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Buyers expect vendors to help them set realistic expectations and goals, and to follow up after a predetermined time frame to ensure that those objectives are met. To meet those demands, vendors have begun to put in place structured ROI calculation tools to quantify value from the outset. "It's about time!" says Amir Hartman, managing director at Mainstay Partners LLC, a consultancy that specializes in ROI assessments.

Hartman stresses the importance of setting clear ROI goals from the start. Without clear ROI assessment guidelines, Hartman says, companies will not only fail to see what value if any is being derived from technology, but will not be able to accurately monitor the changes in business processes needed to make CRM initiatives work.

Many vendors and their customers have taken this advice to heart. Read on to see how some vendors are helping their clients plan for and get ROI before, during, and following a CRM installation. 

Pregame Planning

In the past implementing a CRM package could be compared to a no-huddle offense in football. Companies just ran with enterprise systems and hoped a good play would come together. Nowadays companies demand results, so they engage in extensive preplanning to set expectations for exactly what they want to gain from implementing new technology. These companies don't do all this planning on their own--they expect vendors to act as their partners in goal-setting. 

Brad Wilson, vice president of marketing in the CRM division of PeopleSoft Inc., says that part of his company's mantra is "to engage early," which includes creating an understanding of a customer's business process to discover just how a PeopleSoft CRM installation can help. "We have an ROI analyst tool that analyzes four specific areas of CRM: marketing, sales, support, and field services," he says. "We collect as much financial information as possible to get a good idea of how much particular business activities cost the company, and show how we can reduce that cost."

In fact, zeroing in on the key business processes a company is trying to improve--and making sure these problems can be solved using technology--should always be the first step before any money is put on the line, Hartman says. "CRM can become a dangerous catchall for a variety of growth initiatives. Companies need to be sure that they are defining a problem that CRM can solve, and then establish measures for success--typically no more than three," he says.

One company that put this philosophy to work is Nissan Motor Acceptance Corp. (NMAC), the financial arm of Nissan Motors. Sean Hicks, senior manager for consumer communications at NMAC, explains that his company's call center monitoring system was archaic. "We tried to understand why customers were calling before we decided what we needed to do to better serve them," he says.

Hicks says that when the company selected Witness Systems Inc. to update its call center monitoring systems, the sales associates also met with Witness several times prior to installing the software. The meetings were held to work out what metrics NMAC was going to set to ensure it was going in the right direction. "[Witness] even brought to light some business automations that we hadn't thought of," Hicks says. Witness suggested including metrics for measuring the cost savings of worker retention through enhanced training, which is something that Hicks says NMAC hadn't planned on measuring prior to the project.

Integral to planning for ROI is calculating the potential risk involved in achieving that ROI. "You have to come up with a scoring system," says Tom Pisello, president and CEO of Alinean Inc., a company specializing in helping companies see positive ROI. "Stack a few projected projects against each other, and see which ones provide the best benefits, while also assuming the least amount of risk."

Perhaps the biggest impediment to calculating ROI and potential risks is the simple fact that companies are so diverse. Companies have unique business models, goals, and strategies that will affect the outcome of even the smallest of CRM projects. That is why companies like Salesforce.com say there is no universal system for planning CRM results, but rather, they work closely with each customer to devise an individual ROI road map. "Every company needs something different," says Kaiser Mulla-Feroze, senior product marketing manager at Salesforce.com. "But one thing is certain: Up-front ROI justification is necessary before anyone will make an investment." 

Hand in Hand

More and more vendors are recognizing that helping customers set ROI metrics from the start is just the first step in an ongoing relationship. Vendors must help guide their customers during rollouts to ensure that implementations don't stall.

Companies should conduct regular, frequent, and ongoing "operations reviews" that keep track of project milestones and metrics, Hartman says. "[Organizations using CRM] need to allow for adjustments along the way, as they move along their own learning curve," he says. "They must keep in mind what the key value drivers for the business are, and what key variables influence those the most."

One way vendors can help prove that their product is effective is to take part in these process reviews. They also can to work with a company on the other challenging part of the implementation success equation: people. Vendors should take steps to ensure that corporate buy-in and end-user adoption is at or near 100 percent. No matter what a CRM product has the potential to do, if user adoption isn't high the CRM initiative will certainly fail.

Salesforce.com has a system in place that makes a note of every time an employee logs into the CRM system, according to Mullairzen. Companies can thus instantly see if employees are using the tool, and react accordingly if adoption is low.

"We also offer free Web-based training and tech support geared toward helping individual users to understand and embrace the system," Mulla-Feroze says. "Because really, user adoption rate is the ultimate metric; it alone is the one thing that can make a CRM project fail right off the bat."

Ken Mason, vice president of marketing at Fujitsu Technology Solutions Inc., says that Salesforce.com's training modules helped the company see widespread adoption of the software in a short time frame. "New users 
have been extremely satisfied with Salesforce.com," he says. "In less than a year we have tripled the user base, and currently have employees in sales, marketing, finance, and management using the application."

Another strategy CRM vendors can employ to assist their customer is to roll out the implementation in phases instead of as a "big bang," says John Jordan, principal with financial services firm CAP Gemini Ernst & Young. These phases should coincide with the milestones that companies set in the planning stage of the project.
Alinean's Pisello makes a similar point, noting that companies should follow what he calls the 90-day rule for CRM installations: "Any project should be up and running in 90 days, and show some sort of viability or potential for a return on the investment from the start, or else it should be axed."

Don't Forget to Write

It's easy for CRM vendors to promise the moon, but sticking around after an installation to ensure that projected ROI is realized is what makes vendors worth their upgrades.

According to Pisello, fewer than 10 percent of companies are currently doing extensive postimplementation ROI analysis. One reason is a lack of preset goals to measure against. Another is because doing so is not put into a project budget, Pisello says. "It needs to be put in as an up-front cost," he says. "Executives should expect to pay a little to find out if a project is working."

If in-house ROI assessments are not proliferating, it seems that vendors are beginning to offer more comprehensive ROI tracking, which includes follow-up consulting to get the most value from a project.

Nelle Schantz, global CRM strategist at SAS Inc., says the company is constantly following up with customers to examine whether they are continuing to drive value from SAS's CRM solutions. "We have experts on staff for several key verticals who can analyze just how well the solution is doing for a company based on its respective industry," she says. Schantz also says that companies that see little value from an installation can stop paying licensing fees to cut some of the loss involved with a failed CRM project.

PeopleSoft's Wilson says that a major part of its ROI analyst tool is what he calls the health check, which reveals just how well an implementation is doing based on the goals a company is trying to achieve. If a company is not seeing the value levels prescribed at the beginning of a project, Wilson says, PeopleSoft investigates to see if it can tweak the current platform with additional modules, or remove some nonfunctioning aspects of a platform.

When PeopleSoft implemented enterprisewide CRM for European media firm Hubert Burda Media, for example, the vendor realized soon after the implementation that Hubert Burda could achieve even more benefits by adding a sales function to the suite, so sales agents could maximize sales efforts. "Other systems are easily added to the framework," says Alexander Market, business development manager at Burda Ciscom, the internal CRM services arm of Hubert Burda. "PeopleSoft as a company has very good people, who really understand their customers' needs."

"You can't be passive about these things," Wilson says, so PeopleSoft always tries to follow up, because positive customer response equals continued business. 

Contact News Editor Martin Schneider at mschneider@destinationCRM.com

Getting Realistic About ROI

There are six key considerations to keep in mind to ensure that expectations for CRM benefits are set realistically, according to Tom Pisello, CEO of ROI consulting firm Alinean Inc. They are:

1. Having business units' buy-in is imperative to realizing savings. In CRM projects most benefits are achieved as a result of business units and users. Today business units, not IT departments, have the majority of the control over IT budget allocation. 

2. All business unit investment requirements need to be accounted for, including business process reengineering and user training--the most often overlooked issues. 

3. Model conservative user adoption, which can delay the realization of business case benefits; the user community adopts most solutions over time. 

4. Assess and model the impact of risk via risk-adjusted discounted cash flow analysis. Quantify risk based on likelihood of occurrence and potential impact, and adjust the discount accordingly.

5. Discount indirect soft benefits of the project to less than 25 percent to adjust for the risk in achieving these.

6. Don't stretch to quantify all intangible benefits. Leave them in nonmonetary terms, but figure out key performance indicators relating to intangible benefits to track whether the intangible benefit goals were met.

These could be an increased JD Powers or customer satisfaction ranking. --M.S.

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