ROI on the Rise?
CRM failure stories are yesterday's news. Great return on investment is now becoming commonplace, and improving every day.
Have CRM vendors identified what was so wrong with their systems? Or have companies wised up and started to analyze business processes and establish metrics at the onset of their CRM initiatives? The answers fall somewhere in between.
A recent IDC study found that successful implementations of CRM applications have yielded returns ranging from 16 percent to more than 1,000 percent. "We discovered that ROI was so high because companies have begun to scope out very specific goals, and purchase only those applications that helped the companies do what they wanted to do," says Mary Wardley, vice president for IDC's CRM applications research. "Instead of buying big solutions, companies are taking a much more modular approach that is easier to control and measure returns [from]."
Wardley also notes that the highest returns came from companies that purchased applications that performed tasks the company could not previously execute. "If a company can now pick up leads off the Web but could not previously, that is going to provide a high level of ROI," she says. These smarter implementations are leading to faster ROI in addition to higher returns. The IDC survey found that nearly 60 percent of participants saw a payback in one year or less.
The IDC study also found that technology-related savings account for only 7 percent of the average return, while the benefits accrued from increased productivity and business process enhancements account for 51 percent and 42 percent of the return, respectively.
Sheryl Kingstone, CRM program manager at the Yankee Group, agrees that it is not just better technology that is causing increased returns. "Many enterprises implementing CRM learned from past lessons," she says. "The majority of the ROI success is through a better understanding before the project begins. For example, companies are not rushing into their CRM projects. They are documenting the status of the company before the
project, to quantify the results afterward.
"While I also believe the solutions are better, the majority of companies I am speaking with give the credit to better process versus [better] technology," Kingstone adds. "Most [companies] fixed poorly implemented projects during an upgrade."
Wardley says another point to consider in the ROI equation is that in many cases, companies are seeing more management-level buy-in and accountability for the success of a CRM project, which makes for a more flexible and results-driven CRM system: "As CRM trickles down from the top, business processes can be more easily reworked to be more productive."