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Gartner glum on CRM success rates and costs

While many IT research firms have been boosters of CRM and have pointed to the industry segment as one with great potential for future growth, Gartner stands out as a naysayer.

While many industry research firms have been strong boosters of CRM and have pointed to the area as one with great potential for future growth, Gartner stands out by being a piquant naysayer. It has just announced the results of some of its research into real-world CRM implementations, and these they paint a grim picture for corporations hoping to use CRM to improve performance.

Through 2006, Gartner said, more than half of all companies implementing CRM systems will view those implementations as failures. Although this sense of failure will be drawn from many customer-specific problems, Gartner said it feels that the software's inability to link various channels, the lack of true process redesign and the failure to provide any real customer benefits will often be the main culprits.

In addition, Gartner claimed that while many businesses are implementing CRM strategies, most of them will severely underestimate the costs of such projects. The researcher claims these underestimates will be as high 40-75%.

Gartner analysts said there are three key areas that enterprises must implement to effectively use a CRM business strategy. To emerge as a market leader, a company needs to excel in at least one of these areas, and it needs to be as good as the competition in each of the others:

  • Driving the overall market on the strength of its products or services, meaning that the company's offerings are truly unique.
  • Being operationally brilliant, meaning the company uses technology such as back-office and operational systems so well that they give it a real cost advantage.
  • Being customer-centric, meaning that it builds such a strong and intimate relationship with the customer that the customer doesn't even consider buying from anyone else.

Most companies will have a hard time reaching any of these goals if they do not start the CRM process with the need to overhaul corporate culture in mind. Becoming customer-centric is not as simple as installing a suite of software from Siebel or E.piphany. To get there, and to avoid a flop of an implementation, will take at least two initiatives.

First, companies need to spend the time reasoning out their customers' relationship with them. If this is done well, not only will companies have stronger marketing and better use of technology, but also the customer will be more fully integrated into the whole technological process. Companies will have to closely examine all of the channels that they use to deal with customers -- in sales, marketing and support -- and then design systems that make those contact channels easier.

Once that is accomplished, according to Gartner, companies will need to extend "the customer's understanding beyond the marketing organization to other groups within the enterprise, such as the supply chain for mass customization or customer service for cross-selling opportunities."

"The rewards of greater customer-centricity are significant, and that is why many enterprises are turning to the business strategy of CRM, which clearly places the customer at the heart of an enterprise's strategy," said Scott Nelson, vice president and research director for Gartner.

To help thwart the heavy cost overruns, companies will need to adopt specialized project management tools and metrics to track, analyze and influence the CRM implementation. Gartner estimated that a large enterprise can blow through between $30 million to $90 million over a three-year period on technology, labor, consulting services and training related to their CRM projects. Companies can trim those costs by using tools such as a TCO (total cost of ownership) tracker, which offers a view of true IT costs over time, including all three major areas of any company: people, technology and processes.

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