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CRM - A Changing of the Guard: Part 1

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Posted October 4, 2002 By EnterpriseAppsToday.com Staff     Feedback

In Part 1 of a two-part case study, Bruce McCracken takes a look at the CRM vendor landscape to learn why there has been widespread reporting of CRM deployment nightmares and dissatisfaction, especially with one of the largest CRM players.

By Bruce McCracken

The promise of technological tools in customer relationship management (CRM) to be a magic wand has produced mixed results at best. It has been widely reported that client satisfaction and successful deployment has been a dream turning into a nightmare for many companies. Often the magic wand became a nightstick that beat has up the sales reps, IT staff, CTO, CFO, CEO and the enterprise itself.

What is wrong with CRM? Nothing is wrong with CRM, per se. What is wrong is how it is approached and implemented. The answer lies in the needs of the company combined with infrastructure capabilities, human capital, and budget. As CRM vendors, application service providers (ASPs) and managed service providers (MSPs) reach towards the small to mid-sized businesses (SMBs), they must realize that the potential clients know what is not a solution.

What Was and Won't Be
For many CRM users, one giant in the CRM vendor landscape symbolizes what the problem is perceived to be: Siebel. Nucleus Research of Wellesley, MA recently found that 61 percent of Siebel's reference customers report a negative ROI after two years. The study also discovered that 65 percent of customers had customization and performance problems; 78 percent said the product was not user friendly; 57 percent said deployment took longer than planned; and 55 percent said it cost more than was planned.

The picture painted worsens as the survey reveals that deployments typically ran three years, frequently costing millions of dollars at a rate of $18,000 for each user. These results would appear to quantify the sensational gloomy state of CRM deployments. Siebel has argued that the small survey size of 23 users is invalid. While this is an arguable point, it is countered by the fact that the 23 subjects were customers referenced on the Siebel Web site. Further, the second quarter reports of the goliath and figures on customer upgrades to Siebel 7 support the reports of customer dissatisfaction.

Denis Pombriant, vice president, CRM managing director of the Aberdeen Group of Boston, MApoints out that, "Siebel 7 represents a significant shift from Siebel's traditional applications. Pre-7 apps were client-server centric and version 7 represented a switch to a Web-centric model. Siebel installed some very complex systems early, before anyone developed the tools and technologies to do things in a more cost effective manner. Consequently, some of those implementations are looking tired in comparison to what can be done with more modern technology."

Nucleus Research concludes that, "Companies investing in large CRM projects are unlikely to achieve a positive ROI, because consulting and software costs outweigh returns and a long deployment process slows payback. Companies are better off investing in rapidly deployable CRM solutions with a smaller footprint and extending them over time as business objectives dictate."

It can be proposed that the Web-centric model over the client-server centric model may represent the best value option, especially as the market moves towards the SMBs. The hardware, staffing and maintenance costs become dramatically reduced. Compatibility issues that had been major problems when attempting to involve customers or partners are greatly alleviated.

Seeking Alternative Application Implementation
In the report "Customer Relationship Management: Mid-Market Holds Surprises," Aberdeen reveals the pulse of the mid market. This segment is poised to deploy CRM, but on the terms of the enterprise, not the traditional offerings and arrangements of the vendors.

As noted in the figures below, a significant number of respondents are evaluating CRM with the intent of purchasing.

Figure 1: What is your firm's involvement, if any, with the following CRM applications?
Figure 1

Figure 2: Please indicate if your firm intends to purchase the following CRM solutions of the next 12 months.
Figure 2

Whether it be a software purchase or a lease, the evidence is clear that the mid market is definitely interested...if the price is right.

Figure 3: Please indicate how much your organization would be willing to pay (per user) for the following CRM software license purchases.
Figure 3

Figure 4: Please indicate how much your organization would be willing to pay (per user/per year) for the following CRM software leased through an ASP model.
Figure 4

Aberdeen concludes that, "The fundamental challenge facing the market is the striking disconnect between what users want to pay for CRM and what suppliers are accustomed to charging."

Next week, in Part 2, we'll take a look at a specific case and point: When Kliklok-Woodman International needed to implement a cohesive, integrated CRM tool with only a limited budget available they chose salesforce.com.

Bruce McCracken is a business writer with specialization in outsourcing. His coverage areas are primarily in IT, eCommerce, CRM, HR, and supply chain/distribution with focus on small to mid-sized companies. His work, useful links, and commentaries with guests may be seen at www.brucemccracken.com. He may be emailed at abatar@bsn1.net.

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