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CRM Purchasing Considerations for the SMB


Posted on January 19, 2011 by Chris Hooven, Vice President, Business Development, OSF Global Services

Customer relationship management is among the most frequent search queries in Google’s Applications Marketplace and Forrester pegs 2010 CRM spending at $11 billion globally.  Meanwhile research published by Access Markets International (AMI) Partners indicates that just 54% of medium-sized business and 30% of small business have CRM systems in place. And 19% of SMBs who do have a CRM are planning to upgrade the application.

So I’m not surprised when asked by SMB leaders how or where they should get started with a CRM project.  My response is this:  CRM is not a project.  Nor is it a technology.  It’s a business philosophy built on sound, customer-driven relationships.  It’s a business strategy built on the lifetime value of each of those customers.  And it’s a journey that requires an understanding of where and how your customer data is collected.

Customer data offers you a competitive advantage.  Collecting, managing and analyzing that data provides insight into their preferences and needs.  Which helps you better service them.  Which leads to increased customer satisfaction.  Which leads to long term relationships.  Which leads to increased sales. 

Increased customer satisfaction also helps reduce churn. Whether your business revenue is $5 million or $500 million, the cost to acquire a new customer is between six and seven times the cost to retain an existing customer.  Improving your customer knowledge can help you customize offerings or enhance their experience with each business communication, thereby increasing customer loyalty.

Where to begin

I recommend you first determine the pain points you want to alleviate. Prioritize them. And establish clear, simple metrics that will enable you to track your progress pre-CRM vs. post-CRM implementation.

Start small and focus on meaningful objectives. For example, you could start with a standalone CRM application for a specific business function, such as Customer Support. Just be sure it can integrate with your other business processes – Sales, Marketing, Accounting, ERP, Supply Chain – to accommodate your future needs.  Ultimately an integrated CRM should offer you a 360 degree view of your customers, from pre-purchase through post-sales interactions. 

The cause of most failed CRM implementations is the human factor so be sure to get user buy-in upfront.  Too often I’ve encountered businesses that focused on the technology, with user adoption an afterthought.  Not surprisingly these firms were disappointed by the less-than-anticipated ROI after the CRM application had been roll out.

Survey your internal needs and over communicate with your employees.  Their input is invaluable in determining the capabilities desired, understanding how the CRM application will impact processes, and identifying the actions required to deploy the solution in your environment.  Also your user adoption strategy should cover training:  not just how to use the CRM, but also focus on the benefits so your staff will want to use it.

One size does not fit all

Next, select a CRM that is right for your business because one size does not fit all.  It may sound cliché, but with hundreds of CRM applications available on the market, it is easy to be confused by vendor puffery.  Asking the right questions early on will help you move beyond the hype and avoid a generic system that (a) does not integrate well with your current business processes, or (b) includes costly functions you won’t use or are inappropriate for your business model.

Here are several questions that I consider mandatory when comparing CRM vendors’ products:  

  • What do you want the CRM to do? Will it support the sales function? The support function? Most CRMs on the market today do not do both very well.
  • What are your business processes?  How do you organize customer information?  The CRM must support that work flow.
  • How difficult is it to implement? And to what degree will you require the CRM be customized? Does it offer an ecosystem of implementation partners to help you with customization should you decide to outsource that work? 
  • Does the product offer excellent technical support and an enthusiastic user community?
  • How difficult (or easy) is it to use? Does it facilitate collaboration? Is it scalable? 
  • Does it address your (SMB) pain points? Or is it a shoe-horned version of an enterprise CRM?
  • How many licenses do you need? Are the support costs reasonable given your number of users?

CRM software is a tool that should support your business strategy and add value to your organization.  Not the other way around.  Your people and your processes should take precedence in your decision making.  Most of the popular CRM solutions offer a free trial, so you can test the application using your processes, your users and your data.  Any CRM product that requires you to adjust your work flow in order to meet the limitations of the application should not be considered, period.

For guidance in selecting the appropriate CRM solution, you might turn to an independent CRM consultant; someone who does not have a vested interest in swaying you towards a particular vendor’s offering.  My advice here is to work with a consultant that offers process design expertise, not just CRM technical know-how.

Accessing customer data on-premise or on-demand

In conjunction with determining which CRM product best meets your needs, you must also determine if you want to purchase the CRM or lease it. Your delivery choices include On-premise or Hosted. Some basic definitions are:

  • On-premise CRM – The CRM software is installed on your servers, which means the upfront cost is high.  However you control the application, including monitoring, maintaining and updating.  Customization potential is almost unlimited, for instance your internal technical resources can tailor the CRM’s data models and interfaces to support your unique processes.   On-premise CRM works well for firms that require heavy analytics or real-time integration with business intelligence systems; those that cannot tolerate data latency; or those that require their local database to be available from a disconnected laptop, providing mobility not currently found in SaaS.
  • Hosted CRM – Also known as SaaS CRM (Software as a Service), the application resides in an off-site data center and is maintained, updated and secured by the CRM vendor or a service provider. You pay a fee to lease the CRM features that you require.  To access the CRM all you need is an Internet connection and a web browser, which means your cost savings on hardware and IT staff is significant.  However if your internet connectivity goes down, so does access to your CRM … a temporary inconvenience if the software is supporting sales forecasting; a major blow if it is supporting your Customer Call Center. 

AMI Partners expects spending on SaaS CRM to grow 16% over the next five years while spending for on-premise CRM will remain flat.  SaaS CRM is popular with small and medium businesses thanks to its pay-as-you-go pricing and access flexibility.  And Forrester declares that for SMBs with 50 to 100 users, SaaS CRM "is a slam dunk" and highly probably for those firms with 250 to 500 users.

Statistics aside, base your decision on the delivery approach that provides the best business value overall – in other words total cost of ownership (TCO).  To aid your decision making, think through the following: 

  • An off-the-shelf CRM solution should provide between 80% and 90% of what you need; however customization is required to align it with the processes within your company; and perhaps for your specific industry. Also, over time the product’s technology upgrades will need to be incorporated without negatively impacting previous customization.  What is the cost for on-site system administration?
  • Gartner reports that interest in mobile CRM is at an all-time high.  Will your CRM need to be supported on personal devices?  Do you have the needed technical resources on staff to own that responsibility? 
  • What is the service level proposed by the SaaS CRM provider?  What are the hours of help desk support?  Are they available by phone or only by email?  Do you have the flexibility to scale usage up or down, and the usage fee adjusts accordingly? What happens at the end of your first contract term?  Do you have the flexibility to negotiate caps on their future price hikes?
  • Browser-based access to a SaaS CRM means you are connecting at Internet speeds of between 100kbs and 1000kbs.  Your internal Ethernet connects at speeds up to 1,000,000kbs.  Will you need to regularly transfer large files?  Or just during seasonal peaks?
  • Are you in a regulated industry, such as healthcare or financial services?  If so you might be legislatively required to host your customer data on-premise in order to comply with privacy laws.

Once you’ve selected the CRM application and delivery method, your next decision is implementation. Should it be done in-house? Or should you outsource the implementation to a third party?  I will detail the pros and cons of each approach in Part 2 of this article series.