final section is a summary and scoring section. Once the interview is complete, the interview team can score the categories based on their mutual impressions of the interview. You can transfer the results to an overall scoring spreadsheet so the results of the reference interviews become part of the overall evaluation.

Briefly summarize record your overall impressions of the call. Do this immediately while the content and overall flow of the conversation is still fresh in your mind. Do not focus only on the facts of the answers. Also consider any background or attitude that you may have gleaned from the interview. When the interviews are done in a team setting, these reflections should include a summary of the team's position.

Reference Rating Table

Ratings are on a scale of 1-5 with 1 being lowest and 5 being highest as in the Supplier Evaluation Model.

Reference checking is key to outsourcing success. Just do it.

Lessons from the Outsourcing Primer:

• There is no more powerful or effective way to measure a supplier's ability to provide service that to ask the supplier's customers.
• Check references early in the RFP process.
• Record your impressions as well as the facts.

Publish Date: September 2001

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Copyright © 2001 - Everest Partners, L.P.

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