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Home > CRM ROI: Fact or fiction? |
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Getting analysts to agree on the potential ROI of CRM is nearly impossible. Several reports published in 2003 claimed that the return on investment (ROI) from recent CRM implementations had been dismal, with eight out of 10 projects failing to deliver on ROI promises, and project failure rates typically running between 50% and 70%. Other reports were more optimistic, estimating that about 70% of companies said their CRM initiatives had exceeded original ROI expectations. Why the big difference in the results? Some blame analysts for a lack of clarity. But the biggest problem is a failure to measure success. Only about 20% of companies surveyed were able to demonstrate ROI for their CRM investments. Additionally, most companies say that, when it comes to determining value, intangible benefits are more significant than cost savings. Yet companies often fail to establish key performance indicators for judging these intangible benefits. [TABLE] | |||||||||
Companies need to use yardstick techniques when evaluating CRM software investments. Metrics are essential. A formal business plan must be in place before the project begins -- one that quantifies the expected costs, tangible financial benefits and intangible strategic benefits, as well as the risks.
According to a February 2003 survey by CAP Ventures Inc., nearly 90% of organizations that have measured ROI-based CRM objectives have found
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How can a company replicate that kind of success? Crafting a detailed business plan is a good start. This plan should predict:
Assessing the issues in these three categories -- costs, benefits and risks -- helps establish a business case for the project and helps allow for post-project success measurement. Now let's look at each of these objectives in detail.
Implementation costs
Implementation costs are often split equally between IT costs and business-unit costs. Here's how they break down.
IT costs include:
Business-unit costs include:
Tangible and intangible benefits
Benefits typically include increases in staff productivity, cost avoidance, increased revenue and margin, and reduced inventory costs (due to the elimination of errors).
Here are a handful of the objectives that should be considered:
Risks
Some potential pitfalls include:
Tom Pisello is the CEO of Orlando-based Alinean, the ROI consultancy helping vendors, CIOs and consultants assess and articulate the business value of IT investments. He can be reached at tpisello@alinean.com.
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