CRM ROI series: Building a business case for SaaS CRM
Dan Merriman, contributor
10.18.2006
Rating: --- (out of 5)
Don't miss the other installments in this ROI series
* Building a business case for remote call center agents by Donna Fluss
* Building a business case for outsourcing the call center by Richard Snow
* Building a business case for self service -- coming in November 2006
Q: "I'm the CRM director for a midsized business. I have to give a presentation for the front office next month, and I'd like to convince them that Software as a Service (SaaS) is the right choice for our organization. Can you help me design a business case for SaaS CRM?"
 Dan Merriman, President, Chapin Consulting Group
Chapin Consulting Group helps companies increase revenue and reduce costs by maximizing the business results of major initiatives. For over 20 years, Dan has helped his clients realize significant business gains through the effective use of business performance management, business intelligence, customer relationship management (CRM), enterprise resource planning (ERP), and e-commerce. Dan has worked with companies in financial services, high tech, healthcare, and telecommunications in North America, Europe, the Middle East and Asia. He often presents at conferences and corporate events. He can be reached at dmerriman@chapinconsulting.com.
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A: With CRM and SaaS, it's all about actual business results. Purchasing a CRM application as an on-demand service (i.e., Software as a Service or "SaaS") should motivate both the buyer and seller to maximize quantifiable business improvements. The extent to which customers gain business value from SaaS applications drives their level of usage. In turn, the level of usage determines the success of the provider. This is a welcome change from the traditional onsite license model, in which the upfront costs led both parties to put significant effort into justifying the investment, while doing little after a deployment to measure and improve results.
ROI is still important -- but focus on actual business results
When purchasing SaaS, companies should complete an ROI analysis. However, a greater portion of their efforts should be focused on measuring and improving the actual value enabled. It is also important to continually assess results. Determining how much the service should be used in the future (i.e., will the usage level be maintained, expanded or reduced?) is part of this ongoing process of assessing and improving actual results.
Questions to ask internally
Companies should ask the following questions when considering investing in a CRM SaaS application:
What business goals will the application address? (e.g., increasing revenue by improving the effectiveness of generating new business and/or add-on sales; reducing costs by improving the efficiency of marketing, sales and/or service processes; improving IT cost-effectiveness by reducing the cost of supporting a CRM application).
How will the actual results be measured? (e.g., revenue per sales rep, marketing/sales cost per order, revenue/margin per account, CRM solution cost per customer).
What improvements do you expect from using the application and how do they impact the bottom line?
Note: The focus should be on the value of the application (the R of ROI), not merely the fact that the cost is reduced (the I of ROI) -- a serious shortcoming with many SaaS business justifications.
Does the expected quantifiable benefit justify the total internal and external costs of using the SaaS for at least one year, including costs to terminate usage or transition to another service provider?
Note: The costs used to assess the investment should include expenses related to making changes to business processes, skills, roles/responsibilities and the incentives needed to achieve the expected results.
Who in the organization will be accountable for each of the major expected improvements?
Note: Senior business managers should be accountable for expected improvements in revenue and business costs. Senior IT managers should be accountable for improvements in IT cost-effectiveness. Lack of accountability is another major shortcoming of CRM initiatives.
What additional metrics, such as leading indicators and drill-down comparisons, can managers use to identify and address the issues that will inevitably arise? (e.g., the number of qualified opportunities per marketing campaign, the time required to complete each step of the sales process, a breakdown of results by product, region and sales rep).
Questions to ask vendors
As mentioned earlier, SaaS providers should take a more active role in working with their customers to maximize their services, as their success is closely tied to their customers' success. During the sales process, buyers should ask vendors the following questions to assess the level of assistance they will provide:
Besides the standard implementation and technical support, how will you help maximize the business results? (e.g., business-oriented training and support, proactive communication and assistance providing updates/best practices/templates, active community of other users).
Based on your experience working with similar customers, what business metrics, reports and dashboards would be useful for us to track?
How does your application help track and improve business results? (e.g., dashboards, reports, analysis capability).
The responses to these questions can help:
1) Determine whether the investment in the application is justified, and
2) Select the appropriate service provider.
They should also set up the metrics, dashboards and processes for measuring and continuously improving the actual value once the application is implemented.
Don't miss the other installments in this ROI series
* Building a business case for remote call center agents by Donna Fluss
* Building a business case for outsourcing the call center by Richard Snow
* Building a business case for self service -- coming in November 2006
This tip originally appeared on SearchCRM.com.
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