Lifecycle costs of CRM systems: a comparison can reap dividends

Lifecycle costs of CRM systems: a comparison can reap dividends

When it comes to deciding whether a customer relationship management (CRM) solution is financially viable, you need to look at the long-term total costs.

The cost of buying the solution is sometimes only half the story, since charges may also apply for services such as implementation, maintenance, support, and upgrades. Different suppliers' pricing systems can make it difficult to calculate the lifecycle cost or total cost of ownership (TCO). This can cause projects to go over budget. Generally speaking, CRM solutions include many cost and service factors, so the decision to buy a particular one should take account of all expenditures over the lifetime of the product, as well as any hidden costs.

The cost may also vary depending on how you use the software

The charging mechanisms for CRM have changed significantly over recent years. Licensing agreements with a large upfront investment are being replaced by flexible monthly, annual or usage-based subscriptions that are intended to mitigate the amount of financial risk involved in a CRM investment. However, these do not necessarily make the TCO any easier to calculate, as some suppliers offer various licensing schemes such as “limited use” licenses, or low introductory subscription fees for limited CRM functionality. Over time, as an organization’s CRM needs become both more complex and more broadly deployed, some suppliers force expensive upgrades or the addition of many more limited use licenses, both of which can drive up costs significantly.  Therefore, it is important to realize that when comparing CRM vendors, many times it is not an “apples to apples” comparison when looking at introductory subscription pricing versus long term TCO, as editions and subsequent costs can and will rise over the course of the deployment. Be sure to ask vendors the right questions, such as: “Will usage, customizations, or other system development result in a required edition upgrade?”

Also, CRM solutions may be offered on a software-as-a-service (SaaS) basis, or as a traditional premise-based server software solution with a limited or unlimited number of user licences, in which case there can be already big differences in the purchase cost. A complex pricing schema, and dependence on a variety of existing enterprise agreements with suppliers, may push up the cost of a server-based solution. And many suppliers charge extra for access from multiple mobile devices and for maintenance and support.  It is important to never assume that mobile or tablet access is a free extension for every user when factoring in costs of more traditional premise-based CRM solutions.

Customer pitfall: hidden costs

SaaS subscription pricing models typically have no server fees or annual maintenance charges, and a subscription should include standard functions, such as the core CRM application, an email plugin, a reporting module, and configuration options. Although the pricing model may appear simple, there may be hidden costs for important applications, such as mobile access. Some providers may provide free mobile versions on a limited basis, with extra charges for full access.  In addition, some SaaS CRM providers charge exorbitant data storage fees when users cross a low threshold, as well as restrict access to systems integration capabilities, forcing organizations to either add more users to soften limits, or upgrade to premium and thus more expensive editions. Some providers may also charge or enforce edition upgrades based on the amount of contacts in the system, the number of emails sent, or the number of documents in the file system.

When browsing the market for a new CRM system therefore, look for a solution that offers a pricing structure that is as simple as possible. This will ensure you can see the full cost at a glance. Also, look for flexibility in your solution that provides you with exactly what you need, to further reduce costs. Opt for a model that gives you the choice to choose an on-demand or SaaS service, or the option to host the system in-house on your own servers; with no hidden costs or compulsory upgrades.

Save money by analysing your needs

CRM products vary a great deal in terms of what they include and how they are priced. It makes sense to carry out a detailed analysis of pricing structures and watch out for hidden costs. In the long run, a product that looks inexpensive may turn out to be more costly than you first thought because it offers a limited range of functionality. This is particularly important if you're a growing business and need to expand your CRM system to reflect new challenges and an increasing customer base. If this is the case, you need a comprehensive subscription with no hidden extras, providing a more predictable and manageable TCO for the life cycle of your CRM initiative.

*Originally published in MyCustomer