'F' word still dominates CRM thoughts

No matter how hard it tries to take it off, the CRM industry continues to wear a scarlet "F" for failure.

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ATLANTA -- Julie Simonds attended the Smart CRM conference because her company wants to do a better job tracking sales leads through the pipeline. Yet, even before she arrived at the show, she had seen the research claiming that the cards were stacked against her project's success.

CRM often fails, those reports say. And in roughly a half-dozen presentations, as well as many conversations around the conference coffee pot, attendees were reminded that the road to CRM is scarred by potholes.

"It's forcing us to put together a valid business case," said Simonds, the SAP project manager at Fabri-Kal Corp., a Kalamazoo, Mich.-based plastic packaging manufacturer. "If I can [do that], I don't think I will meet with any resistance."

Why CRM fails

There are dozens of reasons why CRM fails, but Meta Group analyst Steve Bonadio said some of the most common are:

--Not creating a business plan

--Substituting a vendor-defined methodology for a CRM methodology

--Letting IT take the lead on projects

--Not defining metrics for success

--Failing to build a customer data integration strategy

In fact, as word of CRM's pitfalls has spread, companies are redoubling efforts to get it right. Recent studies, including research released earlier this month from Framingham, Mass.-based International Data Corp., confirm the progress. Still, no matter how hard it tries to take it off, the CRM industry continues to wear a scarlet "F" for failure.

The reputation isn't entirely unearned. Whether CRM failure rates were ever really as high as the oft-cited 80% estimate is subject to debate, but it's not difficult to find someone to share a tale of CRM woe.

One attendee who asked not to be named said that his firm's CRM efforts were doomed from the start because it broke several of CRM's cardinal rules. First, the regional southeastern bank hired a consultant that produced a vague business plan. It let IT control the project, never defined clear goals and assembled a steering committee plagued by office politics.

The result: Two years later, the company has little to show for its CRM investment, and individual business units are pursuing their own, separate projects that likely will cost a fortune to integrate.

"You can't call it a train wreck yet," the user said, "but the trains are heading for each other at high speed."

An executive from Siebel Systems Inc., the San Mateo, Calif.-based CRM software behemoth, said he's actually surprised that the failure rates aren't higher. Peter McCullagh, group vice president of strategy, said that nearly 90% of CRM applications are custom-built and that "the vast majority of those companies [doing the building] are not software firms."

Regardless of what's to blame -- homegrown apps, packaged software, poor planning or myriad other factors (see sidebar) -- there was no shortage of advice at the conference on how to prepare for a CRM project or resuscitate one that's on life support.

Steve Bonadio, senior program manager for enterprise-application strategies at Stamford, Conn.-based Meta Group, laid out a formula that melds people, processes and technology.

He said that the first step is "basic business planning 101." That means devoting several weeks to creating a document of about 10 pages that outlines CRM goals and metrics for success. Bonadio advises companies to then assess their current CRM capabilities to determine whether they may need to create a "chief customer officer" who's responsible for CRM success, or a "program management office" to align different business groups around common CRM goals.

"In a CRM strategy, the customer [needs] to be the design point," he said.

Bonadio's other recommendations include having executives spearhead the effort, making sure business units drive the project, re-engineering processes around the plan and configuring software rather than customizing it.

"Customization has created a great deal of heartburn when it comes to upgrades and migrations," Bonadio said. He also said that Meta Group research has found that companies that hire systems integrators are three times more likely to deem their CRM projects a success.

Even if executives champion a CRM initiative, the workers in the trenches still need to get on board. That's the concern for Stephen Norton, the general manager of Portsmouth, N.H.-based Owl Separation Systems, a manufacturer of laboratory products.

Norton's company is undertaking a business-wide initiative to create a usable data warehouse to that draws on customer information from several divisions. Other than small rollouts of low-end contact management and sales force automation tools, this is the organization's first concerted CRM effort.

"I don't think we're afraid of failing," Norton said. "The question for us is, 'How do you create value for the people who are actually going to use the software?'"

Clearly, CRM is complex. But it is also maturing, Bonadio said. He expects the industry to grow by 5% this year, and he cautioned companies to keep in mind that a "subtle nuance" lies between failing and not succeeding at CRM -- especially when few turn their expectations into definable metrics.

"[CRM] has been bruised. It's been battered. It's been bloodied," Bonadio said. "But it refuses to die."

TechTarget is the organizer of Smart CRM and owner of the family of Web sites that includes SearchCRM.com.

FOR MORE INFORMATION:

Special coverage: Smart CRM East

Article: Forget the failures; IDC says CRM delivers

Best Web Links: Measuring ROI

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