CRM Customization: Is it an ROI Slayer or Savior?

Despite some vendors' claims that enterprise CRM applications can address business issues straight out of the box, the reality is that most customers-particularly large customers-are forced to customize the software to address their individual needs. Even though IT executives would prefer to avoid such time-consuming tasks, it's not surprising that they undertake them: After investing significant amounts of money on technology and integration efforts, businesses want their systems to address their specific business needs and vertical market.

The problem is, heavy customization, while solving individual business needs-can create significant headaches when it comes to maintenance and upgrades. And at a time when IT departments face budget constraints and increasing pressure to justify investments, customization efforts go head-to-head against the need to prove return on investment.

However, says John Ragsdale, research director at market research firm Giga Information Group, many companies are unable to truly leverage the investments they make in CRM if they don't customize their software. "It's necessary to customize your CRM applications to reflect your environment," says Ragsdale. "It's also necessary for employee adoption. The problem is, when you're doing customization, it's difficult to quantify ROI. And it's particularly difficult to quantify customization that involves legacy integration."

Indeed, without customization, CRM systems are unlikely to deliver the business benefits they might otherwise provide, says Rod Johnson, vice president of customer management service at AMR Research.

As for returns on investment, he says, "you've actually got a better chance of ROI the more customization you do, because you're making the applications fit your business processes." Of course, he adds, "this raises your TCO due to increased cost of upgrades," but these checks and balances are the cost of improving business processes.

Nonetheless, there continues to be ongoing demand for vendors to deliver CRM applications that don't require mass customization. Help is coming from such providers as enterprise applications providers Siebel and PeopleSoft, which are delivering tailored applications designed to address the specific needs of vertical industries.

"Vendors are making the investment, following Siebel's lead, in developing vertical applications with vertical presentation that lowers the risk and cost of implementation," says Johnson.

However, while such systems may ease the implementation burden, says Johnson, even vertically tailored applications can't automatically solve problems out of the box. "Even within the same industry, every company is different, with different processes," he says.

In any case, vertically tailored applications alter the ROI equation, says Ragsdale. "A vertically specific application does cut customization, but reduced customization doesn't necessarily mean better ROI. They cut implementation time, so you're cutting costs, but you have less of an investment to get a return on." And, he reminds, there's still the integration issue with existing systems, though vendors are including integration packages that address this problem. "If a vendor provides a package integration for back-office ERP, say, that can definitely save time and money on implementation," he says.

While some vendors are developing vertical applications to address customization complaints, others are addressing customization issues via the development side. "More and more vendors are delivering vanilla applications but providing sophisticated development tools to customize them. They're pitching highly customized applications based on the toolset rather than the packaged software," says Johnson.

Whatever the approach to customization, viewing it in terms of ROI is a difficult proposition-as is the issue of ROI in CRM investments in general. For one thing, there are different measures of ROI in any technology implementation, says Ragsdale, and CRM is no exception. "There are the hard [ROI] numbers surrounding agent productivity, sales productivity, and marketing campaign effectiveness," he says. "But there are also the soft numbers, like measuring customer satisfaction." And while he believes that increased customer satisfaction does translate to a business's bottom line, Ragsdale says it's difficult to assign it a quantifiable number.

For Johnson's part, he believes the focus on ROI in CRM implementations often draws attention away from more important metrics. "Many CRM projects are backwards; businesses talk about customer relationships, but CRM often has very little to do with customers," he says. "I don't think customers care about the effectiveness of your sales force, unless you're lowering the cost of your services and products."

"Businesses should think about ROI, yes, but it's just one metric," he continues. "They should think about a CRM project from a customer's perspective and what will be valuable to them. That means focusing on the return on relationship (ROR), and on competitive differentiators."

Sidebar: How Much Customization is Too Much?

Though many large businesses find it necessary to customize the CRM applications they purchase, they should carefully review their present business needs, existing processes, and the capabilities of the software before proceeding, according to Giga research director John Ragsdale. It comes down to a need to balance usability with the ability to upgrade, he says. He makes the following recommendations for those facing customization and subsequent upgrades:

*Don't recreate flawed processes. If a business process differs radically from the out-of-the-box flow, it requires an objective review before coding.

*As system integrators reuse customizations from project to project, IT should evaluate customizations on the basis of what the base product is capable of, not on the custom code in the system integrator's library.

*Businesses should log every customization function they perform, including the business need driving it. This work will pay-off down the road when IT needs to eliminate or change custom fields and isn't sure who's using the data.

	CRMindustry.com 336 E. Padre Street Santa Barbara, CA 93105 ph. 805.687.8829