By Neil Davey, editor
Businesses are keen to avoid any unwelcome surprises when it comes to project costs. And the process of planning costs is normally a painstaking process. So why is it that when it comes to CRM programmes there always seems to be a shock lurking somewhere down the line? Certainly there are classic mistakes that could befall any project at any company – enthusiasm about a programme running so high that nobody wants to build up a big cost case, for instance, or so much pressure to get started on the programme and be seen to be doing something that the project plan and the costs aren’t adequately investigated. But it seems there are also issues unique to CRM initiatives.
“The overall cost of putting a CRM solution in always seems to take companies by surprise,” stresses Solica Consulting’s Tony Trevillion. “CRM as a concept is a difficult thing for business to get their heads around sometimes, particular smaller businesses getting into sales, marketing and customer management for the first time in a serious way. Most companies will probably have some idea of software implementation from having put in an accounting system, but this is based around a pretty rigid framework – you have legal requirements in the way accounts have to be handled and so on – and there is little creativity that can go on within that. CRM is completely the reverse. It is something that has to fit the business process – and every company’s business process is different.”
The area that tends to receive most attention in the costs process is IT. Certainly in the age of hosted CRM systems, businesses can now be clearer than ever about technology costs in terms of licenses and infrastructure. Yet firms can still come unstuck and it is surprising how many companies assume that the software vendor’s proposal is the total cost for the project. In particular, effort relating to implementation, data migration and data quality can be underestimated.
Richard Boardman, founder of Mareeba CRM Consulting highlights several considerations. “If you are bringing data into a brand new system, how are you going to get it cleaned up – is it going to be by internal resources or are you going to outsource your tech ability? You have got your hardware to bear in mind and your database software too, things which vendors typically don’t quote. You may also require some business intelligence tools and want to integrate it into post code verification software like QAS so that you can clean up your data and prevent poor quality data getting into the system in the first place. So the bits that the vendors tend to sell are only a proportion of the overall investment required in the system – a lot of costs are hidden and are only discovered when people start to get to the implementation stage.”
Internal resource time
But there are other cost considerations that can be overlooked besides IT. Indeed, outside of the direct cost elements that come into play in a CRM programme, there are numerous areas that can fall through the cracks. One of the most commonly overlooked issues is internal resource time. CRM implementations can be hugely time consuming in terms of internal resources and once the project is complete there is also the matter of resource demands on an ongoing basis. The costs of internal resources in ongoing management, administration and change management are therefore a critical consideration.
“You may need a project manager and certainly a project team,” highlights Boardman. “Then you might need a full-time administrator. You need the resources to manage it on an ongoing basis, keeping the system up to date and useful over time.” Trevillion adds: “It is amazing how many companies baulk at training after spending tens of thousands of pounds investing in CRM. They will only train one person – maybe the administrator or the product champion of the system – to go around and train others. And often they aren’t a natural trainer. The ideal scenario is that users train on the system - or a copy of the system - as it is being implemented and they can then walk out of the training and literally start using the system.”
But it’s not just training staff to deal with the technology. People change must also incorporate a general shift towards more customer-focused behaviours. As Gary Smith, director of 2020 Management, highlights: CRM programmes are business projects with an IT component as opposed to merely an IT project. “The much bigger area is the whole issue of people change,” he says. “Sure, you have to train people to use the system, but if the goal is to have better customer relationships and provide better customer service then whilst implementing a CRM system is part of that, you also need to train people to deal with the customer better.
"You have to ensure the right culture, the right attitudes and the right behaviour to deliver a service that the IT systems just enable. You must consider the cost of doing all of that. Companies sometimes think that you can just wave a magic wand and the IT system will improve things, but you have to make sure that people are behaving in a way that reflects the customer service that you want to deliver.”
A more structured approach
When it comes to underestimating the costs of CRM programmes, Boardman believes some blame rests with the vendors, and questions their motivations – “Vendors don’t go out of the way to help companies because a vendor’s sole focus in life is selling software and if they explained to you what was involved in implementing a system they would probably sell a lot less software.”
But he also stresses that the biggest downfall is lack of preparation on the organisation’s behalf. “Companies don’t really appreciate what goes into running a successful CRM system and they miss a lot of the costs that are hidden away – and that catches up with them,” he explains. “It doesn’t mean that they don’t fork out for the resources later on. But it generally means that they are doing without in the meantime and therefore there are a lot of systems out there that quite frankly aren’t doing a lot.”
Smith agrees that preparation is the key and believes that most CRM projects are badly constructed, particularly when it comes to providing a clear definition of what the project is intended to deliver in terms of business capabilities. “If you can define what you want the company to be able to do as a result of the project, then you can define the benefits; if you can define what the company needs to be able to do as a result of the project, then you can define what you need to deliver in order to give it these capabilities,” he suggests.
“Companies often wrack their brains about the costs, but actually they should take a more structured approach and as a starting point define what you want to be able to do as a result of the project. If you are clear about that you can then be reasonably robust about the benefits and the costs. And you can’t consider the costs without building a decent benefit case to go with it.”
Forrester Research estimates that enterprises will spend nearly $11 billion annually on customer relationship management solutions to improve the customer experience and boost the productivity of frontline workers. The chastening early experiences of CRM investment are slowly fading from memory and firms are once again starting to loosen their wallets when it comes to customer relationship management. Nonetheless, there are plenty of nasty surprises lying in wait for firms if the cost process isn’t grasped.
Smith provides a checklist for a CRM programme cost plan. “You need to consider IT costs, licenses, costs of data cleaning, costs of implementation and managing the implementation, and I think often companies underestimate the amount of business input that is made, and it is an opportunity cost,” he concludes. “Then there is the matter of training, travel, getting people off of the road (if you are training salespeople) and into a room, and non-system training in terms of behaviour and so on. But the starting point is to work out what it is that you are trying to achieve – then work out the costs from that. Often that first important step can be missing.”
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