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CRM conjures up a
variety of definitions, ideas and fears with many people
involved in automating their company’s sales,
marketing and support functions. Unfortunately, often
times the costs associated with implementing such an
important project are not understood, or realized, until
it is too late. Statistics show that between 50 – 80%
of all major CRM projects fail due to a variety of
reasons – improper funding not being the least
important one. Failure doesn’t just mean the project
was thrown out either. It includes projects that were
delivered late, missing key functionality and/or
excessively over budget. It’s the budgetary issues
that will be addressed in this article.
Since a major part
of the planning for a CRM solution must include costs,
this is a critical concern within most companies. But
what should the budget include? It’s easy to assume
that the cost of the software will comprise the majority
of the budget. While it could represent a major
percentage, depending on what product is chosen for
implementation, it typical should be just one of the
many pieces that make up the whole. In fact, depending
on the company’s exact needs, plans and requirements,
the software cost could easily be the smaller percentage
of the total cost.
Insight
Technology Group, a consulting firm specializing in
researching how companies are reengineering the way they
sell to and service customers, recently surveyed more
than 200 firms regarding how they budgeted for
first-year expenses for hardware, software,
customization, integration, training, and support. The
average cost was $10,385 per user. However, 37.5% of
those surveyed stated that they ended up over budget and
didn’t deliver on all the intended functionality.
Therefore, if we take into account only those projects
that met or exceeded expectations, then the first-year
investment to successfully automate a salesperson is
$17,000, according to the survey. Obviously,
implementing a CRM solution is not something to take
lightly regardless of the product that you choose.
Although, these figures are quite high and represent
large-scale CRM implementations, the point is still
valid for smaller scale projects -- the costs can and
will be considerable.
COST BREAKDOWN
As mentioned
earlier, the software cost is only one piece of the pie.
Additional costs include hardware, customization,
training and support – not to mention other inherent
costs associated with lost productivity of the
individuals while they’re learning to use the system,
downtime associated with implementing the system, and
other soft costs. Let’s take a closer look at each of
these items.
Hardware
It’s not enough
to say, “My sales reps already have laptops, so my
hardware expenses are already taken care of.” When you
consider that the system may require their existing
laptops, and even the desktops, to be upgraded with more
memory, larger disk drives, faster modems, and more of
the latest technologies to ensure their systems are
fully functional, then perhaps they are not quite ready
after all. Add to that the costs for servers, networks,
modem pools, and other hardware necessary to ensure a
proper infrastructure exists to support the users, then
the costs for hardware can escalate dramatically.
Today there are a
variety of alternatives for remote users to access the
central system and database. If your remote users need
to have access to their customer and calendar
information while not being connected to the central
database (such as while at a customer site or in an
airplane), then they will need to use a synchronization
mechanism to share their local data with the central
one. As such, their local system will need to have a
large enough disk drive to accommodate the local
database, as well as more memory to run the application
locally and a fast connection to transfer all that
information as rapidly as possible.
Alternatively, if
they only need to access their information while
connected to the central system, then their memory and
disk drive requirements won’t be as strict since they
will typically only need a high-speed Internet
connection for real-time access. While this method does
not require the robust systems in the field as the
previous alternative, it does prevent the users from
accessing their information when not connected to the
central system. Either alternative must be understood
and decided upon prior to implementation so that the
proper infrastructure can be established and the
expenses budgeted.
A good rule of
thumb is that each user’s hardware requirements could
range from $3,000 to $6,000, which includes the latest
technology, accommodates future growth and takes into
account the sharing of the central system they will be
accessing either locally or remotely. Most importantly,
don’t skimp on hardware technology. There’s nothing
worse than a sales person losing valuable selling time
waiting for their ill-equipped system to respond to a
query, or even worse, come back from the repair center.
Software
There
may be fifty ways to leave your lover, but there are
over 200 ways to automate your sales force. That’s how
many products, by some counts, are available today that
do some sort of sales force automation, CRM, or contact
management. CRM software products vary dramatically in
price and functionality. Prices for high quality and
fully functional CRM/SFA products range from around $300
to several thousand dollars per user. Add to this the
cost of software for e-mail systems, presentation
software, office suites, quotation systems, proposal
writers, and more, and you can easily see how a user can
carry around $2,000 to $5,000 worth of software on their
laptop.
Much
of this software, such as office suites, comes with the
system, which reduces the impact and cost dramatically.
The biggest variable here, however, is the CRM product
itself. In order to address the needs of a typical sales
and marketing organization, the proper CRM product
should handle all contact management functionality,
calendars and group scheduling, opportunity management,
forecasting, manager reports and analysis, reliable and
fast synchronization (if necessary), automated
processes, imbedded e-mailing, Internet access, and
more. It should also be scalable from a small number of
users with a small database up to hundreds of users
perhaps spread over multiple networks (which synchronize
together) and all seamlessly accessing a very large
database. This high-end scalability requires a CRM
product that supports a client/server architecture.
Also, add to the cost of the software around 20% of the
manufacturer’s suggested price for annual support and
maintenance.
One
more thing to add at this point is the additional cost
for the installation and setup of the software, since
the software price itself does not include this required
effort. Depending on the product chosen, this can take
just a few days, or span several weeks or months, which
is the case with many higher-end products. Expert
consultant rates for this type of work can range from
$1,000 to $2,000 per day.
Customization
Since
every organization is different, and every department
within an organization is equally diverse, it is
imperative for a CRM solution to be tailored to meet the
unique requirements of its users. These customizations
vary wildly depending on the requirements of each
department and user as well as the priority of these
individual requirements, which dictates when they need
to become available. Clearly, it is advisable to roll
out changes to the system in reasonable increments over
time, thus allowing the individual entities to absorb
them, learn them, and use them as they become available,
without being inundated by too many new features and
functions simultaneously.
When
searching for an appropriate CRM product, several key
issues need to be considered, beyond the basic
functionality. Customizations vary depending on the
capabilities and flexibility of the product purchased,
as well as:
·
How difficult the
product is to customize,
·
Who does the
customization (you, the vendor, a value-added reseller,
all the above, or none of the above),
·
Whether or not the
modifications affect the core product versus external
files that provide for more flexibility and ease of
update, and
·
Whether the changes
and additions can be rolled out in phases over time.
For
example, several products are not only easy to use, but
do not require someone with programming skills to
customize them. The more complex the end-user
requirements, however, the more a trained, certified
specialist may be needed to assist in the customization
effort, thereby relieving the end-user of having to
become an expert at programming. Frequently, value-added
resellers who are specialists in a specific product, or
sometimes the vendor themselves, initially perform the
customization work. As the end-user becomes more
proficient in the product, they do some, if not all, of
the on-going customizations. You need to look for those
products that provide flexibility and strong
customization capabilities that you need, yet allow for
a phased rollout approach so your company can scale your
CRM project without causing major disruptions to the
productivity of your organization. Obviously, the
specific product that you choose based on your
requirements will dictate the price for this portion of
your costs.
The
costs for performing the customizations will vary and
will probably continue at some level over time. While
this portion of the cost of your system is difficult to
estimate, you can limit some of the costs by controlling
the amount of customization required initially, and at
the same time planning for future changes, thereby
spreading the costs over a reasonable period of time.
The scope of costs for customizations can range from
hundreds to thousands of dollars per user. One must be
careful to remember that a lot of customizations on the
front end not only increases the initial rollout cost,
but also can dramatically delay the release of the CRM
project to the users and increase the training time
required before a user can adequately run the system. If
we remember the earlier discussion about why many CRM
projects fail, exceeding the budget and project delays
are two of the top culprits.
Training
Good
training is required – Period, end of story. Anyone
who thinks that they can release a powerful system that
will automate and streamline their operations and
increase the productivity of the users without proper
training is fooling themselves and risking a failed
project.
First,
training might be required for basic computer usage,
such as Windows, word processing, presentation software,
e-mail, and the like. It shouldn’t be surprising that
many end-users out there, including sales reps, are
still not very familiar with using computers. Hence, an
inventory of the skills of each user needs to be
performed and then this sort of training should be
provided to those whose inventory indicates that they
need it. Second, there’s basic usage of the CRM
product itself; such as which buttons perform which
functions, learning the basic user interface, mail
merging, using the calendar, email usage, and basic
functions.
Third,
and most important, is the specific ways in which the
product should be used within your business. In other
words, how does the system help to execute your
processes? This includes -- what business processes
should be followed, workflow management, document
management, opportunity management, how it is applied to
your unique forecasting methodology, and task
delegation. Basically this is training on how the system
should be used to reflect the way your company uniquely
wants things done using this new technology.
Training
costs can range from $500 to $1,000 per user depending
on their pre-existing knowledge. Typically, a half-day
course on basic system usage for the novice, plus
another day on the new CRM product, should cover the
basics. Another full day or two may be needed for
learning to use the system as your company intends on
having it used (i.e. your business processes). In some
instances, the very expensive, highly customized CRM
products can require 1 to 2 weeks of training per user
depending on their job function. Training rates can
range from one to several thousand dollars per day per
class, or when based on a per-student model, can cost
several hundred dollars per student per course. Don’t
forget that you must also add specialized training
classes for those individuals who must manage, support,
and maintain the system in-house.
Training
should not end when the student leaves the introductory
class. On-going training is necessary to reinforce basic
concepts and policies as well as to introduce new
functionality that gets added to the system at the time
that this functionality is being released to the users.
Sales people especially are too busy to stop and learn a
new system, even if you initially only rolled out basic
functionality. Therefore, you should expect the rate at
which users adopt the system to be slow and to provide
additional training opportunities to remind them what
they learned in their initial class. As you roll out new
features over time, don’t forget to train them on
those as well. It is recommended that you provide the
initial training in person and in a classroom in order
to provide synergy and to stimulate teamwork. The reps
will work with and help each other as they are learning
the new system. The more advanced and experienced reps
will help the less experienced ones. However, some of
the on-going training can be handled remotely via
web-based meeting tools or standalone computer-based
training products. Be sure to factor all this into your
budget.
Support
Finally,
support and maintenance must be included in your cost
estimates. Typically, the CRM products available today
offer annual support and maintenance packages for around
20-25% of the manufacturer’s suggested retail price of
the software product itself. This includes free and/or
discounted updates and upgrades as well as phone support
for technical issues. Additionally, or perhaps in lieu
of the support package offered by the software author,
the reseller who helped install, customize and train
your company on the CRM project can provide support for
an additional fee.
You
also cannot afford to forget to factor in the additional
costs for your own internal help desk. This would be the
individual(s) your users will call back at your
headquarters when they need help. Also, loaners for sick
hardware, replacement units, and similar costs should be
included in your estimates, as well. Industry estimates
for support tend to run between $1,000 and $1,500 per
user per year.
SUMMARY
At
this point, you’re either intrigued with the prospect
of implementing a system or frightened to death by it.
Regardless of your attitude at the moment, you need to
be more aware of all the costs associated with fully
implementing a CRM solution. We discussed mainly hard
costs in this article, including hardware, software,
training, and similar expenses. However, there is a
broad range of soft costs as well. One of the major soft
costs in a project of this type is the lost productivity
attributable to the learning curve associated with the
new system and the challenge of adapting it to their
work environments. You should expect work to slow down
and perhaps even expect sales revenue to decrease while
you get your organization to change the way they operate
on a day-to-day basis.
This
challenge can occur whether you use technology or not.
When you introduce new processes into your business,
even if done on paper, the way people work will change
and there will be a certain amount of lost productivity
and resistance to the change. When you add to this the
technology that needs to be mastered, additional
productivity can be lost. Thus, you must factor in these
soft costs as well and provide some forgiveness and
latitude for your people while they acclimate themselves
to this new system.
Yes,
all of these costs, both hard and soft costs, add up to
a lot. But before you say forget the whole idea, think
about what it costs to not have your organization
operating more efficiently and productively. Your
company today is dealing with much more challenging
circumstances than in the past. Tools and techniques
that worked only a few years ago can no longer be relied
upon to help increase sales. You need something to help
your team overcome the challenges of today’s selling
environment. The bar has been raised. That’s where the
CRM system comes into play. By all means, consider your
CRM project as an investment, not a cost.
Russ
Lombardo
President
PEAK
Sales Consulting
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