The Truth About CRM

During the Thanksgiving holiday of 1998, Monster.com took a million-dollar gamble. The Maynard, Mass.-based job listings site, which had roughly 300 employees, rolled out a high-end software package to provide its telephone sales force with instant information on prospective customers, thus boosting the company’s chances for rapid expansion around the world.

Instead of helping the sales force do a brisk business, however, the new system, Siebel Sales Enterprise, was so slow that telephone reps were unable to help customers. Salespeople working on laptops in the field were locked out of the company’s customer database--and remained so for a full year. "The entire sales force--and everyone here--was very upset," says Ned Liddell, Monster.com’s vice president for business applications development. "Our business was hurt. At the time, no one understood how complex these systems can be."

Liddell, who places much of the blame on the consultancy that installed the initial package, is far from alone. In Monster.com’s case, the local consultancy was inexperienced, and eventually, developers from San Mateo, Calif.-based Siebel Systems returned to help Monster.com rebuild the application.

In the end, the initial failure resulted in millions of dollars in added expenses and months of effort to get the application to work. "CRM is not for the weak spirited," says Liddell. "It requires a lot of management and money."

As vendors and consultants selling CRM software rake in growing profits, companies are struggling to implement the complex systems they peddle. Like Monster.com and other small and midsize startups, most Fortune 500 companies are involved in some sort of CRM project, experts say, and many multimillion dollar initiatives have quietly stalled or failed as executives search for business benefits and salespeople shy away from technology they say won’t help them. In one example, a large telecommunications company rolled out a major CRM application to more than 1,000 sales reps in late 1999, at a cost of $10,000 per user, only to find a year later that fewer than 100 were using the system, according to one CRM consultant. Software vendors aren’t always at fault; in fact, analysts say the software packages are adding more useful features while slowly becoming easier to use. And it’s often true that companies jump into CRM projects without clear strategies or support from top management. But those embarking on CRM projects need to be wary of slick marketing messages because, so far, there is no one end-to-end package that can provide an easy CRM fix.

And stuck in the middle of the confusion are CIOs, pressured on one side by CEOs desperate for a quick CRM fix, on another by vendors falsely promising customer service Nirvana and on yet another by cranky users who are often slow to adopt the precepts and technology of CRM.

"It’s pretty endemic out there that there is a lack of satisfaction with the CRM programs to date," says Peter Grambs, principal in the IT group at Booz-Allen & Hamilton in New York City. "People are reticent to say my $100 million project is a failure. But when you’re looking for returns, you can see they’re not there."

Simply put, CRM software is designed to help companies keep track of their customers and boost revenues by increasing customer loyalty (see "Jane’s Adventure in CRM Land," March 15, 2000, and the CIO-100 "Masters of the Customer Connection" issue, Aug. 15, 2000). The customer-facing applications range from sales and field-service automation to call center and customer-database management. Ideally, the new systems work to develop customer loyalty and sales per customer, thus increasing the bottom line.

Unfortunately, that simple goal is proving tricky to accomplish in many cases, in large part because some sales and marketing teams are reluctant to adopt the new, automated CRM systems. The stakes are high, considering that companies are investing up to $70 million in a CRM launch and millions more during a multiyear rollout. In order to avoid career-threatening, million-dollar CRM failures, CIOs need to look back to the bad old days of ERP, when some high-profile disaster stories taught IT leaders to carefully examine vendor hype and work closely with top management to ensure successful implementations.

Crm Hype

Warnings from consulting companies that up to 70 percent of CRM projects don’t produce measurable business benefits--according to Howard Berg, president of Berkeley Enterprise Partners, a Boston-based consultancy--have done little to deter most companies from jumping in. Meta Group, an IT consultancy in Stamford, Conn., predicts that the CRM craze will only intensify, with the market growing from $20.4 billion this year to $46 billion by 2003. One of the chief beneficiaries of this hot market is Siebel Systems, which clearly leads the CRM vendor pack boasting a 121 percent rise in revenue last year to $1.8 billion and profits of $123 million, up from $56.9 million the previous year. And while Siebel dominates the market for software that helps companies manage sales staff, customer service and call centers, competitors including Clarify, Epiphany, Onyx Software and Oracle are also making tidy profits as companies rush to woo customers and boost revenues.

Business strategies that focus on coddling the customer have been around as long as the corner drugstore. When Internet shopping came along, giving customers more power but less personalized service, companies began to look for innovative ways to search for newly fickle clients and analyze shopping patterns. Vendors jumped at the opportunity, coming out with new software packages that automated sales and marketing departments, as well as call centers and systems that promised to link the front of the organization with back-office systems.

Despite the criticism that CRM systems are hard to implement, Siebel claims that the vast majority of its customers are happy with its product. According to David Schmaier, Siebel’s executive vice president, a recent outside audit by Satmetrix Systems of Mountain View, Calif. (Siebel is a minority owner of this company), showed the vendors’ customers boosted revenue by using Siebel software and also reported a 21 percent increase in customer satisfaction levels.

Still, many who work with companies involved in CRM projects say those figures mask a widespread level of confusion. David Dobrin, president of B2B Analysts in Cambridge, Mass., says he has visited six Fortune 500 companies during the past two years to examine large-scale CRM implementations and described the projects as either "moribund" or used in a way that didn’t match initial expectations. "The scope and the benefit are far less than what has been talked about in CRM vendor sales pitches," Dobrin says.

Adds Liz Shahnam, a senior analyst at Meta Group: "Within the next 12 months, if the vendor community doesn’t respond, people are going to start holding them accountable."

Schmaier admits that some projects fail, but he argues that’s due largely to the fact that sales and marketing departments aren’t used to the automated systems that have made finance and manufacturing hum for years. The trick is to work with qualified and certified systems integrators, he notes. Siebel, which certifies consultants to implement its software, also has its own group of systems integrators who work with 15 percent of its customers. In a typical CRM implementation, 28 percent of the total cost goes to buying software, while 38 percent of the cost goes to services such as software customizations, application integration and training, according to Wendy Close, a research director at Gartner in Stamford, Conn. Hardware makes up 23 percent of the cost, while telecommunications expenses make up the remaining 11 percent.

But when a CRM project does run into trouble, CIOs are often the ones who suffer the most. "It happens all the time in this field," says Evelyn Follit, CIO and senior vice president at RadioShack in Fort Worth, Texas, which is now evaluating CRM vendors for its initiative. "After the Internet, CRM is the next silver bullet. There are heightened expectations that IT folks are going to deliver something." However, if the company’s CEO and top sales and marketing executives aren’t actively involved, the tricky task of imposing new systems on the workforce can easily fail.

"There’s a tremendous squeeze on CIOs with CRM because there’s such a corporate need," says Berg. "The vendors are selling the CEO, saying they can just plunk it in."

In order to cut through vendor hype and ensure that those within the company will use CRM applications, CIOs need to partner with business executives to promote companywide training programs and effectively sell the new systems internally. "CIOs have got to turn this around and make it an end user project, not an IT project," says Jim Dickie, managing partner at Insight Technology Group in Boulder, Colo.

Selling to the Sales Force

Bob Ogdon is one of those who learned the hard way about the importance of selling CRM to those who are supposed to use it. At first, the promise of CRM was enticing for Ogdon. With a $300,000 investment, his sales force would be equipped with the latest technology to follow sales leads, acquire new customers and boost the bottom line.

But Ogdon, CEO of Mshow in Highlands Ranch, Colo., which produces training and marketing programs to companies via the Internet, saw his hopes quickly dashed. After a months-long implementation of Siebel Systems Mid-Market Edition software in 1999, his 50-member sales force refused to use it. "Spending the money and not getting a result was a huge disappointment," says Ogdon. "We paid for our education."

Ogdon blames the initial CRM blunder both on the company’s failure to articulate its needs and the consultancy hired to implement the system. For remote salespeople, access was slow and data was unavailable.

Companies large and small are finding that fancy new tools for those who don’t want to use them are often left untouched--even if they do work. "A typical member of a field sales force is independent," says Berkeley Enterprise Partners’ Berg. "They don’t adopt or accept easily." Indeed, many CRM projects are stumbling because the sales force needs to be sold on the idea. Even Microsoft, one of Siebel’s largest customers, has gone down a long, hard road in its bid to get its 19,000-member sales and marketing force to use the new software, according to several consultants familiar with the project. Microsoft declined to comment on its Siebel implementation. When asked about difficulties with large implementations such as those with Microsoft and IBM, Siebel’s Schmaier says: "In any IT project there’s always bumps in the road."

At Mshow, executives decided on the second go-around to go with a point solution designed by SalesLogix specifically for use in smaller companies. Ogdon stresses that the company’s failed CRM implementation made it easier to do research the second time. "The first time, we went out and bought technology and then a consultant," he says. "We should have done it the other way around." And he notes that salespeople are now required to use the system.

Others who have run into problems with CRM projects stress the importance of focusing on the users throughout the process, letting them test different programs and creating an incentive plan to encourage use of a new CRM system. "Salespeople are nomads scouring the landscape. If they aren’t taken care of, you’re in trouble," says Rodolphe Kirk, director of IT at CopperCom, a DSL provider in Santa Clara, Calif. CopperCom abandoned a $500,000 CRM project last year after an ASP failed to provide adequate support for the complex new system. Now implementing a new, smaller scale application, CopperCom has created an incentive plan and is "nurturing" the sales force with a newly formed support center. "It will take another three to six months of hand holding," Kirk says.

So Many Vendors, So Little Time

When the word got out that Blockbuster was looking for campaign management software, a parade of vendors began to approach the Dallas-based company. As the stream of CRM vendors made their appearances and their pitches, those working on Blockbuster’s project began to scratch their heads. "The vendors started to create a lot of confusion in the organization," says Augie MacCurrach, principal and CTO at DiaLogos, a Boston-based consultancy working with Blockbuster. "They’re good at getting the CIO cornered and making them believe that if they don’t choose them, they’ll fail," he says.

Barclays Global Investors, the San Francisco-based asset management arm of Barclays, examined the top 15 vendors two years ago when looking to augment contact management capabilities for its sales force. "Every vendor told us they could do everything," says Bill Drobny, manager of strategic projects and Web. "They all wanted to walk us into multimillion-dollar software exercises."

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