Airing CRMs' dirty laundry

The biggest problem of the CRM industry right now is the startlingly high failure rate in implementation. A round table of 12 award-winning CRM vendors takes an in-depth look.

The sins of enterprise resource management software companies are being visited upon the customer relationship management business, which has overpromised and undersold its abilities, according to market research firm Gartner Group.

Up to 60 percent of projects to install CRM systems fail, Gartner says. This startling assessment seems to run contrary to vendors' claims that highly integrated, Web-enabled CRM systems provide sales and customer support personnel with unparalleled access to the information they need to get the job done.

Stories of delays, clunky programs and unfulfilled expectations are making companies hesitate before plunking down six- or seven-figure investments in the software. And at a time when companies are re-evaluating their priorities in light of the economic downturn, this is a report card the industry can do without.

Is CRM boom or bust? YES

Brent Duncan, now a director of marketing at Cleanscape Software International, which sells software for developers, tells the story of a $125,000 CRM package installed at a former employer. "It became shelfware," Duncan says. The former employer purchased new customer service software for its entire organization, but didn't install it beyond the customer service department. Marketing and production modules were bought, but went unused after management considered how to integrate the new software. "It became an infrastructure question. We could not get management support for implementing those modules. Everyone used their own systems," and productivity gains were lost, he says.

There are plenty of success stories for vendors to point to, though. Siebel Systems, for example, recently published a half-inch-thick booklet detailing its customer success stories. Press Access, a public relations firm, used a CRM platform to create a sales application that now accounts for about 80 percent of new revenue, says Rochelle Nemrow, vice president of product strategy at Press Access.

The Limited, which operates a number of online stores, including Lane Bryant and Victoria's Secret, has used analytical CRM software to link separate product databases. It achieved a return on investment of 400 percent when it tested the software to see if Victoria's Secret's apparel customers will buy beauty products as well, says Bill Lepler, vice president of CRM at The Limited.

But if the industry is to truly achieve the financial returns and improved levels of service that CRM systems promise, changes must take place. CRM vendors say customers must take more responsibility in the implementation process.

At a roundtable interview with 12 award-winning CRM vendors that were named last month as having the best overall products in the industry by consulting agency ISM, vendors also admit to playing a role in the problem as well. Here are excerpts from that discussion. Questions were asked by reporters from Interactive Week and Selling Power Magazine. Q: How do you define CRM?

Vic Guerrieri, vice president of sales at Remedy: The art of creating e-dialogues.

Jim Goldfinger, vice president of CRM strategy at PeopleSoft: Managing profitable relationships.

Jon Wurfl, director of CRM communications at SAP: Sensing and responding to customers in real-time.

John O'Connell, chairman and CEO of Staffware: It's a business approach that builds customer loyalty and retention.

Margaret Gerstenkorn, business development associate at Oncontact Software: Conquering barriers that prevent customers and companies from knowing each other.

Barton Goldenberg, founder and president of ISM: Our industry has not done a good enough job to make that value proposition clear. I define CRM as a business approach that integrates PPT [people, process and technology] to maximize relations with all customers. It's not a one-off, but a complete approach that coordinates customer-facing operations like sales, marketing, customer service. It should help sales, raise productivity, improve employee morale.

Q: The biggest issue that CRM customers are concerned about is the failure of CRM implementations, and return on investment. How do you define failure of implementation?

O'Connell: It's the inability to achieve measurable business benefits. In that sense, we're in danger of emulating the ERP [Enterprise Resource Planning] market. It's sometimes oversold, overambitious.

Q: Is it unrealistic expectations?

Alan Goldsworthy, president and CEO of Applix: It's not that simplistic. People expect functionality. Failure occurs when business processes don't align with functionality. Implementation helps because you discover problems in business processes.

Q: What can you do to prevent failures?

Goldfinger: We're a little guilty as vendors. We don't always see that as our responsibility. Sometimes we think that's their responsibility in their role as consultants and systems integrators. Vendors can't force management to take ownership of a project. We can maximize their chance of success.

Guerrieri: It takes a passionate executive. We've been successful when we have a backer in the customer.

Valerie Doyle, senior director of product marketing at Nortel Networks: There's a post-implementation strategy: What do we do to help after the sale?

Goldsworthy: We see a lot of CRM deployments fail because they forced companies to define the process too early. The entire deployment methodology needs to change when a company changes. We have one customer that when we started out was a $36 million company. It just recorded $108 million in revenues in 2000. Everything we did is no longer as usable. You have to adapt the software.

Goldfinger: It takes user buy-in. You're constantly selling. There's this feeling that once we've negotiated it and implemented it, and the calls come in, we've got it won. That's not the case.

Gerstenkorn: We agree. References are a huge issue in building trust. If users don't hear that someone else has a good experience with a product, they'll have doubts.