DSC Tech Library
Customer Relationship Management
This section of our technical library presents information and documentation relating to CRM Applications and Customer relationship management software and products. Providing timely customer contact information is vital to maintaining successful business environment. Accurate information provided in an organized and thoughtful manner is the key to any business success.
TELEMATION, our CRM and contact center software, was built on this foundation. The ability to modify your Customer Relationship Management software is just as important in this ever changing business environment.
Our customer contact management and CRM call center software was developed initially with this concept.
Our Telemation Customer Relationship Management solution and contact center software is ideally suited for call centers throughout the world.
The following article relates to the CRM industry.
CRM ROI: Creating a Business Case
By: Tom Pisello, Founder and CEO, Alinean
Tom Pisello has been helping companies get more business value from IT investments for 15 years. He is founder and CEO of Alinean, which specializes in software, methodologies and tools for evaluating, presenting and measuring the value of IT investments through the use of benchmarking and ROI analysis.
Tom holds several software patents, is a regular contributor to many technology publications, is a featured speaker at major IT and management conferences, and has written several books on ROI and TCO analysis; his most recent is "IT Value Chain Management - Maximizing the ROI from IT Investments.”
Getting a read on the return on investment (ROI) of customer relationship management (CRM) from analysts is near impossible today. Several 2003 reports claimed the ROI from CRM implementations was dismal, with 8 out of 10 projects failing to deliver on ROI promises, and 50-70 percent typical project failure rates.(1) Some of this year’s reports are more optimistic, with about 52 percent of companies responding that their CRM initiatives generated an ROI between 51 percent and 500 percent, and 30 percent of respondents saying the return was greater than 501 percent.(2)
Why the big difference in the results? Some have blamed the analyst researchers for the lack of clarity.(3) But the biggest issue is that only about 20 percent of the companies surveyed are able to demonstrate ROI on their CRM investments, since most companies indicate that non-financial metrics (often called intangible benefits) outweigh financial metrics as gauges of technology investment value.(4) In addition, those that use either financial or non-financial metrics are not quantifying key performance indicators, which would provide clear guidance and proof of success.
Companies need to implement serious yardstick work when seeking to evaluate CRM-software investments. Metrics are essential, with a formal business-case in place before the project begins, and an evaluation that quantifies the expected costs, tangible financial benefits, intangible strategic benefits and risks.
According to a February 2004 survey by IDC, 58 percent of companies that have measured ROI-based CRM initiatives had a payback on their CRM projects within a year. Another 35 percent received payback in one to three years. In the survey, the median initial investment in a CRM application was about $426,000 (USD); this covers all costs incurred before the CRM implementation began. The median total cost over the first five years is estimated at $1.2 million (USD).
The business case for CRM should include
(1) Popping Bubbles - Maximizing CRM ROI, CRM Today
- 1) Tangible Net Benefits—a clear and precise cost-benefit analysis which tallies all of the planned project costs, quantifies each of the tangible benefits and calculates key financial performance metrics such as ROI, NPV, IRR, and payback period. Costs should be less than 50 percent of the benefits (because of inevitable cost overruns and typical benefit adoption schedules) and the payback period shouldn’t exceed twelve months.
- 2) Intangible Benefits—a total of the expected intangible benefits including key performance indicators (KPI) that will be used to measure success or shortfalls.
- 3) Risk Assessment—a listing of the people, process, and technology risks in order to proactively mitigate their probability and manage its impact on project success. Getting a read on the return on investment (ROI) of customer relationship management (CRM) from analysts is near impossible today. Several 2003 reports claimed the ROI from CRM implementations was dismal, with 8 out of 10 projects failing to deliver on ROI promises, and 50-70 percent typical project failure rates. Some of this year’s reports are more optimistic, with about 52 percent of companies responding that their CRM initiatives generated an ROI between 51 percent and 500 percent, and 30 percent of respondents saying the return was greater than 501 percent.
(2) IDC: The Financial Impact of CRM, February 2004
(3) The Blueprint for CRM Success, CRMGuru.com, December 2002
(4) CRM Quiz: Where's the ROI?, CFO Research Services and Saugatuck Technology – May 2003