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THE COSTS OF CRM

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The cost of any CRM (Customer Relationship Management) solution must be considered both in terms of hard costs (software licensing, hardware fulfillment, implementation consulting fees, IT labor) and soft costs (employee downtime, integration, training, etc.) While it still comes as a surprise too many, soft costs will normally exceed hard costs by a factor of at least two. Most analyst firms would suggest that the factor is closer to four and often more. Software as a Service (SaaS) CRM implementation costs are normally lower than traditional licensing and on-premise software installations, however, internal costs continue to apply.

Companies like Microsoft (Dynamics CRM), Sage (SalesLogix), Epicor (Clientele) and other software manufacturers normally charge a per user license fee. Some, like Microsoft, also now offer a small business edition (this works in conjunction with Microsoft’s Small Business Server and is okay for up to around 50 users).  Enterprise editions normally cost in the $1100 and up range per user (although Microsoft’s Small Business version starts at about $490 per user). Companies must also be cognizant of software add-ons and specialized modules that will increase the cost of the software packages. In addition, these programs need to reside on software platforms (SQL Server, Oracle, Windows Server 2003) and hardware (database servers, web servers, reporting servers, domain controllers, NAS (network attached storage), etc.) that will support them. Properly done and built with redundancy, this can be a significant investment even before considering the IT labor that will be forever required to deploy, maintenance, patch, administrate, trouble-shoot and upgrade both the software and hardware. It is important to look at the manufacturers recommended specifications for what the minimum requirements are for both supporting server software and hardware. The word minimum means just that – the absolute least you should be able to get away and still expect reasonable (not great) system performance. As a general rule, going with the minimum is an open invitation to higher maintenance costs and more problems. Given that a quality CRM technology solution is a mission critical business-centric application, most buyers are advised not be penny-wise and pound-foolish. In these types of situations, investing less does not save you money in the long run.

For the CRM implementation on a Microsoft platform, it is usually recommended that Microsoft Server 2003 be used as a minimum as Server 2000 is off of support. Costs for Server 2003 start at around $1,000 and the Enterprise Edition starts at about $3,200. The difference between the two, as it affects the network and usage is that Enterprise will allow for much more RAM memory to be utilized which is one of the most influential components related to system speed and performance. Given how data intense a CRM solution is, do not skimp on RAM when equipping your servers. Having a great program that helps your business isn't really so great if it runs so slowly your employees are wasting time watching the computer and getting frustrated. What is important here is to know what you need today, and be able to forecast your needs over about a three year horizon. Similar to the software component, the hardware component will depend on the number of concurrent users, the volumes of data and integration with legacy systems. The primary focus should be on the memory, storage and processor speed. It is also important to note that you should make sure that your network can run as fast as the server. Ask about the NICs (network interface cards) on the computers being used and within the system itself. It makes no sense to get a fast server if the network cannot keep up. The costs for the hardware can run similar to the software.

A major cost component comes with the configuration and customization of the CRM software application. Today’s CRM professionals are compensated $150 per hour and more for their time. For most implementations, each line of business and business process must be identified and then mapped or re-created within the CRM solution with a series of menus, drop down lists and tables. For a company of 25 users, this can easily take two to three months of elapsed time, or, 200 to 300 hours of work time. There is an economy of scale however, as the primary driver of cost here is not in the amount of employees, but in the amount and variety of business processes involved (i.e. sales, marketing, customer service, order entry, project management, etc.) Some CRM solutions include pre-packaged industry specific templates and formats which can increase initial fit and save time and money.

A soft cost that needs to be considered is the impact on employee productivity during the investigative and implementation stages. Know going in that time must be spent on the project for not only the selection of the solution, but also the implementation, integration, customization and training phases. Few solutions come out perfectly and there is normally a period of adjustment while employees become accustomed and acclimated to the new system, as well as to the working out of any misconfigurations or bugs.

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