A big chunk of customer relationship management (CRM) software bought by enterprises is currently doing nothing more than collecting dust, according to a recent report.
And that adds up to a lot of shelfware – software that’s been bought but never implemented. The study by Stamford, Conn. research firm Gartner Inc., noted that in 2002, 42 per cent of CRM software licences purchased went unused. Gartner calculates the value at approximately US$1 billion to $1.27 billion.
According to Gartner analyst and report author Beth Eisenfeld, organizations likely buy software in bulk believing that it is saving money. But it ultimately costs more – Eisenfeld noted businesses with more CRM software licences than needed spend 20 to 30 per cent more in total cost of ownership compared to businesses that plan their purchases more carefully.
Peter Rondinone, project manager for the City of Newmarket, Ont., noted that the city is carefully planning its software implementation.
The municipality recently implemented the J.D. Edwards 5 enterprise resource planning (ERP) suite to manage its back office functions including financials, purchasing, human resources, and payroll. Proper planning is key to avoid any unnecessary costs, he added.
But most enterprises do not initially intend to let such a huge investment in software and licences go to waste. Rather, the study found enterprises are still grappling with the software installation.
Another problem is that CRM software is often purchased by non-IT executives who don’t really understand what it does.
At McKesson Corp., a San Francisco based firm that sells software to hospitals and insurers, it was the vice-president of sales who bought three CRM modules in May 2002 from Pivotal after volume discounts were dangled in front of him. One year later, only one of those modules – the sales force automation (SFA) piece had been installed, and even that application is still not fully used by McKesson’s sales force, according to an IT manager there.
Sitting on McKesson’s shelf are the two other components: a business intelligence application and software that integrates the SFA application with Outlook. “We don’t have enough resources to install them,” the manager said.
While the billion-dollar CRM applications market has cooled off recently – analysts note that sales will remain slow this year – organizations fell into the trap of buying in bulk.
According to software analyst Warren Shiau at IDC Canada Ltd. in Toronto, “some vendors seem to be able to convince users to buy more seats than they actually have or need – that’s money wasted right here.”
Planning CRM software licences correctly involve strategies such as creating a spreadsheet that plots different scenarios, costs and ROIs.