Customer Relationship Management (CRM) software has become an integral part of businesses in managing customer relationships and streamlining customer intelligence in a centralized platform, enhancing customer communication and engagement, and fulfillment.
Investing in a new CRM platform may seem simple enough on the surface, but it requires both technical and financial evaluation to ensure you get maximum return from your investments from the perspective of impact on the organization. To make an informed decision about a significant business application purchase such as a CRM, you need to clearly understand its total cost of ownership (TCO) and measure that against the benefits (both tangible and intangible) to arrive at an ROI assessment.
This blog explores the importance of TCO estimation, discusses the components involved, and how leveraging customer insights can help reduce costs and maximize value.
What is TCO, and why is it Important?
Total Cost of Ownership (TCO) is the direct and indirect cost involved in acquiring and operating a system over its lifetime, measured mostly annually.
For a CRM, TCO refers to the total expenses associated with implementing and maintaining a CRM system throughout its entire lifecycle. It includes the upfront costs and the ongoing fees around technology, support, and upgrades. Involved.
Organizations need to understand some key components that go into the TCO assessment to estimate TCO. These components include:
Upfront Costs: Upfront costs include the initial expenditures required for CRM implementation, including software licenses (if it’s a perpetual license fee paid upfront), hardware costs, customization, training, and deployment costs, not to underestimate project management costs. Integration Costs: These may include data migration, integration with other existing systems within the organization, ongoing support (technical and business) maintenance (fixes and upgrades), and any other unforeseen expenses. By identifying and analyzing these costs, organizations can ensure a more accurate estimation of their TCO and avoid financial surprises during the lifetime of this initiative.
Ongoing Expenses: Ongoing expenses encompass the costs incurred throughout the life of the CRM initiative. This includes subscription or licensing fees (if this is a recurring fee, like in most SAAS offerings), infrastructure maintenance costs (public cloud versus private cloud, etc.), regular upgrades, and user-level support. Understanding and managing these ongoing expenses is essential to optimize the CRM system and ensure effective continuing value delivery.
In some instances of TCO assessment, organizations also tend to include an opportunity cost of lead times and the costs associated with not making a CRM investment in business performance.
Lowering Total Cost of Ownership
For an organization embarking on a CRM initiative, it is critically important to keep an eye on the TCO of the project. With that in mind, the focus needs to be on the key components that constitute Total-Cost-of-Ownership.
As a rule of thumb, if the initial cost associated with onboarding and implementation runs at a significant multiple of the recurring licensing fee on the SAAS platform, the decision to go SAAS stacks heavily against the SAAS solution provider.
While the financial costs of an implementation exercise are in primary focus, what is also looked at closely as to whether such an exercise will have a more than disproportionate disruption impact on the organization
No system in present times is an island. They need to ingest data and capabilities from third-party systems and feed output to other systems. For a SAAS CRM to work effectively and minimize implementation challenges, it should offer easy-to-deploy integrations that are either ready-to-deploy on a no-code basis; or require minimum implementation and development costs.
This relates to the “keeping the lights on” assessment of what is required to ensure the system meets the business needs and requirements from a performance perspective. This primarily includes recurring licensing costs (generally on a user basis on most SAAS models as well as capability signed up); any infrastructure costs that are outside of the multi-tenant SAAS environment (generally bolt-on items at the behest of the organization, to cater to their specific needs); business user level engagement and support; and technical support (bug fixes and version upgrades etc.). Generic CRMs, while they tend to be low on headline licensing costs ($ per seat criteria), then tend to require significantly higher incremental costs of ongoing engagement when you throw in the range of the expenses described above. Specialized and verticalized SAAS solutions tend to incorporate some basic level of business user support and cover you for tech support and upgrades.
Ease of Onboarding and Engagement
When deciding to either acquire a CRM or switch from one CRM to another, every organization cringes on going through a difficult process to get things up and running and stabilize in the shortest possible time. For SAAS CRM offerings that can convincingly lead this challenge from the front and minimize both business impact and costs, they will possess a significant competitive advantage over their peers.
Vital UI/UX Engagement; Drive User Adoption
The graveyard is full of CRM initiatives gone wrong, where either the stated benefits to the business never materialized, or the costs went out of control. When it comes to failure to meet the stated business goals and objectives, most often, organizations need to pay more attention to the challenges around user adoption of a CRM. Without an enthusiastic user base that can see how they, in a selfish way, benefit from being active participants as contributors to the CRM initiative, one fails to drive long-term business value. If the system is clunky and boring with laborious workflows that are far from intuitive and intelligent; or needs the necessary integrations with long lead times to put them in place, you get a user adoption challenge that only grows over time.
Proactive User Support and Engagement
Users need nurturing, handholding, and almost real-time support for their queries and challenges. With a proactive support model, user confidence and adoption rates tend to improve. Many global CRMs, primarily generic in design (out of the box), have support models that involve very little direct phone support but email support that responds within 24-48 hours. A significant factor that should go into any TCO and project risk and success consideration should be the support model and infrastructure needed to drive strong user engagement.
Rising positive impact on Business
We strongly urge organizations to judge their CRM initiative and its impact over time. A CRM initiative is as much a “tech” initiative as a “people” initiative wherein you are changing cultures and ways of transacting business. For smaller organizations (with less than 50 seats on a CRM), we believe one should expect positive results from business impact from month 4-5 onwards, where productivity, customer engagement, and intelligence benefits start rising exponentially. For larger institutions and global rollouts, the full benefits of this initiative might accrue beyond 8-9 months.
At InsightsCRM, we are deeply passionate about all the above issues and challenges; we grapple with them daily to ensure our customer experience and commercial value in the marketplace deliver a compelling proposition.
Drop us a line; we will be delighted to walk you through our proposition!
Get in touch with us today to embark on your transformative CRM journey.