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META Report: Key Success Factors for CRM Implementations

June 19, 2002
By

Andreas Bitterer







META Trend: During 2002/03, CRM vendor consolidation and technology rearchitecture will challenge CRM application portfolio management. By 2004, CRM suites will be the dominant platform for managing and synchronizing direct and indirect channel interactions. By 2005/06, maturation of Web services and integration technologies will enable extension of CRM practices and processes into collaborative frameworks that support multiple relationship types.

Our research indicates that numerous European CRM initiatives are still failing for various reasons. Although plenty of advice is available describing best-practice approaches, many of these initiatives are still being delivered late, with cost overruns and, worse still, often unmet line-of-business (LOB) expectations.

During 2002/03, we will continue to see unstructured, bottom-up approaches to CRM ("guerrilla CRM") that are prone to failure, but will still serve as catalysts to more strategic, top-down CRM movements.

www.metagroup.com

Through 2005, we will see more organizations becoming successful by consolidating "islands of CRM" and strategically planning initiatives, working from an ROI-based model. Through 2007, broad CRM awareness in management, widely available experience from systems integrators, and applied CRM best practices will be subsumed under XRM (extended relationship management), which will enable companies to reap the benefits within the organization (e.g., increased sales force and call center productivity) and beyond it (e.g., higher satisfaction of customers, partners, or suppliers; increased efficiency of sales channels).

Our research has highlighted the following key success factors that IT and LOB executives should embrace:

  • Management buy-in: One of the most important factors is continuous strong management support. From the early stages of CRM planning, top management is required to back the efforts while ideally providing a CRM program office with full responsibilities and "teeth" to follow through when resolving conflicts. Because virtually all CRM business functions (e.g., sales, marketing, customer service, channel relationship management) are to be involved, top management is required not only to communicate the strategic importance of CRM throughout the company, but also to monitor the efforts and demonstrate ongoing commitment.

  • Business plan: Quite often, organizations engage in CRM with little or no vision of potential outcomes. Because CRM is a company-changing initiative, it is essential that it is handled as such in a thorough business plan that lays out the expected cost (e.g., personnel, infrastructure, hardware, software licenses, systems integrator fees), quantifiable benefits (e.g., increased customer satisfaction, revenues, or market share; decreased customer churn, lead-to-order time, waiting time for reports, or cost per service call), and time to benefit - that is, a timeline of when expected benefits should materialize and what effect it has on the organization and infrastructure.

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    For example, companies running a successful marketing campaign must be aware that this may put an additional load on the company's call center. If call center staff members have not been trained appropriately to handle the increased call volumes, the provided benefits are negated by a possible decrease in customer satisfaction (e.g., long call queuing, inefficient call center agents) or increased churn.

  • Organizational dynamics: Political power struggles must be avoided at all costs. Our research shows that most ailing CRM initiatives suffer from disagreement over issues such as priorities (e.g., sales vs. marketing), management (e.g., direct reports vs. dotted line), or vendor preferences (e.g., IBM vs. Oracle). If any issue cannot be resolved among the parties, the program office is required to act as moderator or escalate the issue to top management. As a proven model for rapid decision making, organizations should consider tying problem resolution ability to compensation plans.

  • Integrating CRM: Within European CRM initiatives, the integration component is the technology that is most often overlooked. Independent units within an organization (having autonomous IT departments and budgets) are rarely interested in integration, and even centralized corporate groups often ignore an enterprise application integration (EAI) strategy alongside their CRM efforts. This inhibits organizations from implementing end-to-end business processes that connect CRM to back-office enterprise resource planning and supply chain management systems.

    In addition, without EAI (and/or inter-enterprise integration), it is increasingly difficult to connect suppliers and partners. The EAI component must be brought to the table (and sold) by the IT department, because sales and marketing groups often do not understand the cost/benefit analysis of moving data across the organization and beyond. In addition, EAI is perceived as IT middleware, with an implicit lack of visibility outside the IT organization. Therefore, required middleware has less focus from a business requirement point of view and is rarely budgeted correctly, which leads to integration issues during the project.

  • Partner selection: Selecting a systems integrator to help design, develop, and deploy CRM applications involves much risk for companies. Not only do we see a great deal of politics in this area, but organizations should also pay particular attention to accurately defining the scope of the engagement, watching for systems integrator/software vendor affiliations that may conflict with the organization's preferences, and selecting only integrators with the appropriate industry affinity and proven track records. In addition, apart from the "usual suspects" (e.g., the Big 5, IBM Global Services, EDS), decision makers should also evaluate smaller "boutique" CRM integrators (e.g., Akibia, itelligence, Software Innovation) for their strong focus, flexibility, and attractive price/performance.

    • Business Impact: The delivery of successful CRM initiatives will result in both revenue improvements (e.g., higher sales force efficiency, increased up-sell/cross-sell opportunities) and cost containment (e.g., better targeted marketing campaigns, consolidated software portfolio).

    Bottom Line: Companies engaging in CRM must not enable disconnected CRM initiatives; rather, they should communicate a strong management message that describes the CRM vision, followed by proper resource gathering and planning. The selection of integration partners, as well as hardware and software vendors, must be detached from personal preferences and directly related to meeting the objectives defined in the business plan.

    META Group of Stamford, Conn., is a leading research and consulting firm, focusing on information technology and business transformation strategies. For more information, visit MetaGroup.com.

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