Customer Relationship Management 2001By Terry Kirkpatrick | Posted 07-01-2001
Customer Relationship Management 2001
For the past few years, pundits have talked about customer-relationship management as the killer app of the Internet era. At the same time, some analysts see CRM as an expensive Swiss Army knife: In trying to be all things to all people, it fails to perform any core function well enough to justify its high cost and implementation difficulties. The CIO Insight survey of 434 CIOs and top IT strategists suggests that even as strategic expectations for CRM systems grow, satisfaction remains a concern.
CIOs now in the process of deploying new CRM systems want those systems to accomplish more strategic goals,even in light of the more complex technological and business environments into which they 're being deployed, compared with completed CRM installations.
The survey also points out that, compared with CRM systems already deployed and now in maintenance mode,new CRM projects are more costly, more time-and resource-consuming,and more likely to run into technical,financial and organizational hurdles.Mike Perkowski
Flip through the presentation deck of a CIO undertaking a customer relationship management project, and you'll likely find a slide that says: "CRM is a journey, not a destination." Indeed, the 434 CIOs participating in our survey and follow-up interviews indicated that surmounting the nearest CRM hill only reveals a vista of new opportunities.
"We're gathering a lot of data, and now we're trying to figure out how to use it," says John Good, vice president of technology finance at Merrill Lynch & Co. Inc., who was on the team that launched a call-center integration project last year. "How do we mine this data and interpret it to meet our clients' needs? Now we can track a client's total history with usokay, what do we do with that?"
The 13-month project was the result of the firm's desire to understand its individual customers better. "If we know from their history that a client has no children, for example, then we don't want to be offering educational investments," notes Good.
This scenario is familiar to Kimberly Collins, a senior research analyst with Gartner Financial Services in Durham, N.C. "In many instances, CRM used to be thought of as tactical," she says. "Now you're starting to see people looking across the enterprise. Once they realize that CRM must cross multiple channels and multiple products, they realize that they will need to leverage the insights derived in the marketing and IT departments. Analytics is starting to play a bigger role. Initially this will come with a higher price tag, but it will also bring greater long-term revenue gains."
Often, the second step in the journey won't become clear until a company has taken the first. "Only after you get started can you really visualize the magnitude of the benefits your firm can realize," says Don Peppers, founding partner of The Peppers and Rogers Group, a CRM consulting firm in Norwalk, Conn. "In many cases, if you have no CRM capabilities, it's difficult to quantify the business case for it at all. So companies begin on the basis of reducing cost or realizing efficiencies, but when they get big revenue benefits, they ramp up spending."
Moreover, companies will find they must adapt their CRM efforts as the expectations of customers and their familiarity with technology change. "Although corporate bean counters would like to see a defined conclusion to a CRM initiative, that's not always possible," says Carol Parenzan Smalley, a customer communications consultant and former editor of searchCRM.com. "As customers evolve, so do the technologies that support them. CRM is not a once-and-done endeavor. It is an evolution of processes and strategies."
Fifty-two percent of our respondents rated their satisfaction with their CRM projects at 4 or 5 on a 5-point scale (where 5 is the most satisfied). The mean was 3.4. Yet dissatisfaction, analysts say, often has nothing to do with technology.
"CRM has to optimize marketing, sales and servicethey have to be aligned," says Collins at Gartner. "In most organizations they're separated."
John Goes, vice president of operations at Ellison Machinery in Kent, Wash., a distributor of machine tools, studied CRM failures for a long time before deploying a system in 1998 to link all of his firm's sales, service, engineering and administrative staffs. "For our little company, I couldn't have a failure," he says. "One of the problems with a CRM package is that companies purchase it looking for a process. You're buying a process in a can and telling your people that the beatings will continue until we're using this. Everyone has to change how they work. What we did was build our application to fit our existing process."
The key to winning employees over to a new system, he says, is user value. "A new system has to make their jobs easier." Often it's the sales force that balks. "They're afraid the new system means they will be fired," Goes says. "I brought the service staff up first, which allowed me to get a lot of clean customer data into the system. Most of what the salesperson needed was already there when they were brought into it. Now they realize that it's not a policing tool but a communications tool that allows them to keep up on things on their territories."
Goes is quite pleased with his system. "It probably has had more to do with us staying in business and maintaining our market share than anything else," he says. But he, too, is planning for the next phase: moving to a larger, more comprehensive system that will offer new functionality, including more marketing capabilities such as a Web interface for customers. The system is being rolled out by Ellison's parent corporation, Meritage Corp.
While Goes was deploying his system "before the term CRM was even coined," others are just beginning. The Orlando Utilities Commission, a municipally owned utility, is looking into data warehousing and Web account access to improve customer service. Says Thomas Washburn, vice president and CIO: "We pride ourselves on having good customer service, and it's something we can improve now that the technology is here. One thing we try not to do is be on the bleeding edge. The size of our company is such that we can't go out and try the latest and greatest. We have to let it get shaken out by the industry."
Sixty-one percent of respondents either have a CRM system in place, are installing one or plan to do so this year. That leaves a lot of room for growth.
"We're probably at the beginning of a three- to five-year bubble for CRM," says Gartner's Collins. "A lot of people are ready to move forward. It's a long-term process. For people beginning today, it will take a couple of years to get there. There's still quite a window of opportunity. And it's always going to be shifting in some way. How, for example, is wireless going to play? Will it play? Over time, customers will expect different things, and this will change the environment."
Don Peppers thinks CRM has a long way to go before it lives up to its real promise. "I want to do business with a bank that fills out my loan application for me with data they've already gotten," he says. "I want to do business with a phone company that allows me to go to a Web site and control my call-forwarding options for the day, the week, the time of day. I want a car company that lets me make my service appointments online and a credit card company that sends me my bill in a password-protected Web URL. When those days arrive, I'll say CRM is living up to its real potential."Terry A. Kirkpatrick
Pros and Cons Goals Achieved Time and Space Was It Worth It?
As challenging as CRM systems are to plan and deploy, the survey points to a number of positive signs. Respondents indicate they're stepping up their purchasing and deployment of CRM systems, while also voicing somewhat better-than-average satisfaction with the systems they've implemented. This seems to be true even in larger companies (those with at least 1,000 employees) with more ambitious goals, where CIOs are looking for more ways to connect seamlessly to their customers.
The survey shows that 61 percent of responding CIOs either already have a CRM system in place,are in the process of installing one or are planning to do so this year;for large companies,it 's 63 percent,and even at smaller companies,it 's a respectable 58 percent.
As for which types of companies are focusing their efforts on CRM systems,an impressive 71 percent of all high-tech firms 'CIOs said their companies either had or were in the process of implementing a CRM solution,compared with 58 percent of non-technology companies.
CIOs currently planning and implementing new systems expect those systems to do more than do CIOs whose CRM applications are already installed and are in maintenance mode. Those currently implementing new systems were more likelyoften far more likelythan their maintenance-mode counterparts to expect their systems to deliver on their most critical business objectives. But actually delivering on those goals is a different matter entirely.
Ninety-three percent of CIOs currently implementing new CRM systems said that "better customer information "was a key objective, compared with 83 percent of those who have already installed their systems. Similarly,many more CIOs currently installing CRM applications cited such key objectives as better customer support (91 percent) and creating a seamless customer experience (79 percent)than did those already finished (78 percent and 67 percent, respectively).
At the same time, respondents who have installed systems are not uniformly pleased with the results. While several high-priority objectives have been fully or mostly achieved by many respondents such as better customer support (78 percent), better customer information (74 percent)and lead management (64 percent)only 43 percent of the respondents said they had fully or mostly achieved a seamless relationship with their customers, while only 36 percent fully or mostly achieved an increase in revenues.
If you're like the CIOs in our survey and you're considering a CRM project, get ready for a few realities. Like anything designed to change the way we work with customers, CRM isn't cheap, fast or easy.
Respondents 'average expenditure for their CRM installation was $1.9 million ($2.7 million for larger companies, $650,000 for smaller companies). Of those expenditures, CIOs are shelling out major dollars for services as well as the technology components:65 percent of the typical project 's costs comprise such services as business-needs consulting, integration services, applications development and training, with the remaining 35 percent going toward products.
For older CRM projects, the average cost was a little more than $1.5 million, but for new projects, respondents said their average project cost was more than $2.4 million. Why the difference? The newer systems are more ambitious and are being deployed into more complex environments, making hurdles more likely.
It's critical to remember that CRM is not an event, it's a process, and one that can take a significant amount of time before the benefits are seen. Given the strategic and potentially revenue-enabling nature of CRM, it's probably no surprise that so much time is devoted to figuring out exactly what to do, how to do it and with whom to do it. The result can be completion delays and cost overruns.
Respondents say their typical CRM project took more than 15 months, with more than half of that time being spent on upfront consulting, planning and vendor evaluation/selection.
Respondents say it took about 7.6 months to achieve value realization, with small companies typically seeing value realization after 6.8 months, while large companies took 8.1 months. But 20 percent of small companies took 12 months or longer to realize value, and that number rose to 38 percent among large companies.
Many respondents are experiencing delays in completing CRM projects as well. Half of the CRM projects at small companies were completed behind schedule, and for large companies, that number rose to 72 percent.
The scope of CRM projects often expands during implementation, especially for larger companies.More than half of all respondents said the scope of their project increased moderately or significantly after the project began; 58 percent of those in large companies cited "project creep "as a factor.
Why did the project scope change so often? Company strategy changed (45 percent), followed by new input from vendors or consultants (37 percent) and changes in the project 's personnel (35 percent). Half of the respondents said their projects cost at least 10 percent more than the original projection, while 58 percent of CIOs at large companies faced cost overruns.
Despite the significant commitment in money, time and resources to making CRM work, CIOs are only mildly satisfied with both their CRM projects and their vendors. It is somewhat comfortingif unsurprisingto note that CIOs whose CRM projects are now in the maintenance phase are more satisfied than those still in the implementation stage.
On a 1-to-5 escalating scale of satisfaction, CIOs put their satisfaction with their company 's CRM projects at 3.4. Fifty-two percent of all respondents rated their satisfaction level at either somewhat or very satisfied on that 5-point scale, while 55 percent of large-company CIOs reported that they were somewhat or very satisfied.
Vendor-satisfaction scores were a little bit better: The average score was 3.5,with almost identical scores for large and small companies.
Among CIOs who have completed implementation, the mean score rose to 3.6, while that number stood at 3.5 among those not yet finished. The respective scores for vendor satisfaction: 3.4 and 3.5.
At a time when the hype factor for Internet applications seems to run unabated despite the economic slowdown, the response to CRM among CIOs actually working with the technology appears tepid. Clearly, CRM is by no means free of the difficulties of any major IT project, and all too many CIOs appear unsure that CRM is paying off on all of their most important strategic objectives. There is considerable room for improvement.
Moreover, the increasing complexity of CRM-enabled environments, coupled with demands for increased functionality for new CRM systems, means that CIOs' continued satisfaction with their CRM projects is far from a given.
How the survey was done: CIO Insight designed the CRM survey in partnership with Survey.com, a San Jose, Calif.-based supplier of online research services. The study was e-mailed to CIOs, chief technology officers and vice presidents of information technology and services gathered from a number of sources, including third-party lists and other Ziff Davis publications. The survey was posted on a password-protected Web site, and 434 people responded from May 2 to May 10.