CRM failure rates: 2001-2009

CRM failure rates: 2001-2009

Summary: Discussions about failed CRM projects often begin with statistics describing failure rates. To facilitate those conversations, here's a summary of CRM failure stats for the period 2001-2009.

SHARE:

Discussions about failed CRM projects often begin with statistics describing failure rates. To facilitate those conversations, here's a summary of CRM failure stats for the period 2001-2009.

This is the basic list; see down below for more detail:

  • 2001 Gartner Group: 50%
  • 2002 Butler Group: 70%
  • 2002 Selling Power, CSO Forum: 69.3%
  • 2005 AMR Research: 18%
  • 2006 AMR Research: 31%
  • 2007 AMR Research: 29%
  • 2007 Economist Intelligence Unit: 56%
  • 2009 Forrester Research: 47%

This table lists the year, organization conducting the research, and reported failure rate. As described below, measurement differences make comparing rate changes across years difficult at best.

RESEARCH DESCRIPTIONS

2001 Gartner Group: 50%. Gartner released numerous CRM-related reports during the 2001-2002 period. Significant among these was research (September 2001) claiming that:

Through 2006, more than 50 percent of all CRM implementations will be viewed as failures from a customer's point of view....

Several years later, in a 2004 interview with CustomerThink, Gartner's Vice President and CRM Research Director, Ed Thompson, qualified this statistic by saying:

We were asking, 'Did it meet expectations?' That was the question. And, the answer we picked up fairly consistently, was that a lot of organizations failed to meet expectations.

As I describe below in the analysis section of this post, the definition of CRM failure in not always clear, making it difficult to compare studies accurately across years.

2002 Butler Group: 70%. This dramatic number is perhaps the single most quoted statistic on CRM failure.

Despite a lengthy search, however, I could not find the source document. Butler Group's Senior Research Manager, Maxine Holt, kindly attempted, unsuccessfully, to find the document for me. In an email, she suggested that perhaps the number "was quoted by one of our analysts in discussions with the press and that's how it has been circulated."

Butler did release a report, in July, 2001, describing conditions that cause high rates of CRM failure, however it did not include this statistic. That report, Real CRM: Pitfalls and Potential, begins:

[T]he massive potential for conflicts of interest between the business world, the CRM vendor community, and ultimately the customer needs to be acknowledged.

Although the source statistic is not readily available, I accept the number for four reasons:

  1. Butler did substantial work on this issue during the 2001 period.
  2. It closely matches the Selling Power number described below.
  3. Microsoft marketing materials specifically quote Butler as saying: “70% of CRM implementations simply fail.” It's unlikely Microsoft would make a direct quote without verifying genuine source data.
  4. Top CRM author and analyst, Paul Greenberg, includes this number in the third edition of his generally acknowledged industry Bible, CRM at the Speed of Light (page 3). Given Paul's stature and my own personal respect for his work, I accept his numbers as fact.

2002 Selling Power, CSO Forum: 69.3%. Paul Greenberg also reported this number and I could not find additional references. I accept this number based on Paul's credibility as described above.

2005 AMR Research: 18% 2006 AMR Research: 31% 2007 AMR Research: 29%. In 2007, AMR reported these numbers for the period 2005-2007 in an document titled, Ending CRM Failures: Get in the Loop. The figures describe the "percent [of] respondents that have experienced any implementation failures that kept them from 'going live'...." The followed graph shows the data:

2007 Economist Intelligence Unit: 56%. The Economist Intelligence Unit also released a report in 2007 stating that:

CRM success continues to elude most companies. Eighty-six percent of survey respondents say that CRM will be important to their companies over the next three years. Despite this, more than 40% of respondents do not have a formal CRM strategy in place. Of those who do, 44% say that they have seen only “acceptable” results from their efforts, and another 22% say that it has been a disappointment.

2009 Forrester Research: 47%. In a report titled, Answers To Five Frequently Asked Questions About CRM Projects, Forrester Vice President and Principal Analyst, Bill Band, presents evidence that under 50% of CRM projects fully meet expectations. The following table summarizes:

THE PROJECT FAILURES ANALYSIS

Although not an exhaustive list of studies, this collection provides a useful indicator of CRM failure during 2001-2009.

When examining the data, be aware that dramatic year-to-year changes probably result from research differences rather than market shifts. Multiple organizations produced this data over time relying on different methodologies, assumptions, respondent company size, CRM project size, and research goals. In addition, most (but not all) failed CRM projects actually deliver mixed results and achieve partial objectives, making the definition of "failure" quite subjective.

I asked IDC Group Vice President for Software Business Solutions, Michael Fauscette, to reconcile these differences:

Despite potential weaknesses, the data remains extremely useful for two reasons:

1. Each data point alone tells us something about the state of CRM at that time of the study 2. The aggregate weight of this data clearly suggests strong dissatisfaction with CRM projects

Different organizations collected this data over a period of almost ten years. Without examining the research methodology for each study closely, we don’t know what they actually measured. For example, their definitions of failure and success may not be the same, let alone how they characterize CRM.

My take. In the spirit of not throwing babies out with bath water, please be aware that many organizations do achieve acceptable ROI from their CRM implementations. Still, the data clearly states that substantial numbers of CRM customers are dissatisfied with some significant aspect of their implementations. CRM technology vendors and consulting companies should take this message seriously,

Topics: Enterprise Software, Software

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

9 comments
Log in or register to join the discussion
  • Interesting Collection of Stats

    As one of the people who constantly said that 50% of CRM implementations fail (although I believe that the number is higher) in the early 2000 while at Gartner, I see that the number is holding.

    To me then, and still now, the main problems stems from two different things:

    1. there is a lack of understanding of how to calculate ROI for CRM (actually, for most things. but we are talking about CRM) and thus when the results come in they don't match the expectations. I see this very often.

    2. I would add that since close to 70% of implementations don't have a strategy (no, I mean a real one - specific numeric goals and objectives tied to the corporate strategy, list of steps to take to get there, set expectations) they don't know what to compare their results against. thus, they compare to the ROI model that was provided by the vendor and find out (surprise, surprise) that it does not match. then label it a failure. those projects were doomed to fail before they started.

    you cannot measure the success or failure of ANY project unless you have specific metrics and values for them, timeframe and steps to achieve them, and what are you going to do with those results.

    I am surprised that it is still 50% (as in, they never learn), but also that is not higher (I guess luck continues to affect about 1/2 of the success stories).
    Esteban.Kolsky
    • Two excellent points

      As I suggested in the post, I think the numbers are less important than the overall message: many customers are dissatisfied with the results of their projects.

      Since the points you mentioned are rooted in human tendencies to go "ignore the torpedoes and go full steam ahead," perhaps such high failure rates are not surprising.

      Thanks for commenting.
      mkrigsman@...
    • Excellent points, but can we also look from another perspective?

      While I think you're spot on in your analysis of the user base perspective, I would argue very much that we should also be placing the blame on CRM software providers for making abysmal software up to this point.

      I mean, have you even tried Salesforce? It's the poster child of CRM in the cloud and it's just a mess. Sure, it is packed with features, but the interface is so cumbersome that it would make anyone shrivel up and crawl under their desks.

      The state of CRM software today is abysmal, reflected by it's abysmal adoption rate. I don't think we can hold it against the users for such a widespread problem. We can be angry at the fruit for always turning bad, but if it's coming from a diseased tree then you're angry at the wrong guy.

      When we started creating our JobNimbus CRM software (http://www.jobnimbus.com), we got into the market for this very reason, and our adoption rate has exploded because of our simple design and customer-centric framework. We built our CRM for our customers, not for theirs, which is why they love it and continue to use it daily.

      Maybe we should start pruning the tree to start getting good fruit.
      bradhodson
  • RE: CRM failure rates: 2001-2009

    The other thing to take from this post is that analysts talk crap. If they can't even get within 50% of each other they are blowing it out an orifice
    twohills
  • RE: CRM failure rates: 2001-2009

    Great article. You did an excellent job capturing the
    dramatic differences between different CRM vendors while
    still maintaining the key point: the success-rate for CRM
    implementations is still very low.

    Great job.
    Scott Annan
  • RE: CRM failure rates: 2001-2009

    Pls. clarify is the 47% from Forrester Research 2009 a FAILURE rate or "exceeded expectations" what is mentioned in a graph?
    Urban100x
  • RE: CRM failure rates: 2001-2009

    The failure rate for CRM or almost any other IT project involving development and/or extensive configuration falls within the same boundaries established by Barry Boehm et al decades ago. The range given in "Software Engineering Economics" is 50%-80%, depending on type of system and development.

    He wrote a more recent paper on the fact that project cancellations are not project failures, more indicative of practical thinking (http://www.cs.unc.edu/~welch/class/Fcomp145/media/docs/Boehm_Term_NE_Fail.pdf)

    Overall, these rates have not changed significantly in 40 years. Maybe we can take these as established baselines and look instead at what causes these failures in a specific domain like CRM since they vary from one to another.
    all-the-names-are-taken
  • RE: CRM failure rates: 2001-2009

    Overall, these rates have not changed significantly in 40 years. Maybe we can take these as established baselines and look instead at what causes these failures in a specific domain like CRM since they vary fro<a href="http://vb.maas1.com">m</a> one to another.
    maascom
  • CRM FAILURE RATES:2001-2009

    PLZ, HELP ME TO CLEAR THE DEFINITION OF "CRM FAILURE"..... what are the parameters taken to judge "failure".......hope to get the reply.
    neerja nigam