Cantata has been doing Return on Investment (ROI) and Total Cost of Ownership (TCO) analysis as part of our CRM consultancy since we were founded in 2002 – indeed, it was one of our key offerings at a time when CRM initiatives ran into many millions.
TCO (Total Cost of Ownership) analysis was always important as the headline figures for license and services costs were often complicated to work out, and product vendors inevitably push marketing messages that skirt over the difficulties and additional complexities of a real world implementation. So working out the total cost, over a reasonable lifetime (typically 3-5 years) including internal staff costs and/or savings, infrastructure and a complete picture of what is required was always critical.
ROI (Return on Investment) planning was also key, particular when CRM was more of an unknown quantity than it is now. When you’re spending many millions on a CRM initiative, you want to be sure it will justify such an expense.
As CRM systems got more commoditised (and again, we were at the forefront of implementing the new breed of commoditised technology as it developed), so costs fell. Multi-million, virtually bespoke, implementations became smaller projects; we would often remark that the amount organisations had previously spent on the business case became the total project budget. As a consequence, we found less and less demand for proper ROI and TCO analysis at the start of projects (with some notable exceptions from some of our forward thinking clients).
Now, though, costs have gone up again. There is no denying that the license costs for CRM products has gone up substantially over the last few years. Much of this cost increase is justified, with additional functionality and fully-fledged solutions that plug many of the gaps that used to exist. These increased license costs can reflect a reduction in the professional services budgets required for a project. However, the reality for many of our clients is that their expenditure on CRM is now a much greater percentage of overall IT spend (and indeed, overall spend for their organisation) than it was before.
This is now particularly the case for complex, cloud based solutions. We regularly discuss how the total costs of an implementation need to account for potential disc space additions or other infrastructure extensions later (we still have discussions with clients who assume it will be “all inclusive” in a cloud solution, which is rarely the case). The cost of cloud based infrastructure can grow rapidly over the lifetime of a system, and it is critical to at least be aware of the implications at the outset. Very real savings, assumed for the lack of on-premises infrastructure or for maintenance of a previous system, need to be realistically assessed, and a holistic view taken of the overall budget.
With relatively expensive implementation projects the norm, it is more important than ever to ensure spend is appropriately targeted (choosing the right, and most cost-effective solutions), well understood (through TCO analysis) and will bring an appropriate return on the investment (through ROI analysis).
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