• November 4, 2010
  • By Juan Martinez, Editorial Assistant, CRM magazine

A Succession of Failures

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The CRM industry has two general interests: happier customers and higher revenues. But what happens when the industry leaves users—its own customers—disgruntled? Not long ago, that was an all-too-common outcome, with lawsuits peppering the landscape. In the last few years, the frequency of failure seemed to have tapered off—see “CRM: Then and Now” (July 2010) for more on the industry’s progress—but a recent spate of high-profile bonfires has reignited some of the old controversies.

Take, for example, the recent debacle between systems integrator Electronic Data Systems (EDS) and United Kingdom–based broadcaster British Sky Broadcasting (BSkyB). EDS (now owned by Hewlett-Packard and called HP Enterprise Services) agreed to pay BSkyB a whopping $460 million to settle a lawsuit claiming EDS misrepresented its capabilities in the bidding process back in 2000. For an industry still sometimes struggling to make clear that CRM requires more than a reliance on Microsoft Outlook’s contact tab, any such lawsuit can become a significant impediment. CRM may be mission-critical to the business processes of most organizations, but why invest in a CRM system that can’t live up to its advance billing? 

To be clear: Every analyst reached by CRM agrees that the EDS/BSkyB failure was a one-off. Rarely, if ever, are there communication failures of this magnitude or major CRM technical breakdowns. The analysts also agree that errors in communication—whether by misrepresentation or not—can and should be avoided at all costs. A handful of problems may be unavoidable, but both users and vendors should be eager to avoid becoming the subject of the next blogpost by Michael Krigsman, chief executive officer of Asuret, a consulting company dedicated to reducing the number of technology-implementation failures.

“It’s very rare that there’s a CRM failure that’s an absolute failure,” Krigsman says, “meaning that the implementer spent $100 million and at the end of the day had to throw it all away.” The vast majority of CRM failures, he adds, are “exclusively a function of the buyer’s perception.” Most disputes, he explains, can be traced to a system that is late, only “sort of” works, is overbudget, or doesn’t deliver the value promised. 

Krigsman compares the installment of a CRM solution to the renovation of a house: A homeowner and a contractor might establish a budget and a timeline, but what happens when the contractor opens the walls and discovers rusted-out plumbing? The homeowner doesn’t have to change the pipes, but that will only lead to a bigger problem in a year—so he decides to redo the plumbing along with the other renovations. In other words, the project now has an entirely different scope. 

The economic downturn, Krigsman suggests, has caused businesses to be increasingly sensitive about financial waste, thus causing a greater degree of wariness regarding potential problems in the CRM market. The way to assure yourself that your CRM project doesn’t end up as the fuzzy end of a lollipop is to set concrete reference points in the project’s original contract. Sounds simple, right? So why doesn’t it always happen? 

“Companies think they’re buying [Microsoft] Excel when they buy a CRM tool,” Krigsman argues. “There’s a very strong temptation to try to think of it as a simple tool, but it’s not—it operates within the context of a business process. Companies need to know [by whom], how, and why the platform is being used. If they really understand that, they’ll have a better reference point to evaluate the vendors.” 

The results of a 2010 Forrester Research survey reveal a huge gap still exists between CRM vendors and buyers. According to the survey, only 46 percent of businesses using CRM agree that the product’s functionality matched what was promised in the sales cycle. (Another 45 percent say they “somewhat agree.”) Isn’t there something wrong with an industry that completely satisfies less than half of its consumers? 

Sure, says Forrester Vice President and Analyst William Band, but there’s plenty of blame to go around. “Customers are justified in terms of their experience,” Band says. “[But] we’ve done other surveys where we took the same group and asked them to tell us what their problems were and they identified 200 different problems. Thirty percent to 40 percent of the problems were related to the vendor and its technology. But the other two-thirds were people, process, and strategy. We found a lot of people acknowledging that they didn’t have the skills that they needed to implement the solution, they didn’t have their business processes defined, and they didn’t manage their data properly.” 

Flexibility and communication are vital, says Paul Greenberg, president and founder of consultancy The 56 Group. When putting together a statement of work, CRM vendors should establish flexibility from the get-go, ensuring that the parameters are clear from the start. That way, if the project somehow goes beyond its original scope, the following will be predetermined: the new price, the level of the scope’s expansion, the steps that will be taken to meet the additional need, and the time frame required to complete the newly defined job. The terms and conditions should be crystal clear to all parties, Greenberg says. “In the early days, you didn’t have a protocol for dealing with issues,” he recalls. “Now, absolutely everything should be spelled out in contractual terms.”

According to Ray Wang, a partner at Altimeter Group, every CRM failure occurs on one of three axes. The contract, he insists, has to span the entire implementation process, from the product demonstration to what would happen if either business were to be acquired. “You can put a clause in the contract that says every material you showed me as part of the contract is what you’re going to deliver,” he explains. “When the vendor comes in to do demos, we film them. We’re going to assume that the stuff in the demos is in the software. Is the stuff out-of-the-box? Is this something you modified and is custom? Or is this something you made up? Ask them that question on every screen. When it comes time for the contract, you say, ‘Look, these are our assumptions. This is what you’re delivering to us.’ If they back off, don’t buy the software. It’s actually pretty simple.” 

Aside from the obvious repercussions for CRM users, what’s the effect on customers when these initiatives fail? “These systems are important,” Krigsman says, “which is why organizations invest so much to select, deploy, and use them. Therefore, any glitch or problem that interferes with these systems has the potential to create a chain reaction that negatively impacts customers and their relationship to the organization.” 

In short, Wang says, failures in CRM produce frustrated customers, and it hurts the bottom line. And if businesses lose money—well, then the entire CRM industry suffers. “We can’t afford any more of these disasters,” he warns. 

Executives at EDS would likely agree.  

The 3 Faultlines of Failure

According to Ray Wang, a partner at Altimeter Group, every CRM failure occurs on one of three axes: 

  1. The software may not necessarily be the right solution for that market.
  2. The systems integrator doesn’t deliver on its promises.
  3. The customer doesn’t do a good job preparing its internal teams and planning. 

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