Spending shareholder money on a customer relationship management (CRM) system in the fervent hope it will generate indisputable and invaluable information about customers is akin to corporate roulette. Place your bet and hope for the best.
How else can you characterize an IT investment that costs millions of dollars — yet is likely to fail at 60 percent of the companies that implement it?
Not that this sobering news (courtesy of technology consultant Gartner) is in any way curbing the corporate appetite for CRM. Despite some real horror stories from CFOs, improving customer relations remains a very high item on corporate to-do lists. Hence, CRM apps are in real demand.
The numbers back this up. Three out of every four U.S. corporations are currently implementing CRM applications. Those implementers will spend a lot of cash on the rollouts. In 2001, businesses forked out $26 billion on CRM deployments ($22 billion in consulting fees, hardware maintenance and software maintenance, and $4 billion for software licenses). That’s way up from a total CRM bill of $17.5 billion in 1999, estimates Gartner.
And don’t forget: Those numbers do not include any money invested in hardware to run the applications, nor the cost of installing a communications infrastructure.
This, of course, raises the obvious question: If customer-relationship apps are expensive, and rollouts a landmine, is CRM more trouble than it’s worth?
Sand First, Paint Second
“A lot of it is,” concedes Gartner research director Wendy Close. “It’s your basic hype cycle. Right now, CRM is at the peak of inflated expectations. Many Type A companies put big dollars into it during the previous period of rising expectations, and they will eventually encounter the trough of disillusionment — where we’re headed.”
That trough is getting wider, too. Close now expects the current 60 percent CRM project failure rate to jump to 75 percent next year.
Chalk up the failures to a potpourri of factors. Some companies run out of money for expensive CRM modifications. Others fail change underlying business processes before implementing the technology — a mistake in any IT deployment. “Technology is not the answer alone,” says Close. “But many companies think it is.”
Indeed, consultants say many corporate CRM adopters forget basic business concepts when rolling out the customer-facing apps. “They forget about the other elements involved, the change management strategies affecting people and processes, the need for training, user buy-in and collaboration,” explains Close. “And they introduce CRM initiatives piecemeal, in this department or that one and not across the enterprise, where it will have the most profound impact.”
By Close’s reckoning, only 8 percent of companies that have implemented CRM have what Close calls “true enterprise CRM” — a system that resides across many desktops and producing diverse reports on customer trends, buying patterns and loyalty issues. “CRM that is departmental only can only yield departmental efficiencies and results,” says Close.
Others agree. “CRM demands some fairly wrenching cultural changes,” says Stephen Shaw, vice president of CRM strategy at Go Direct, a Vancouver, British Colombia-based consulting firm. Shaw says if there is a single reason why so many CRM projects sputter and stall it is this: Companies aren’t quite prepared to make the required organizational and process changes.