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CRM Journey
CRM Investment

The road to CRM starts with Contact Management, morphs into Sales Force Automation, and may ultimately lead to full blown CRM.

quote Surely there comes a time when counting the cost and paying the price aren't things to think about any more. All that matters is value - the ultimate value of what one does. quote

- James Hilton

What are the costs of implementing a Client Relationship Management system?

The first and most obvious cost is of course the licensing costs of a purchased software solution. This can vary from under $200 to the six zeroes investment depending upon the number of users involved, the size of the company and which application you chose. Whether your solution is hosted or purchased, the majority of CRM vendors require software maintenance fees for support and upgrades. These are usually annual, recurring costs for the life of the software. When you’re presenting your business case for your Client Relationship Management system, include these in calculating your Return On Investment (ROI).

With the advent of hosted, web-based CRM solutions, midsize businesses can play in the big leagues. Subscription costs as little as $65.00 USD per person per month exist for true CRM hosted software. These solutions require little or no investment in IT infrastructure, and even more importantly, IT personnel. Be aware that you may be tied to a contract for an agreed upon duration for web-hosted software.

If you don’t already provide PCs, laptops, or PDAs for your sales personnel, then a hardware investment will be necessary. This applies whether your CRM software is hosted or not. You can obtain the equipment either through purchase or lease. Depending upon the requirements for the software, you may be forced into purchasing new hardware anyway, if your technology is not current. Be sure to get hardware requirements from your Client Relationship Management vendor before making a hardware procurement.

Implementation costs, which include the costs of hiring consultants to help you setup and use the software, can be difficult to predict accurately. Some hosting vendors will include a fixed fee implementation in the monthly fee, most do not. Most vendors selling the CRM solution will not provide a fixed implementation fee. The majority of firms involved in implementing software provide only estimates based on service hours. Very few put a ceiling on consulting hours, and costs can spiral.

Professional, experienced consulting firms will tie an implementation contract to the scope of work to be performed. Having your business processes documented and refined can reduce the hours required to implement a CRM solution significantly. If you don’t have them documented, the professionals you hire will likely have to do so, and this will add to the cost. The general rule of thumb is to expect to spend a minimum of the same amount on implementing the software as on the cost of the software package.

Alignment of Business Needs and Processes
If you don’t align and define the benefits and business processes for each aspect of Marketing, Service, and Sales, your CRM implementation is very likely to exceed the budgeted estimates and under-deliver the benefits. Dividing the Client Relationship Management implementation into several, short, strictly defined phases for each of the departments can help reduce costs and show continuous successes. Each department and phase should have specific objectives and each should be tied to specific cut-off measures and timelines. If not, your implementation costs will escalate. These hidden costs are the principal reasons almost half of all Client Relationship Management implementations fail.

Because culture varies from company to company, and tolerance for specific software behaviors prevails, some customization of the CRM software often occurs. Each customization will have a cost, and most vendors will quote you an estimate for this, based on hourly rates. If the customization scope expands, expect to receive another cost estimate. Generally, customizations are not fixed-fee contracts, and expanding customization scope is the big budget breaker of many implementations.

Ongoing Training and Support
Initial training and support are integral parts of a successful CRM implementation and are usually included in the one-time implementation contract fee. However, ongoing fees for these add to the costs, and unless your sales team has no turnover, you can expect to have to pay for this. Since we can expect a Client Relationship Management implementation to be constantly advancing, you should include changes or customizations in your ROI calculations on an annual basis. This applies particularly if you are doing a Total Cost of Ownership analysis.

If you have disparate systems, such as one for financial software and one for Client Relationship Management, then you are faced with an integration decision. Do you want them to talk and share information with each other? If the answer to that is yes, an integration between the two systems is required. Do you have other systems in place, and if so, does the CRM software need to be integrated to those? Add the costs of developing this integration to the implementation costs.

There are at least three ways of developing an integration, using your own IT staff, hiring a specialized systems integrator firm or using the CRM vendor. Each of these methods has added hidden costs, such as changing knowledge repositories (the likelihood the same team who wrote the original integration is the same one who maintains it for the life of the software), maintaining separate databases for CRM and Finance, and the effort to synchronize them. Again, these are costs that are difficult to quantify, but plan for their existence.

If you elect to remain with separate solutions for both areas, then there are other hidden costs. The information from both systems will have to be entered twice, (double entry), once in the CRM software, and then again in the financial software. If two separate departments are entering data, then there is the chance of entering incorrect information in either of the two. Correcting the erroneous data adds further costs, but there is also the possibility that incorrect information remains in the system, and may result in misinformation, another hidden cost. In addition to the cost of developing the integration, there is also the cost of maintaining it through upgrades of both software packages over the life of the software systems.

Future Upgrades
Web-based or hosted Client Relationship Management solutions are the most cost effective on the market today. There are several hidden benefits such as the leverage gained from leading edge technology. When Microsoft comes out with a new operating system, such as Vista or Longhorn, your hosted solution will upgrade in the background at no additional fee to you. This means no additional investment in software purchases, no incurred IT labor time, no down time, no data loss for the new technology, but, on the other hand, there may be a cost of training your personnel on the new software upgrade.

If the solution you identify is not web-based, then there is a significant infrastructure investment required in hardware, operating systems, software, and the IT personnel necessary to maintain and customize everything. If you have your own IT staff, then there is always the hidden cost of being two versions behind on everything while your IT personnel play technology catch-up. That oomph of nimbleness and speed deteriorates, and productivity sags. These are all qualitative costs that are difficult to quantify.

In some states, such as Florida and Louisiana, disaster costs may apply. If your CRM solution is in-house and you are located in one of these states, what are your backup solutions? What are the costs for a hot-site data center? If you are in the customer service or customer support industry, these are serious contingencies to consider. Imagine being without telephone or email contact with your client base for a week, perhaps three – would your business survive? Again, these are all costs associated with implementing a CRM solution.  More CRM Journey

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