3 reasons CRM financial analysis always fails

Everybody gets that procuring and implementing software isn’t the same as procuring and implementing hardware. I’ve been writing endlessly about how CRM is different from other enterprise software — not technologically, mind you, but in terms of the business drivers and the mechanics of the cost-benefit equation.

So why does everyone try to make CRM business cases the same way they would for an HVAC system upgrade? Well, part of the reason is that many businesses spend less on IT than they do on heating and energy, so they don’t feel they have to be thatcareful. Plus, everyone wants to use the financial analysis tools and methods perfected in other parts of the business (say, the factory, the distribution system or the network) rather than starting from scratch. Blindly applying financial rules and methods from other parts of the business to CRM projects yields crummy decisions — and crummy assumptions lead to crummy results.

Unlike any other enterprise software category, the costs and benefits of CRM systems vary widely by industry, and the costs/benefits don’t scale up or down in predictable ways. Further, as with many things in this era, the information that’s easily accessible to you is very likely to be misleading.

CRM vendors will gladly provide case studies only marginally applicable to your business. Industry analysts will give you lots of data and examples, but the data points are from a fairly skewed population. Benchmark data on the meaningful stuff is hard to find because it’s a trade secret (whether it’s a huge success or a big dud, your competitors don’t want you to know).

If you want the right answers to drive an optimal CRM business case, you’re going to have to do some original work.

CRM costs are always more than they appear

The good news? Some costs are fairly easily quantified. You can just ask for quotes and, in a few days, know the up-front obvious stuff: license fees, extra products, initial implementation services.

Of course, that’s not the important side of costs. Four factors will completely overwhelm the initial procurement cost: