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License To Waste

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Posted March 13, 2003 By Robyn Greenspan     Feedback

Nearly half of the CRM software licenses that were bought to improve the consumer experience are languishing on shelves — unused.

Customer relationship management solutions are gathering dust as Gartner, Inc. found in a December 2002 survey of 631 companies that nearly 42 percent of the total number of software licenses bought by businesses go unused. Furthermore, mounting maintenance fees contribute to the $1.27 billion that Gartner estimates have been spent on unused CRM applications.

"Through 2005, businesses that continue to buy more CRM software licenses than they need — and those that deploy less than they purchase — will incur a 20 percent to 30 percent increase in total cost of ownership compared to businesses that carefully plan their CRM software license purchases," said Beth Eisenfeld, research director for Gartner.

So what compels companies to turn software into shelfware? Companies may have unrealistic expectations of what CRM applications can solve — buying into the "magic bullet" theory of CRM — and some may have been fearful to miss the boat on the customer enhancement solutions.

Gartner believes that companies are often lured by the big discounts that are offered at the point of purchase, or the company expects to be using them the immediate future.

"Assuming that a business will need more licenses in the future also assumes that the business will continue to grow and require the additional licenses," said Eisenfeld. "Unfortunately, that may be more of an optimistic rather than a realistic way of purchasing."

These unrealistic purchasing habits can be costly: Jupiter Research (a unit of this site's corporate parent) projects that spending on CRM applications will increase from $9.6 billion in 2002 to $10.4 billion in 2003 and will soar to $18.8 billion in 2008.

A Morgan Stanley survey of 300 CIOs found that CRM apps are fighting for space in the software closets. While 12 percent admitted to having unused CRM licenses, one-third said that they had unused database licenses. Nearly 20 percent reported unused ERP (enterprise resource planning) licenses, and just over 10 percent reported unused SCM (supply-chain management) licenses.

Additionally, a poll of 2,236 people from organizations based in 49 countries found an increase in the number of OLAP (Online Analytical Processing [define]) products that are sitting on shelves.

"While modest levels of shelfware are normal and reasonable, high levels are more likely an indication of curtailed projects or over-purchases of software," said Nigel Pendse, analyst and author of the report. "We were disappointed this year that shelfware levels had risen to the point that organizations have typically deployed only 56 out of every 100 OLAP licenses they have purchased, with the other 44 remaining unused. Many of these will probably never be deployed."

Do you believe your organization procured an excess of technology over the past three years relative to current needs?
    Large companies Small/midsize businesses
Yes 10% 9% 11%
Probably 14% 20% 8%
Not sure 3% 69% 80%
No 74% 4% 2%
Source: CFO Magazine and Morgan Stanley

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