ROI report urges wary approach to CRM projects

As IT managers consider which technologies to invest in this year, they should exercise caution with customer relationship management (CRM) projects but expect high returns on investments in business intelligence software.

That’s the upshot of a report issued this week by Wellesley, Mass.-based Nucleus Research Inc. on the best and worst technologies for ROI this year. The report was based on a mix of user case studies and product road maps set by technology vendors, the firm said.

CRM software in particular was cited as a potential source of ROI danger, as it was in an earlier report that the market research firm released in September.

The chances for companies to overspend “are greater with CRM” than with many other types of IT projects, said Ian Campbell, president and CEO at Nucleus. “Think of CRM as the Big Dig of the technology world — you can go way over your head,” Campbell added, referring to a highway construction project in Boston that’s years past deadline and billions of dollars over budget.

To avoid that scenario, Nucleus analyst Rebecca Wettemann suggested two rules of thumb when planning CRM projects: never spend more than twice what you paid for the software on consulting, and be sure to set project milestones that can be achieved within six months.

ROI Potential

While she’s not convinced about the validity of those rules of thumb, Cathie Kozik, CIO at Tellabs Inc. in Naperville, Ill., said she agrees that IT managers should be cautious about CRM projects.

“I’ve yet to find a company that will acknowledge that they’ve achieved their expected ROI on any large CRM investment,” Kozik said “The most successful seem to have focused on delivering CRM functionality in meaningful pieces rather than going for a full-blown implementation.”

For its part, Tellabs, a communications equipment maker, opted to take a step-by-step approach to CRM “after looking at wins and losses at other companies,” she added.

Wettemann said there’s strong ROI potential with business intelligence tools, especially as pressure mounts on data analysis software vendors to improve the usability of their products in anticipation of Microsoft Corp. making a bigger splash in that market.

There are also solid ROI opportunities for high-volume manufacturers that are considering using supply chain technologies like radio-frequency identification (RFID) tags to help manage product inventories and shipments more effectively, Campbell said.

But RFID costs are still high, Campbell added. As a result, it might be wiser for small manufacturers to invest in other tools “with an eye toward RFID in the future,” he said.

Ron Fijalkowski, CIO at Strategic Distribution Inc. in Bensalem, Pa., said he thinks supply chain management technology in general “offers the best ROI given our current economic constraints, since it focuses on an issue with clear, measurable costs.”

Strategic Distribution, a US$300 million supplier of manufacturing maintenance and repair parts, is working to automate tasks such as the preparation of purchase orders, invoices and advance shipping notices, Fijalkowski said. But he declined to specify the software that it’s using.