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Building a business case for a CRM upgrade can ensure ROI

Most businesses are hip to the idea that deploying CRM demands a carefully planned business case, but organizations can benefit from building a case for a CRM upgrade as well.

Building a business case has become a standard step in any evaluation and purchase of a CRM system, but the same cannot be said for upgrading existing CRM software.

It should, Forrester Research analyst Bill Band suggests in a recent research note, particularly for CRM upgrades driven by the IT department or the software vendor.

"In the bad old days of CRM, people didn't do the business cases, and it cost them," Band said.

Ultimately, widespread reports of CRM project failures had organizations casting a skeptical eye on CRM and requiring detailed plans and spending justifications.

"Now we're not necessarily seeing people applying that level of rigor to the upgrade question," Band said. "When IT folks say this system is going to break down and the vendor wants to upgrade -- that set of arguments is not sufficient."

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Using Forrester's Total Economic Impact methodology, which includes factors beyond just costs, such as the benefits, risks and flexibility of the deployment, Band built a business case for a fictional company. Using assumptions from companies facing real upgrade decisions, he found that upgrades driven by business requirements demonstrated a 31% ROI over five years. IT-driven or vendor-imposed upgrades did not.

Building a business case for a CRM upgrade should take about 90 days, Band said. The original business case for CRM can be used as a starting point.

"If you've done a good business case, you would have established the key business drivers and the outcomes and benefits you were trying to achieve," he said.

The business case for a CRM upgrade demands measuring the project's benefits, costs, risks and flexibility. For example, an upgrade can offer multiple options in the future as a result of changes to the infrastructure, application architecture and excess capacity.

"It's always easy to identify the costs. Those are [better] known," Band said. "Cost factors and risk are not that hard, but anything that has to do with revenue improvement is always very difficult to prove in advance."

CRM upgrades could offer enhanced analytics or guided selling that could lead to bigger deals, he said. Likewise, process improvements can lift productivity and cut costs by removing the need for staffing.

The end of technical support from the vendor is a compelling reason for some organizations to undertake a CRM upgrade, though third-party maintenance and support firms like Rimini Street are providing an alternative.

"We're seeing an increased interest in third-party support with a lot of these major deployments in ERP, and now we're seeing that extended into CRM," Band said. "It's definitely in the back of the mind of the people we speak to -- especially with PeopleSoft and JD Edwards environments, where they are quite happy with what they've got, and they don't want to upgrade."

When determining costs and savings, it's important to assign risks to each figure, Forrester suggests. For example, the more complex a project, the more risk should be assigned, factoring in the level of customization and the number of releases that may have been skipped.

Organizations must also consider the impact that upgrading CRM will have on other applications.

"Right now, the application may be interacting with others in a certain way, and if you had to do a lot of customization, it's not a given that an upgrade is going to carry those customizations forward," Band said. "You're at risk of incompatibilities with those other applications. Everything you had may not match. That's one of the risks. The older and more customized your app, the more likely you'll have problems."

Some organizations that have particularly old and highly customized CRM applications may want to consider a new implementation entirely, moving to another vendor, Band suggested. Given the current economy and the low up-front costs, deploying a Software as a Service (SaaS) CRM application may also be a wise short-term plan.

"You can go through the exercise and still come to the conclusion that the business case might look good on paper, but on-premise may mean you can't pony up all the money up front," Band said. "You may look at the SaaS alternative of an existing vendor or a new solution, and we see people do that. That has its own risk."

Common wisdom suggests that the business side of the organization needs to lead the charge for deploying CRM, but it's up to IT to make the case for the upgrade. Just be sure, Band advised, that business signs off on the plan and finance supports it.

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