Why CRM Systems Have a Negative ROI

What This Article Covers

  • How CRM Systems are Presented
  • The Reality of CRM Systems
  • Compliance Issues of CRM

Introduction

CRM is “hot” right now as a software category even though in my estimation CRM in most cases has a negative ROI. I cover this at Brightwork’s software category page on CRM. Meanwhile, a software category with what is most likely a far higher ROI, like BOM/PLM software is far less commonly implemented. But the topic for this article is why CRM most likely has a negative ROI.

The Reality of CRM Systems

No one talks about this, but CRM is often used to deskill the customer service workforce. It also allows for jobs to be more readily outsourced to less expensive countries, so is a negative for employment in the development countries — but that is probably not a concern for most of the readers of this article. And it also allows management to snoop on sales people and to generally micromanage, which is negative for sales. In fact, that is one of the most common usages of CRM.

Compliance Issues of CRM

Since CRM systems were first introduced they have had unending compliance issues. That is salespeople have shown a distaste for putting information into CRM and therefore the data has a strong tendency to be out of date and inaccurate. Salespeople often say that they don’t have time to perform the data entry or to update the data every time something changes on an account. However, there is another unstated reason for the lack of compliance. If anyone has experience with VPs of sales, they tend to be control freaks, and the CRM system is their method of interfering with their account executives. Secondly, not only do account executives place fake numbers into CRM systems (in order to buy more time while they look for a job), but the VP of sales will also manipulate the sales numbers of their account executives as the VP will have their own set of incentives. Sales forecasts are a problem not matter what the system that is used, and CRM systems do nothing to account for that.

Conclusions

There is no evidence as to whether CRM does show a positive ROI. CRM should be the easiest application to show a positive ROI. This is for two reasons:

  • Implementability: It is a relatively simple application to implement. Of the 10 application categories reviewed by Brightwork Research & Analysis, it is by far the most simple application category. You can see all 1o of the software category analyses at the following link.
  • Maintainability: From a systems perspective, CRM systems are relatively simple to maintain. (Although from the compliance perspective they tend to fall off the cliff, at least the system maintenance, which is where the IT costs are incurred is low)
  • SaaS or Cloud: Related to the previous point, virtually all CRM systems are SaaS or Cloud. Which tends to reduce the long term TCO.
  • Direct Financial Traceability: It connects directly to sales. And sales are measurable. All that is necessary is to remove the portion of the sales that is due to the natural increase in the business. This can be done by reviewing the historical trend in sales over a number of years and adjusting.
  • Ubiquity: CRM is widely installed, it is the second most popular software category after ERP. Therefore there are plenty of case studies.

However, no one has ever performed a study that actually shows a positive ROI from CRM. That should make one immediately suspicious of CRM’s positive ROI. There are what seems to be an unlimited number of people proposing that CRM systems have a positive ROI. And yet no one willing to prove that it is the case.

References

CRM has failed? I am so tired of hearing that