Since the earliest CRM adoption period the industry has been plagued with high profile and frequent implementation failures. CRM implementation reports from Gartner Group and Meta Group highlight that:
- More than 50 per cent of all CRM implementations will be viewed as failures from a customer's point of view;
- 55-75 per cent of all CRM projects fail to meet their objectives;
- The majority of businesses implementing CRM systems will underestimate the costs of CRM projects by as much as 40-75 percent.
When comparing CRM implementation obstacles, regardless of hosted or non-hosted platform, user adoption has been a frequently cited and long-standing factor associated with troubled implementations. A Forrester Research study published in CRM magazine asked executives where they ran into trouble most often during CRM implementations. User adoption topped the list.
Source: Forrester Research and CRM magazine
Implementation Failure Factors
The Standish Group (www.standishgroup.com) has been doing surveys on all types of IT projects since 1994. Their research, published under the title CHAOS, reveals some facts that, to most, will be astonishing. The Standish Group CHAOS database shows a staggering 31.1 percent of projects being canceled before completion. Further results indicate 52.7 percent of projects cost 189 percent of their original estimates. The cost of these failures and overruns are just the tip of the proverbial iceberg. The lost opportunity costs are not measurable, but could easily be in the trillions of dollars.
For successful projects, the proportion of projects that are completed on time and on budget is only 16.2 percent. And, even when these projects are completed, many are no more than a mere shadow of their original specified requirements. Projects completed by the largest American companies have only about 42 percent of the originally proposed features and functions. Smaller companies do better, but there is still a pretty large gap. A total of 78.4 percent of their software projects will get deployed with only 74.2 percent of their original features and functions.
The Standish Group’s research shows that being over budget is common. Delivering projects late is normal. Delivering less functionality than was originally planned is nothing special. In short, project failure is almost standard operating procedure.
A number of studies have focused on why projects fail. A study from Peerstone Research (www.peerstone.com) focuses on projects that involve application software products and external services, commonly called implementation projects. This research tells us that the number one reason for obstacles to success is that senior executives fail to lead. However, the second through seventh reasons all focus on shortcomings on the part of the software or services vendor.
- Lack of executive sponsorship and leadership
- Software and/or consulting vendor over promised
- Integrator cost out of control
- Unstable or buggy software
- Integrator doesn't understand client's business
- Software lacks key functionality
- Integrator staff lacks key skills or experience
- Internal staff lacks skills
- User adoption problems
- Integration with legacy systems too difficult
Although the number one reported cause of failure is senior executives failing to lead, we expect that this is rarely stated within enterprises with failed or challenged projects. Call it denial or politics; we expect the number one reason is usually left unstated. The result is that the blame falls to issues two through seven, where the blame is clearly placed outside of the organization on the software vendor or service provider.
The three highest risk software-specific implementation variables include the following:
- Software customization. Adding customization to an implementation increases the risk exponentially.
- Inexperienced software implementation consultants. Working with less than expert consultants increases risk significantly.
- Software integration. Software integration to legacy systems increases risk.
The Five Key Differentiaters Between CRM Failure and Success
Results from an IBM survey reveal how small changes can ensure big successes
The difference between success and failure in CRM projects has little to do with the technology, according to the findings of a survey released by IBM Business Consulting Services (BCS). The global survey, conducted by The IBM Institute for Business Value and part of IBM BCS series "Doing CRM Right," claims that only 15 percent of current CRM projects are fully successful, but that the success rate can be improved to as high as 80 percent through proper business process methodology and prioritization.
According to the survey's findings, the greatest opportunity for improving the outcome of a CRM deployment can be found not in the technological implementation, but in the processes and human factors surrounding it--what Adam Klaber, partner and global CRM leader of IBM BCS, calls "the softer elements of CRM." The survey isolated 16 steps that CRM users take during implementation, and determined the five most common differentiaters between successful and failed deployments: developing a value proposition, managing the budget process, change management, governance, and process change--none of which is directly related to the technology itself. Focusing on those five factors can boost the success rate among CRM projects to 80 percent, according to Klaber. By contrast the implementation of technology was the third least impactful step among the 16. "The core technologies are viewed as enablers," Klaber says. "Even if you do it well, it doesn't guarantee success." Steve LaValle, the CRM partner at IBM BCS who spearheaded the study, is quick to point out, however, that technology still matters. "It's not that technology is not important, it's just not a risk point. People who succeed and fail are both able to implement technology."
Another disconnect between perception and reality, according to the survey, is the importance placed on aligning the CRM project with the needs of the customers alone. Forty-seven percent of respondents said that it was "very important" to align with customers' needs, while only 21 percent thought it was "very important" to align with employees' needs. But, as LaValle notes, "Alignment to employees had the greatest correlation to success."
The survey also concludes that CRM should be managed at the corporate level with a cross-functional view of the project. About three quarters of the companies surveyed approach CRM from the divisional or departmental level, such as sales or IT, but those companies that take a more holistic view across many business units show a 25 to 60 percent greater chance of success.
The survey also concludes that how senior management perceives the value of CRM plays a pivotal role in determining overall success or failure. Although the most common perception of CRM is as a "useful, but not critical" tool, the greatest likelihood for success is found among companies that see CRM as "critical" or "strategic." Affording CRM a lesser level of importance, the study says, "actually detracts from success because it sends the message to employees and middle management that CRM is not a priority."
"A lot of these things we intuitively knew were important actually had a much greater impact on businesses [than we'd thought they did,]" LaValle says. Viewing CRM as "a way of life," for example, had a 76 percent correlation with CRM success, where as viewing it merely as a "strategic enabler" had just a 46 percent correlation with successful deployments. Those companies that thought of CRM as nothing more than "an IT tool" had a 21 percent correlation with success, but those that saw it as "useful but not critical" were actually causing harm. "When it's used as 'useful but not critical,' it drives failure," LaValle says, noting the negative 37 percent correlation revealed in the survey.
Klaber was quick to underscore what he called "the real good news" in the study's findings: "There is significant value of doing CRM, and some of the key things that enable you to be successful aren't the most expensive things." The study found that more than half of all companies think CRM is at least relevant to improving overall performance, and roughly two thirds of them expect CRM "to deliver revenue growth by improving the customer experience and retention, and influencing the development of new products and services."
In the end, Klaber says, any company can afford to eliminate the distance between success and failure. "Doing CRM right only costs you a little bit more than doing it wrong," he says, "and the benefits are tremendous." And, as LaValle notes, "it may even cost you less, if you consider the rework of doing it right the second time."