It's common knowledge that enterprise software markets and IT budgets have taken a beating this year. Amid all the gloom, there's been one bright spot--customer relationship management (CRM). The category has been on a roll and most analyst reports project that CRM will continue growing faster than other enterprise software categories.
By 2005, Gartner Group expects organizations to cumulatively spend $76 billion on CRM software and services. Forrester Research found that 37 percent of the companies it surveyed have either partial or complete CRM installations under way, while 45 percent have CRM projects under consideration.
But CRM is headed for a black eye. In marked contrast to the warm reception they've given CRM for the last year or so, research analysts are beginning to throw some punches at the category. A recent report from the Butler Group points to a 70 percent failure rate among CRM implementations. Gartner Group reports that 60 percent of CRM implementations fail.
The biggest problem is that CRM has been overhyped by vendors, consultants, analysts--even customers and the press. The recent economic downturn has given CRM an unexpected boost as companies began desperately looking for ways to augment revenues that were beginning to go south. Despite overall belt-tightening in IT budgets, business management seems willing to sign on the dotted line when it comes to paying for CRM because it held out the possibility of driving topline growth. By providing a more complete and immediate understanding of its customers, so the reasoning goes, companies will be in a better position to offer them additional goods and services, and thereby increase revenues.
The truth, however, is that most CRM deployments don't drive topline growth - and those that do require a thorough understanding of the business case and complex planning that will likely require significant changes to a company's business process and organization. Nevertheless, business executives and IT managers often neglect making a thorough and complete business case for CRM, and just plain don't understand how the technology fits into their business.
Of course, failed technology initiatives inevitably get blamed on IT management. If you want to avoid getting banged up, it's crucial to understand exactly how CRM will fit into your organization and how it will concretely contribute to business objectives. Here are four things you can do to ensure a sensible approach to CRM and to avoid expensive mistakes:
Analyze the project's scope. Before recommending or embracing CRM, IT managers must analyze the business issues, the customer relationship model, and the exact nature of customer interactions and how they tie together as a whole.
Determine where the benefits will be. Don't embrace topline growth as an objective until you and your executive management understand precisely how CRM technology will provide those new revenues. There must be a solid business case or your stewardship will eventually be tagged as a "failure."
Know your limitations. Be realistic about whether you can effectively tie together information from different corporate databases and customer interactions. Many CRM implementations are severely limited because they fail to provide a complete and meaningful view of the customer.
Get everyone on board. CRM is primarily a business program, and it requires a genuine partnership between IT managers and executive staff to ensure that both business and technology issues are managed effectively. Also, CRM not only takes existing business process and makes it more efficient, but it also requires modification to business processes. For a CRM implementation to be successful, IT managers and executive management need to make sure that all the stakeholders understand and support the required process changes.
Like enterprise resource planning, CRM offers solid benefits to companies with reasonable expectations and with the discipline to match up the technology and the business process properly. But if you're not careful in planning and executing a CRM strategy, your company might end up nursing a shiner.