Over-buying a CRM system can be a costly mistake
When you begin your search to find the right CRM solution for your company, you may find yourself wondering where to start. There are a lot of companies out there that want to pitch their CRM solution to you; however, you are probably already finding out that these CRM solutions come in all flavors, sizes, and at varying costs. There are solutions out there that range from simple contact managers that you can get for a few hundred dollars to extremely complex multi-million dollar enterprise applications that take years to implement.
Over-buying a CRM system can be one of the most costly mistakes a company can make. We hope to provide some valuable information for you and your company to assist your research in finding the appropriate CRM system for your company.
You’re looking for a CRM system: Where should you start?
As you have started your research for the appropriate CRM solution for your company you may have come across many different options from CRM vendors. Whether you have found out about various CRM options from referrals, consultants, internet research, or through various publications – you have probably found many CRM solutions that reach across all types and sizes of companies.
One of the key areas you may want to focus upon when you begin your CRM research is vendors that are specifically concentrated on companies that are your size. There are many CRM vendors that are generalists that try to be everything to everyone and sell their wares to whoever will look at it. There are also some CRM vendors that stay very focused on certain market segments. There are vendors known in the CRM market that focus on companies based upon their size. There are a number of vendors that focus on the small business segment with simple contact management solutions as well as enterprise vendors that focus on very complex CRM solutions that generally take six to eighteen months to implement for large companies. There are also a few vendors that are exclusively focused on the mid-market segment. As you undertake your research you will begin to uncover vendors that focus on companies your size.
There are a lot of choices
The CRM market is made up not only of companies that focus on business’s of varying sizes, but also how the solutions are delivered. CRM Solutions can either be delivered as an on-premise application that the customer licenses outright or as hosted rental solutions. There can be varied costs to these approaches. With an on-premise CRM solution, the company typically pays a one-time license fee and has rights to the software forever. With a hosted, rental solution, a company typically pays a monthly rental fee, but will need to pay this monthly fee as long as it wants to utilize the software. Although hosted rental systems can appear at first to be less costly than on-premise systems, once a comparison is done at the hard costs – these rental systems can become far more expensive.
As discussed before, there are CRM vendors that focus on small, mid-market, and large companies. Most vendors that focus on small businesses offer simple contact management systems that primarily focuses on account management features and is meant for single users or a small networked group of users. Typically, these systems are fairly inexpensive but provide a simple feature set with limited customization capabilities.
Many mid-market companies are looking for more sophisticated systems that offer greater breadth of functionality, run on relational database technology, can be easily customized according to a company’s requirements, and are easy to use. Mid-market companies are looking for appropriate features but do not want to over-buy a CRM system which could be a costly mistake.
Large companies often times may indeed be looking for very sophisticated CRM solutions that cover the sales, marketing, and customer service areas of an organization. Again, these companies are looking for solutions with an excellent feature set, high customizability options, the ability to integrate the CRM solution to third party applications, etc. Large companies as well are looking for an appropriate solution but often are concerned about over-buying. For large companies as well, this can be an extremely costly mistake.
Making your checklist
When you’re researching what vendors will be the best fit for your company there is a significant amount of criteria to consider. Your checklist should certainly outline the most critical and important priorities your company has to properly automate the CRM areas for your company. However, one critical mistake many companies make is allowing for “scope creep” to settle in on their CRM evaluation. “Scope creep” refers to CRM evaluations and implementations where companies believe they need to over-automate and include many unneeded features in their CRM system that users will rarely take advantage of. This can certainly lead to companies over-buying their CRM system, picking the wrong solution, and implementing a system that will take far longer to implement and not meet their budgetary guidelines.
Some of the key components that we suggest in your checklist are the following:
What’s a better deal, buying or renting?
Some of our previous discussions focused around hosted versus on-premise CRM solutions. In your research you may be asking yourself, what’s a better deal? Many of the hosted CRM vendors will try to convince you that a hosted solution is a far better deal than owning the software yourself. An easy comparison is renting an apartment versus buying a house – what’s better for you? Common sense tells you that owning is always a better deal in the long run.
Whatever solution you go with, you will want your CRM system to be a long-term solution that your company will use for many years in the future. We suggest you perform a multi-year comparison so you can clearly understand the short term and long term costs of a CRM system for your company.
With a hosted CRM system, you will face monthly rental costs for as long as you want to utilize and rent the CRM system. Further, you will need to keep in mind implementation, customization, and training costs. The biggest downfall of a hosted system is that the rental fees can reach exorbitant proportions over time. Typically, if you compare the rental fees over a two to three year period – for the same price you could have purchased an on-premise system and own it alright with no future payments due. Most vendors in the hosted space charge anywhere from sixty dollars per user per month to one-hundred and fifty dollars per user per month. This can get very expensive over time.
With an on-premise CRM system, you typically pay once for the software and you own the license outright with no future payments due. Also, many CRM vendors have a lease to own program where you can pay by the month for thirty-six months but then you own the license outright with no future payments due.
Typically, in the long-term, we have found that on-premise CRM systems are a much better deal financially than hosted systems that a company has on a rental agreement.
Your Next Steps
As you can see, overbuying a CRM system can be a costly mistake. There are a wide range of CRM products in the market that focus on companies of all different shapes and sizes. From CRM systems that focus on the small business to mega CRM systems that cost millions of dollars that focus on the largest of companies – there is something out there for just about every company.
We suggest you perform extremely diligent research to ensure the CRM system your company needs is properly evaluated to fit the unique needs of your company.