Watch out for wacky CRM pricing

Buying customer relationship management software is your latest opportunity to get hosed.
Posted September 1, 1999
By

Larry Marion


(Page 1 of 2)


All of the ERP vendor promotion about their various customer relationship management (CRM) software reminds me of the old joke about a teenage boy who killed his parents. When he was found guilty and brought before the judge for sentencing, he asked for mercy because he was an orphan.

Enterprise resource planning vendors--trying to sell salesforce automation, call center automation, field service and support tools, and other components of CRM--bring to mind the cynical teenager. Several years ago when ERP vendors first approached your chief executive officer, chief financial officer, or other mucky-muck about their ERP suite, they sold it on benefits--how it would integrate disparate functions, reduce inventory costs, improve operations, and a host of other positive impacts to the top and bottom lines.

CRM software sales surge
License revenues for customer relationship management software are climbing, but the growth rate is expected to slow after 2000.

CRM software sales surge

Source: AMR Research Inc., "Customer relationship management software report, 1998-2003."
Enterprise resource planning vendors--trying to sell salesforce automation, call center automation, field service and support tools, and other components of CRM--bring to mind the cynical teenager. Several years ago when ERP vendors first approached your chief executive officer, chief financial officer, or other mucky-muck about their ERP suite, they sold it on benefits--how it would integrate disparate functions, reduce inventory costs, improve operations, and a host of other positive impacts to the top and bottom lines. We all know how those promises panned out. They may have reduced inventories or improved productivity, but the costs were far higher than ever imagined. And the returns took a lot longer to be realized, due to a general underestimating of the complexity of the installation process.

Now the ERP vendors, and the other members of the CRM game such as Clarify Inc., Siebel Systems Inc., and Vantive Corp., claim that their new products will deliver top- and bottom-line growth. Market researchers say the promotions will have a big effect: The software license market is expected to quintuple, to $8.3 billion by 2003, according to Peggy Menconi, research director, Customer Relationship Management, at consulting firm AMR Research Inc., of Boston. Heard this before, have you?

Vendors say their products will identify new sales opportunities, help keep existing customers, improve the efficiency of your sales, service, and support teams, and otherwise save Western civilization from pollution, global warming, and all other afflictions. It's the patent medicine show of the new millennium, complete with the lack of discussion about price.

How much will it cost? That's the one question that is guaranteed to stop the torrent of claims. Vendors hate talking about the price. Even consultants have to sign nondisclosure agreements to find out. The simple reason--there is no real price. It's all about negotiation, and more so now than ever.

In part, the pricing flexibility (don't you just love understatements like that one?) is due to push-back from you. After spending $2,000, $3,000, or $4,000 per user for ERP, you naturally object when a CRM vendor asks for another $2,000, $3,000, or more on top of the ERP expenditure. Depending on which and how many modules you buy, how many users, and other factors, the product configuration engine module and other fancy stuff can push the CRM bill to $5,000 per user. An official from Denver-based J.D. Edwards & Co. told me that a major customer added a big CRM package on top of its OneWorld ERP suite, and the CRM cost was double the ERP cost.

 



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