How to Reduce CRM Costs

By Heather Baldwin

Organizations are taking a hard look at the projected return on investment on IT spending these days. And because most CRM systems are extremely expensive, their supporters tend to project unrealistic returns that will never be met, particularly during a downturn and a bear market, says Sam Barclay, vice president of business development for StayinFront (www.stayinfront.com). This is a set-up for disappointment and failure, he adds, noting that the higher the investment, the more likely and more severe the disappointment.

Here’s the good news: you can greatly improve your chances for reaping a solid ROI by bringing down the total cost of CRM system ownership. TCO includes licenses, implementation costs, support costs and, most importantly, the costs of changing the system on a regular basis to meet changing business conditions. In each of these areas, says Barclay, it is a system’s underlying technology – the foundation on which everything else is built – that is the most significant factor in containing the TCO. So how do you reduce TCO? Avoid these three common pitfalls.

First, do not purchase a system off the shelf with the plan to fix it later. “This is actually the most costly way to go about things,” says Barclay. “Everyone who interacts with such a system will want to make changes to it, and if the system does not have the strong foundation of a very flexible software architecture, changes will be time-consuming and costly.”

Second, do not be lured by software that boasts the greatest functionality on the premise of covering all your bases. “Bloatware – or shelfware as many CRM vendors call it because the majority of the functions never get taken off the shelf – makes software more complex, more difficult to use and train and, in the end, more expensive,” says Barclay. The reason: all those unneeded bells and whistles must be maintained and modified during the product’s life.

Third, do not buy into best practices CRM software touted by vendors and consultants. Best practices, says Barclay, is really a vendor’s way of selling inflexible software and forcing an organization to fit its practices to the application rather than the other way around.

Barclay advises buyers to collaborate with a vendor that has flexible architecture paired with solid foundation functionality – one that can get customers started on the process of designing a CRM solution specific to their business. “Buyers should make certain that the business process and logic can be changed, and that the interface is not only flexible but also can be personalized by individual users,” he says. “When buyers take this approach a CRM system can be implemented at a ratio of $1 in licenses to $1 to $2 in implementation costs. That is an astonishing advantage, given that typical large vendors take $1 in licenses to up to $10 in implementation fees.”