CRM can bomb big

By Susan Breidenbach
Network World, 09/11/00

Despite the excitement over customer relationship management's potential, actual implementations fail often and big.

For example, of 202 CRM projects consulting firm Insight Technology Group reviewed last year, nearly one-third of the companies - 31.7% - reported no return for their efforts, while 37.6% reported only minor results.

"If CRM and e-business projects are managed by two different groups, it's a recipe for disaster," says Jim Dickie, managing partner at Insight Technology, in Boulder, Colo. The firm has been benchmarking CRM projects for eight years.

Many companies start CRM by tossing up a Web site with an e-business application. They have a vague notion of integrating full customer support sometime later, but when they finally get around to it, a complete redesign is usually needed, Dickie says.

And failure will mean heads roll. These projects cost big bucks. Insight Technology found the companies surveyed spent an average of $9,894 per CRM user per year on software, hardware, customization, training and support. However, the respondents who reported achieving significant returns on their CRM investment spent quite a bit more - $16,003 per CRM user per year.

CRM projects also are aimed at automating sales and marketing professionals, who are widely regarded as the Cro-Magnons on the e-business evolutionary scale. "Marketing and sales are not traditionally IT-enabled groups," says Howard Berg, president of Berkeley Enterprise Partners, a Boston firm that provides consulting and systems integration services. "They don't have a history of providing detailed specifications to the IT department, so the IT people are kind of being set up to fail."

And however daunting the technology issues may be, sorting them out is actually the easy part of CRM. Technology accounts for no more than 20% of the challenges, estimates Barton Goldenberg, president of ISM, a Bethesda, Md., company that publishes the annual "Guide to CRM Implementation." When CRM projects stall, he says, they usually do so because of the people involved. Change management is by far the biggest component, and you can't get started soon enough.

When Sega of America in San Francisco implemented an E.piphany CRM solution to help manage its distribution channel, the installation went smoothly and was completed within the scheduled 12 weeks. However, the company met some resistance from its employees - partly because they didn't want to give up their old tools, but mostly because they felt shut out of the up-front planning, says Steven McIntosh, vice president of IT for Sega of America in San Francisco.

"People felt they weren't involved in the development process enough," McIntosh says. "That surprised me, because I thought they were. They had to get their hands in the pie so they felt they had some ownership."

Users, particularly salespeople who tend to be mavericks out on the road, may resent the "Big Brother" aspects of a CRM system.

Staff Leasing, a provider of payroll and HR services based in Bradenton, Fla., was moving from a paper-based environment to CRM, so its users had to deal with some serious culture shock. Employees were uncomfortable about giving up the unwieldy paper folders, which had to be literally ripped out of their hands in some cases. But a bigger issue was the service-level standards created by the automation.

"If a client calls in with a problem that is not resolved in 24 hours, the system automatically notifies the agent's manager," says Lisa Harris, chief information officer of Staff Leasing. "It imposes a discipline on people and requires a much greater attention to details. It makes the entire organization more accountable to customers, which is what you want."

CRM also offers a picture of how salespeople are spending their time. "It keeps tabs on salespeople, and they don't want that," says Cassandra Millhouse, lead analyst of business solutions for Ovum Ltd., a market research firm in London. At some companies, salespeople have deliberately entered incorrect information to sabotage CRM systems, she reports.

"You're talking about integrating operations across sales, service and marketing departments, and these people don't even like each other," Millhouse says. "They each have a different perspective on the business."

But, done right, the payoffs of CRM are big. Staff Leasing made a multimillion dollar investment in an Oracle CRM solution, and expects to recoup the entire amount in less than year. Oracle's consulting group helped with the implementation, which took 100 days. "It finished on time and on budget," Harris says. "It's been seven months now, and it hasn't had to come back."

Reducing risks through renting

In fact, analysts advise you to consider service options when analyzing software. Some CRM vendors offer customization, rapid development and deployment using preconfigured components, and even hosted options.

"With our application service provider model, we can get customers up as quickly as 30 days," says Lawrence Catchpole, chief technology officer of WebTone Technologies, an Atlanta CRM outsourcer. WebTone connects customers to its managed backbone network, which supports IP telephony and multimedia applications across distributed call centers. Prices start at about $400 per seat per month.

Risk reduction and the need for a speedy implementation are driving some companies toward CRM ASPs. A single monthly charge provides predictable cost.

"Initially, the ASP model was aimed at moving second-tier companies up to first-tier applications they couldn't afford to implement. That's no longer the case," says Wade Myers, chairman and CEO of Interelate, a CRM ASP in Eden Prairie, Minn. Large companies face tremendous pressure to launch e-business initiatives. They don't want to pay a fortune for software, hardware and consulting services and then wait a year to see if they get any results, he says.

A batch routine pulls information from the client company's back-office systems into Interelate's CRM application on a daily, weekly or monthly basis, using an FTP session or a VPN. A direct, real-time connection would require a dedicated, high-speed line, but Myers says customers aren't asking for one yet. Most of Interelate's customers pay monthly fees between $50,000 and $150,000.

Enthusiasm for CRM continues to build despite high implementation failure rates. Unlike ERP systems and other IT resources that merely improve operating efficiencies, CRM can increase revenue and profits directly. It is a watershed application that raises the visibility and status of IT organizations to a new level.

Start small, pick a technology that is scalable and extensible, and don't get buried in all the hype generated by CRM wannabes. There are sound CRM players with fairly comprehensive offerings that can be implemented incrementally. Take a good look at outsource options, and resist efforts to overcustomize and overintegrate if you decide to build your own CRM infrastructure.

Remember, while back-office systems assume predictability and a minimum of workflow variance, front-office applications are dealing with a real wild card: the customer. Like it or not, this customer is king in the Internet economy, and has to be treated accordingly. Act as if your compensation were tied to customer-oriented indicators like customer retention and customer satisfaction, because your CEO is starting to think along those lines.

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