IGG-06042003-01 M. Dunne Article 4 June 2003 Management Update: CRM Vendor Evaluations in a Volatile Market Decision makers often have difficulty in selecting software for customer relationship management (CRM) initiatives. Gartner provides a blueprint for success. Decision makers often have difficulty selecting appropriate software packages for customer relationship management (CRM) initiatives. Complicated and protracted evaluations are frequent, caused by oversights made by project teams, internal politics, and unfamiliarity with technologies and vendors. Gartner provides a blueprint for success. Assessment of CRM Initiatives With the end of the technology boom and increasing conservatism in IT investments, enterprises are less tolerant of inefficient product selection processes. In today s uncertain economic environment, it is more critical than ever that buyers better manage risk in their CRM application procurements through the use of a disciplined selection process. To help ensure the success of CRM initiatives, the application evaluation process must include a thorough assessment of the potential pitfalls and the tactical and strategic consequences of an application acquisition. Buyers must be able to accurately determine their functional and technical requirements to enable meaningful comparisons to what is available in the software market. Keys to a Successful Assessment Process Key Issue: What methods should be employed to ensure a comprehensive assessment of competing CRM vendors, service providers and technologies? Tactical Guidelines: A CRM application evaluation can take four to 12 months and require the participation of as many as 20 people. Enterprises must establish a disciplined evaluation process to manage time and resources effectively, and to avoid rash actions and unnecessary delays. Devoting sufficient time and focus to the early phases of the evaluation process will help avoid future difficulties in documenting milestones, building consensus, explaining analyses and justifying final conclusions. Throughout the evaluation process, it is critical to remain focused on three key activities: Gartner Entire contents 2003 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
Identifying Requirements. A comprehensive review of the enterprise s requirements and of the potential tradeoffs that can be made in meeting those requirements is the critical first step. This review will lead to the identification of selection criteria that will be used as the basis for measuring the appeal of prospective vendors. Developing the Evaluation Framework. Disparate criteria must be consolidated into a framework and prioritized to reflect the enterprise s concerns, and to ensure consistency when evaluating vendors, products and services. This is a significant issue, for the selection of CRM applications often involves multiple constituencies with competing agendas and perspectives that must be reconciled. Evaluating Vendors Capabilities. Finally, project teams must collect, compile and score information on vendors and their products. The team may have too little information on certain issues and may have to do more research, or it may have too much information from numerous sources and struggle to consolidate it. Mismanagement or insufficient focus in any of these three key areas can derail a product selection project. The potential consequences of such oversights include major delays in the completion of the procurements, the loss of money through poor use of resources or investments, and a poor product selection or no selection at all, if the process breaks down to the point that no decision can be reached. Avoiding this fate requires that these activities be conducted within the framework of a disciplined and comprehensive application evaluation and selection process. This process should be segmented into three major phases: internal needs assessment; research and analysis; and negotiation and selection (see Figure 1). Figure 1 Phases in the Evaluation and Selection Process Phase 1: Needs Assessment (5 to 8 weeks) Confirm opportunity for automation Create project team Define detailed requirements Prioritize criteria Establishlonglist Generate RFI/RFP Prepare demo scripts, reference interview surveys and user evaluation forms Phase 2: Research and Analysis (4 to 8 weeks) Compileresponses Conduct due diligence Establish short list Perform in-depth vendor analysis Solicit presentations and proof-of-concept pilots Select finalists Phase 3: Negotiation and Selection (3 to 6 weeks) Submit conclusions Selectwinner Craftnegotiating strategy Negotiate contract Initiate relationship Source: Gartner Research RFI request for information RFP request for proposal
The internal needs assessment should be closely aligned with the enterprise s CRM business strategy, and should include efforts to identify opportunities for automation. The objective of this review is to determine which processes the new purchases must automate. The efforts in this phase include preparing the vehicles for collecting data in the subsequent research and analysis phase. These vehicles include: Request for information surveys for vendors User evaluation forms for product demonstrations Reference interview questionnaires and vendor performance scorecards Once the needs assessment is complete, the capabilities of the competing vendors and their products are mapped to the defined requirements. Analysis of this data should result in negotiations with a selection of finalists that have the greatest potential to meet expectations. Gartner recommends that a top-down, hierarchical approach be used to identify, organize and weight the issues affecting the success of a product acquisition (see Figure 2). The first step is to determine which enterprise business goals the application implementation must accomplish. Next, decision makers should examine six high-level criteria to evaluate vendors: functionality, technical architecture, costs, services, viability and vision. Figure 2 A Hierarchical Framework for CRM Application Evaluation Goal Confirm the objective Functionality Technical Architecture Cost Services Viability Vision Use six perspectives to perform due diligence SFA Marketing CSS Platform Support Distributed Computing Scalability Integration User Interfaces Initial Costs Ongoing Costs Professional Services Ongoing Support Financial Organization Market Product Service Corporate Explore the critical factors in each area that will affect success in achieving the defined objective Development Environment Source: Gartner Research CSS SFA customer service and support sales force automation
Members of the project team should prioritize each criterion s importance to the enterprise. The process of defining and weighting these six criteria should be repeated until a satisfactory level of detail has been addressed. Gartner has developed a baseline weighting scheme to use as a starting point in prioritizing each of the six high-level criteria: Functionality: 24% Technical architecture: 16% Cost: 15% Services: 20% Viability: 18% Vendor vision: 7% Action Items: Before considering solutions, enterprises must reach a consensus on the scope of the evaluation, establish processes and milestones for qualifying or disqualifying prospective candidates, and determine what information they will use to validate vendor claims. Enterprises should select products using six high-level criteria: functionality, technical architecture, cost, services, vendor viability and vision. The latter three should represent close to half the weight of the purchase decision. Setting Up the Process and Examining Criteria in Detail Key Issue: What are the significant criteria to consider when analyzing CRM vendors, products and services? Tactical Guideline: When creating the evaluation framework, it is important to establish a rigorous, clearly defined scoring methodology for reviewing potentially disparate and conflicting sources of vendor performance information. During the requirements definition process, key criteria are identified and relative weighting are established. Eventually the analysis raises questions that are reasonable but not significant enough to require prioritization. For each of the most detailed and weighted criteria at the bottom of the evaluation framework, specific requirements will form the foundation of the enterprise s needs assessment. Functionality Evaluation Criteria Tactical Guidelines: Enterprises with stable business models and technology infrastructures should consider broader suites, while those with evolving business models will be drawn to best-of-breed components. In prioritizing evaluation criteria, buyers must bear in mind that a vendor will have domain expertise only in a limited set of markets. They should be wary of vendors offering complete
business solutions that really represent conglomerations based on acquisitions, in-house development and partnerships. Project teams typically refine their requirements analysis by first investigating their functional needs before assessing the field-deployable capabilities available from solution vendors. In this morestringent fiscal environment, enterprises must also focus on solutions that address immediate business needs and offer the greatest potential for a positive return on investment. The scope of functionality of many CRM initiatives includes only sales force automation, marketing automation, customer service and support, and field service (see Figure 3). Figure 3 CRM Application Core Functionality Sales Force Automation Marketing Automation Customer Service Opportunity tracking Sales configuration Sell-side e-commerce Order management Telesales Managing campaigns Web-based marketing Content management Telemarketing Call management E-services Knowledge bases Field services Contact Center Technologies: CTI, IVR, Predictive Dialers, Universal Queues Data Warehouse Technologies: Analytics, Reporting Tools, ETL Tools, Data Marts Source: Gartner Research CTI ETL IVR computer-telephony integration extraction, transformation and loading interactive voice response To provide this functionality, CRM suites and best-of-breed applications are available. Project teams should be aware, however, that no single vendor has developed a monolithic solution with best-ofbreed functionality in every major category of customer-facing, front-office applications. Vendors still tend to focus on providing functionally strong products in areas where they initially experienced success, or in areas immediately complementary to their core expertise. Decision makers should consider how well these vendor core strengths map to the enterprise s needs. Action Item: Enterprises should favor vendors that have articulated clear visions for their domains, and use references, scripted product demonstrations and case studies to validate their claims. Technical Architecture Evaluation Criteria Tactical Guideline: Enterprises should investigate the potential impact that product rewrites, acquisitions or enhancements will have on prospective solutions ability to meet scalability, integration, usability and manageability requirements. The category of technical architecture addresses the overall design of CRM applications. It also examines how the components of the software integrate and interact with each other, and with thirdparty hardware and software systems.
Decision makers must verify that the software products comply with enterprise technical standards that are in use or being considered for the future, and how easily these offerings can integrate with installed systems. This audit of the technological fit between the alternatives being evaluated and the enterprise s technical environment helps buyers anticipate additional purchases or customization that would be required to implement an overall CRM strategy. Action Item: Enterprises should carefully prioritize the importance of technological components, and ensure from the beginning that all the pieces work together. They should strive to implement open (as opposed to vendor-proprietary) solutions and standards wherever possible. Cost Evaluation Criteria Tactical Guideline: Enterprises must gain a comprehensive understanding of the initial and ongoing costs associated with a solution. They should be aware that vendors may seek maintenance agreements and other service fees to recoup revenue lost through aggressive software price discounting. Cost analyses should include all financial outlays for procuring and implementing a CRM application and managing the installation on an ongoing basis. Especially important is a thorough grasp of consulting fees for customization and integration, as well as initial training fees. Also of concern are ongoing post-implementation expenses, including maintenance fees, additional training, and additional consulting fees for upgrading or customizing software to support evolving technical and business requirements. Action Item: Do not accept standard, vendor-supplied software-licensing agreements. Seek to purchase only the licenses that are needed at a discount from list price, and be wary of spiraling costs caused by post-implementation expenses. Secure maintenance agreements that represent a percentage of discounted software license investments, and seek payment schedules that secure maximum leverage in any relationship with a prospective vendor. Service Evaluation Criteria Tactical Guidelines: Expect to weight services as the second-most-important criterion, following product functionality, in assessing the value of a vendor relationship. Users should carefully examine the maturity of vendors professional service organizations (PSOs), especially their experience with complex implementations involving multiple third-party products or major integration requirements. When procuring CRM systems, user organizations must ensure that they can efficiently incorporate and use these products to support their business objectives. Such efforts require consulting expertise, problem-resolution capabilities and knowledge transfer of skills that are critical to using the application. The evaluation team should assess the quality and availability of professional services dedicated to a solution, such as business consulting, implementation and training. The team should also address key ongoing support issues such as help desk support, documentation and maintenance services. The provision of these services is a critical factor that impacts customer satisfaction, product acceptance and successful long-term business relationships. Action Items:
Focus the analysis of services on two perspectives: The professional services offered to maximize the product s value, and the ongoing support services needed to ensure reliable operation of the software. Identify vendors that have a strong network of service partners, and be wary of those forced to go it alone in providing professional services. Vendor Viability Evaluation Criteria Tactical Guideline: Enterprises must anticipate that restrained IT spending will slow the operations of most providers. Products may be sophisticated and have high levels of service, but can the vendor sustain these standards? It is critical that enterprises confirm the financial condition, organizational stability and market position of the vendors they are considering. This three-dimensional perspective will enable buying centers to better anticipate whether a vendor will become a leader, remain competitive, become a potential acquisition target, or fail and exit the market. The latter two outcomes could have far-reaching ramifications, placing significant burdens on user organizations. Such consequences may include: Substantially increased maintenance costs Loss of competitive advantage due to disrupted product innovation The need to revisit the entire procurement decision Action Item: In light of economic conditions, carefully weigh the tradeoffs between a vendor s viability and the technical attractiveness or cost competitiveness of its offerings. Vendor Vision Evaluation Criteria Tactical Guideline: A prospective vendor should have a plausible blueprint for continuing innovation, extending services (internally and externally) and ensuring its own survival in the marketplace. The high-level commitment of time, money and personnel required to implement and manage CRM applications mandates a review of the stated visions of the CRM vendors being considered. Users should determine the compatibility between a prospective vendor relationship and the long-term objectives of the enterprise. This analysis should measure a vendor s probability of: Carrying out future product plans Delivering consistent levels of service Maintaining or improving its market position Action Item: Evaluate each prospective vendor s strategic directions for product and business development, assess the attractiveness of that vision and its likelihood of being realized, and determine how well the vendor s priorities align with the enterprise s strategies and business requirements.
Summary The quality of the evaluation and selection process is among the most critical factors that affect the success of a CRM implementation. The research and due diligence efforts undertaken during a wellplanned and conducted evaluation and selection process will also help reduce and manage risks in the long term. Managing risk is paramount when considering the adoption of new technologies, especially those that affect front-office processes and interactions with customers and prospects. Special attention should be paid to the risk that an inappropriate product or vendor relationship could undermine a business objective. Buying centers must realize that the procurement of CRM products establishes relationships with vendors if not a series of relationships with the vendors product and service partners that are critical to obtaining the desired advantages. Decision makers must also realize that services are often the most difficult and expensive aspect of any CRM endeavor, and anticipate that the vendors organizations, services, product development plans and associated partnerships will all be subject to change based on changing market conditions. Properly setting expectations and using a systematic selection methodology will enable enterprises to more efficiently anticipate and accommodate these uncertainties by encouraging greater focus, discipline, oversight and consistency in decision making. Bottom Line Buyers should keep the following pointers in mind to better manage the risks associated with evaluating and purchasing CRM technology: Do your homework and follow the recommended method. Remember that you are buying not just products, but also relationships, and that no single vendor can do everything. Bear in mind that product and price make up only half of the decision, and software prices represent only a portion of total costs associated with procurement. Do not ignore vendor viability or service capabilities. Services represent the greatest risk and the most expensive part of the endeavor. Written by Edward Younker, Research Products Analytical source: Michael Dunne, Gartner Research This article is an excerpt of a chapter from a new report, Building Business Benefits From CRM: How to Design the Strategy, Processes and Architecture to Succeed. The 354-page report is the first offering of the Gartner Executive Report Series, a new business venture of Gartner Press that provides buyers with comprehensive guides to today s hottest IT topics. The CRM report features 26 fact- and advice-filled chapters, an appendix describing six CRM case studies, a glossary of terms and 128 figures. For information about buying the CRM report or others in the Executive Report Series, go to www.gartnerpress.com/crm. For related Inside Gartner articles, see: Management Update: The Real-Time Enterprise at the Customer Front Line, (IGG- 05282003-01)
Management Update: Realizing the CRM Vision, From Strategy to Execution, (IGG- 05212003-01) Management Update: Large-Enterprise CRM Suites, Technology Outlook, Key Vendors, (IGG-04302003-01) Management Update: CRM Suites Magic Quadrant for North American Midsize Businesses, (IGG-04162003-04)