How to Avoid Paying Too Much for CRM

How to Avoid Paying Too Much for CRM by BizCloud (30/11/11)

Customer relationship management (CRM) software has become increasingly important in today’s hyper networked age. According to Destination CRM, the CRM market grew at a 6.2 percent rate in 2010 (to hit a total of $16.5 billion) and expects a 7.6 percent rise through 2011. While much of that growth has been in the Software as a Service (SaaS) sector, companies also continue to invest in on-premises CRM solutions. Most SaaS CRM solutions are fairly inexpensive, at least for the base software, but add-on features, deployment, training, and support costs can quietly increase the total cost of a CRM solution. Of course, on-premises solutions aren’t without their own significant costs.

Companies looking to reduce their CRM costs -- or considering the purchase and deployment of a new CRM solution – can start by asking themselves these five questions:

1. Is an on-premises solution necessary? Even though an on-premises CRM software package may have a cheaper sticker price, it’s likely more expensive in the short run... as well as in the intermediate and long run. On-premises CRM software typically does not incur any sort of monthly fee like SaaS products do, but it does incur significant infrastructure and operating costs. The server and network equipment, power, and maintenance costs will usually exceed the subscription and support costs of most SaaS packages. There are certainly reasons why a company may choose an on-premises solution -- for example, specific security concerns, networking issues, or integration with an existing IT framework – but companies should not automatically assume one is better than the other.

2. Are all those add-ons and features necessary? SaaS sales representatives often try to wow customers with marketing presentations on all the bells and whistles available for their software. Some of these are integrated with the core package, but others cost extra. Sometimes these features have a direct cost; sometimes they’re limited to more expensive professional or enterprise editions.

3. Will expanding upon and developing the CRM solution be necessary? Many SMBs could likely use major CRM vendors’ products out of the box with minimal configuration or add-ons. On the other hand, enterprise-level corporations may find themselves sinking huge amounts of money into development to create custom solutions that work with a given CRM product’s API. If an SMB overreaches and purchases a complex solution, that can obviously result in significant overspending. On the other hand, larger businesses may find themselves spending more on trying to customize a particular product to fit their needs than if they had started with a simpler platform based on a more developer-friendly platform.

4. Does the business already function in a particular vendor’s ecosystem? This question is straightforward. A Microsoft business should probably give Dynamics a hard look. An Oracle one should consider Oracle CRM On Demand. If a business is built on Linux and has no shortage of developers, then the open source Sugar CRM may be a good fit. Having all of a business’s major software solutions operating within the same ecosystem can significantly reduce support, training, maintenance, and integration costs.

5. Has the company shopped around? CRM shoppers may wrongly assume that enterprise-ready CRM solutions developed by established companies all cost around the same amount for any given feature set. In reality, that couldn’t be further from the truth. As an example, the top versions of Salesforce and Microsoft’s Dynamics CRM offer a similar feature set at a substantially different base price: $195/month for Salesforce versus $59/month for Dynamics CRM.

Once a company has settled on its CRM solution, its IT department can take a number of steps to reduce its long-term CRM-related costs.

1. Excellent training from the start is non-negitable. Training takes time and money, but it almost always pays for itself again and again. There’s little worse than investing thousands of dollars on a CRM solution only to watch it sit unused by employees unfamiliar with it -- or even worse, used improperly by untrained employees such that it actually decrease business process efficiency.

2. CRM solutions should integrate with back office systems. Many CRM products offer little in the way of functionality once a sale is made. But CRM can be much more than this, especially with the advent of social CRM features that assist with continued contact and social networking between businesses and customers.

3. CRM solutions must be administered. While the maintenance and support costs of an SaaS CRM product are dramatically less than those of an on-premises solution, companies should still assign someone (or even a small team, depending on the size of the company) to administer its CRM system. This may not be a full-time job, but it’s still an important one, and will result in overall cost savings in the long run.