The Deployment Trap

Three out of four U.S. companies are currently rolling out CRM applications. Why do so many of them get it wrong?
Russ BanhamAugust 1, 2002

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.

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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.

“Usually sales staffs are the villains here,” asserts Shaw. “They’ve done things the same way for half a century, are very proprietary about sales leads and accounts and they’re just not going to change overnight unless you make them.”

How do you make the folks in sales change? Joe Galvin, a Gartner vice president and research director, says you have to get them involved before IT is brought into the discussion. “The CRM technology selected by technologists for all the right reasons won’t meet the needs of the field organization unless the field organization is deeply involved in the creation of the CRM strategy in the first place,” he explains.

Galvin says it’s crucial that the users of the technology drive the development of the technology. “Otherwise it’s like repainting the house without sanding the walls first.”

When CRM projects fail to live up to expectations — or aren’t completed on time or within budget — fingers start pointing. IT blames sales, sales blames IT, and everyone wonders why the CFO wrote this huge check in the first place.

“The CFO is the person who must say, ‘Prove to me that this project will achieve a specific rate of return, or I won’t fund it,’ ” says Close.

But Close conceded that, until the recession hit, CEOs and CIOs tended to override the CFO’s demands for business case justification. “And many of them don’t have a clue what CRM will cost — or how long it will take.”

Back on the Horse: Eight Tips for Redeploying

A failed CRM implementation doesn’t have to be the end of the world. Gartner recommends following an eight-step program before trying again:

1. Figure out what went wrong, but don’t lay blame.

2. Study the customer experience from the customer’s point of view (the normal interaction between a customer and the enterprise).

3. Find the real “pain points,” the internal processes that really need overhauling, and gauge them by asking employees.

4. Reset expectations, because no CRM project will ever reach the level of overstated expectations broadcast by the media, like a “tripling in direct-mail response rates.”

5. Simplify the project by making it easier to manage and control — and don’t let it grow too fast too soon.

6. Gather metrics from the failed CRM initiative to apply to the next generation of the project.

7. Check the data: CRM is a data-based strategy, so it will be only as good as the customer data that supports it.

8. Avoid shortcuts by ensuring that this time around, the project plan details well-thought-out processes governing vender selection, training, timetable of deliverables, etc., and make sure all stakeholders are involved at all stages — including, yes, the customers themselves. After all, CRM is about them.