CRM running costs eclipse up-front pricing

Analysis: Rocketing installation and running costs threaten the returns on CRM projects. Attacking costs is the key to winning the debate
Written by Eugene Lacey, Contributor
Many companies are torn over how far they should go with customer relationship management (CRM) projects, and the uncertainty is leading to massive cost overruns. Sales, marketing, finance and IT departments all instinctively understand that keeping the customer happy is good business. But agreeing on whether an expensive CRM installation to do it will bring good return on investment (ROI) is a different matter, and often the point at which departmental magnanimity ends. The difficulty for the chief technology officer who has to make a recommendation to the board is that few CRM installations are handled in-house. Typically, in addition to the 'per desk' cost of the software licence, firms must also budget for consultants and contractors to come in and analyse business processes, connect the CRM system to other bits of the infrastructure, train the staff, and provide support through the go-live and teething stages. This can add up to a lot of money. "Sometimes you simply don't know how much this is going to cost before the project has begun," says Sam Barclay, vice president of business development at StayinFront, a provider of CRM systems to several global pharmaceutical companies. "To every dollar spent on the software, add several more dollars for the consultants." Though cost overruns can turn a successful project into an unsustainable project, there is often a more fundamental reason for failure. Phil Bligh, chief executive of Inforte, a technology consultancy that has just completed a major Siebel installation for the RAC, says that "there is far too much emphasis on the front end." Firms need to think through their CRM plans and objectives much more carefully, ensuring that the CRM system is a part of an entire business delivery system, and not just a system for delivering contact and communications, says Bligh. Inforte uses a variety of benchmarking and forecasting tools to help their clients link CRM systems with demand chain management systems, so that customer service is improved, not just the tools to communicate with customers. Generally the consultants and contractors will argue that they help firms avoid CRM disasters by specifying the project thoroughly in the first place and encouraging the new customer-focus of the IT infrastructure to go deep enough to deliver real value, cost savings, and improved customer experiences in business processes. Other firms attack the cost of the consultants and the contractors head on. StayinFront's Sam Barclay says, "We separate the CRM application from the business model." StayinFront's CRM solution, VisualElk9, is widely used in the pharmaceutical business by companies like SmithKline Beecham and the Roche Group. UK managing director of StayinFront, Nigel Huxtable, believes that separating the CRM application from the business model is a "paradigm shift" in that it enables a manager to view their CRM tool in the same way as they would view Excel, thereby reducing the hidden costs of consultants and contractors.
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