ROI expectations fail to please customers

MyCustomer.com

Customer’s ROI expectations of major software vendors are not being met two third of the time, according to a new report from analyst firm Yankee Group.

A customer survey of 11 software vendors, including Microsoft and Siebel, found that the ROI expectations of customers were met only 62 per cent of the time. Vendors did better with total cost of ownership (TCO) which was met 73 per cent of the time.

"The results show that vendors, in general, do a much better job at estimating the cost of implementation and of maintaining their technologies, than they do in estimating the return on investment" Yankee analyst Michael Dominy said. "The vendors know their products well, but they don't understand their customers' business as well as they should."

Based on the opinions of enterprises, Microsoft, IBM and BEA Systems scored the highest among the vendors in meeting ROI expectations 78 per cent, 75 per cent and 74 percent of the time. They also scored highest in TCO at 90 per cent, 86 per cent and 80 per cent, respectively. Siebel scored the lowest in ROI at 56 per cent, and Siebel and Vignette scored the lowest in TCO at 69 per cent each.

The Yankee Group ROI / TCO report didn't ask respondents to rate specific products, but to to rate software companies by name. "Our survey of 300 end users revealed that vendors’ ability to meet TCO and ROI expectations varies greatly" says Michael Dominy, Enterprise Services director. "The best TCO performer met expectations 90 per cent of the time. Interestingly, a different vendor performed best for ROI expectations, indicating that the ability to deliver business value requires more than just calculating TCO.

"Every vendor evaluated, except one, met TCO requirements more often than ROI requirements. Therefore, one can conclude that calculating ROI is more difficult than calculating TCO and that vendors need to invest more resources into understanding how Web applications deliver business benefits."

The full line of vendors and their results was as follows, with ROI coming first: in brackets: IBM (75, 90); Microsoft (78, 86); BEA (74, 80); Sun (72, 71); Oracle (65, 78); SAP (65, 73); Plumtree (64, 74); Vignette (64, 69); PeopleSoft (62, 75); Open Text (61, 71); and Siebel (56, 69).

The emphasis on ROI as part of CRM procurements is also seen in a recent study by International Data Corporation (IDC) - IDC's study, "Worldwide CRM Applications 2004-2008 Forecast and 2003 Vendor Shares". IDC believes ROI and TCO will not go away anytime soon, but may in fact be intensifying as market reality points to an increasing need.

"The environment has fundamentally changed with respect to purchasing patterns, from optimistic buying to increased requirements for a clear return on investment and benefits," says Mary Wardley, vice president of IDC's CRM applications research. "Happily, customers are finding both and are achieving a meeting of the minds with suppliers".

But ROI is ranked alongside cost and functionality of CRM applications as the three top issues for UK companies in the small to mid-market space, according to a surve by Sage CRM. The survey results are based on a questionnaire completed by bSage CRM’s SalesLogix UK Business Partners in May/June 2004 about their customers’ buying patterns and attitudes.

ROI was ranked the most important issue for customers evaluating a CRM solution. Next was cost, followed by product functionality and integration with front and back-office systems.

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