The business case for CRM should include tangible net benefits, intangible benefits, and a risk assessment.
Posted Sep 6, 2004
Companies need to implement serious yardsticks when evaluating CRM-software investments. According to a February 2004 survey by IDC, 58 percent of companies that have measured ROI-based CRM initiatives had a payback on their projects within a year. Another 35 percent received payback in one to three years. And the payback numbers are dramatic, with 52 percent of companies responding that their CRM initiatives generated an ROI of between 51 percent and 500 percent, and 30 percent of respondents saying that the return was greater than 501 percent.
The business case for CRM should include tangible net benefits (a cost-benefit analysis), intangible benefits, and a risk assessment.
Creating a Cost-Benefit Analysis
Assess three categories--implementation costs, benefits, and risk--to establish a business case for preproject planning and postproject measurement.
Implementation costs are often equally split between IT and business unit costs. IT costs include hardware and software, implementation labor, and ongoing administration and support. And business unit costs incorporate planning, training, and process change management.
Benefits typically include increases in staff productivity, cost avoidance, increased revenue and margin, and reduced inventory through the elimination of errors. Consider a handful of important improvement areas:
Biting off more than you can chew Start with smaller, more focused CRM solutions.
Over budget and behind schedule 49 percent of CRM projects are now targeted for completion in fewer than 12 months, and 70 percent are now targeted for completion within 18 months.
Poor user adoption Ease of use and training are essential to understand the solution.
High maintenance and support These costs can be 40 percent of the implementation's labor and services. Weak or incomplete training almost always raises support costs.
Isolation Failure to use CRM data across multiple groups can hamper achievement of key benefits.
Garbage in, garbage out Misguided estimates or inaccurate information lead to poor analytical results and bad decisions.
Who needs tangible results? Lack of measurement is one of the clear ROI killers for CRM. Measurement of preproject estimates and postproject standings is essential.
The Bottom Line
CRM solutions should focus on solving a specific sales issue, such as improving response rates, implementing self-service, or automating forecasting and accuracy. Projected benefits should be twice the expected cost, to assure success. Solutions should take fewer than six months to deploy. If more time is needed phased rollouts will drive a steady state of success. Solutions should provide a positive payback on the investment in fewer than 12 months from deployment. Pre- and postproject ROI analysis, including net tangible benefits, intangible benefits, and risk measurement, is essential to ensure success.
About the Author
Tom Pisello is the president and CEO of Orlando-based Alinean, an ROI consultancy helping CIOs, consultants, and vendors assess and articulate the business value of IT investments. He can be reached at firstname.lastname@example.org
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