A common theme we’ve discussed in our “Considerations for CRM Success” blog series is that CRM is an investment—one that should be entered into with careful thought, planning, and research to ensure the solution you pick is best matched to your specific business needs. Today, we’re focusing on another key analysis that should take place before diving into a purchase—Total Cost of Ownership (TCO).
Simply put, TCO is a measure of how much a solution will cost over its lifetime—including direct and indirect expenses. And of course a discussion of TCO for CRM systems would not be complete without a mention of one of the biggest cost differentiators in this space—cost comparisons between traditionally-licensed on-premise options versus pay-as-you-go cloud-based SaaS software models, including considerations of capital expenditures (CapEx) versus operational expenditures (OpEx), and which model works best for your organization.
But regardless of the options you consider, planning ahead and estimating your CRM TCO is a critical first step toward determining a reasonable budget and timeline for rollout. Here are some strategies to keep in mind when managing cost expectations:
Think “Big Picture” When Estimating Total Expenses
While it is true that a significant amount of cost tends to occur at implementation—recent research shows that first-year CRM costs account for more than 60 percent of the overall project—it’s important to remember that CRM is typically not a one-time cost, particularly for those who opt for cloud-based SaaS model CRM systems. For a more accurate view of how implementation will affect company finances, a three-year time horizon is a good place to start when setting a CRM system budget. Factoring in the costs needed to support your investment both now and in the future can help maximize ROI and ensure you’re financially equipped to not only sustain, but truly optimize your solution.
Plan for a Diverse Mix of Lifecycle Costs
While up-front charges can include licenses, training, and implementation services, other elements, including ongoing administration, and/or SaaS subscription costs can also play a key role in just how much your spending total will be. In fact, leading industry analysts estimate up to 90 percent of CRM lifecycle costs are centered on customization, system integration, and long-term deployment rather than simply licensing. For a more detailed breakdown, research shows that over the first year of an installation, 30 to 38 percent of charges are allocated to software costs, 34 to 47 percent to service costs (e.g., customization, tailored integration), 8 to 18 percent to hardware costs, and 7 to 10 percent to maintenance and support activities. Preparing for this range of expenses can help companies strategize a budget that’s comfortable across all departments and system touch points, encouraging long-term adoption and financial stability.
Consider Unique Ways to Lower TCO Over Time
If you find your budget stretched thin after factoring in all the above costs, the good news is you don’t have to completely abandon your goal of CRM integration. With a little creativity, the move onto a CRM platform can be a smooth and cost-effective transition. Think about going with a SaaS-based CRM model and/or taking a phased approach to deployment rather than an all-at-once installation, which provides a greater level of financial control and helps executives roll out system features and functions in manageable stages as the budget affords. Another strategy may be to consider industry-specific CRM systems pre-designed to feature the tools and capabilities required to run your business, saving money and time on customizing “out-of-the-box” solutions, so you can focus on higher-value activities such as back-system integration.
Stay tuned next week as we wrap up our “Considerations for CRM Success” blog series with a look at how choosing the right partner can make all the difference in ensuring a smooth and successful CRM solution. In the meantime, to learn more about how our seasoned CRM consultants can deliver this functionality to your business, please contact any member of our consulting team at [email protected]. We also encourage you to contact Tokara’s VP of Business Development, Mark Fillingim, directly at +1 972-719-0213.
Aptean, “CRM: The Essential Guide: Five Principles for CRM Success,” http://www.aptean.com/assets/pdfs/resources/documents/APT_CRMP_GBWP_CRMTheEssentialGuide_US.pdf