When Marshall Andrew eyeballed multimillion-dollar price tags for CRM implementation two years ago, one thing occurred to the vice president of IT at Station Casinos Inc.: Youd need a lot of slot machines to pay for that.
So Andrew decided to take a healthy bite out of the bloated customer relationship management price tags he had been looking at by doing something that would make many cringe: build a customized CRM system from scratch. This in spite of the fact that his IT staff lacked the CRM skills for which the Big 5 consultancies and implementation companies charge high-roller fees.
The resulting CRM setup allows Station Casinos, of Las Vegas, to track and analyze where customers spend money and to orchestrate Boarding Pass, a frequent-flyer-like program that offers enticements such as hotel stays in exchange for frequent patronage. Development and deployment finished at a cost—Andrew declined to state a specific figure but said it was "minimal"—that has allowed for a quick payback.
Andrew isnt alone in seeking to deflate CRM implementation costs. Analysts say that implementation charges—payouts for integration, customization, networking and training, among other things—can easily spiral to four times the cost of the CRM software itself. The totals can add up quickly when you consider how expensive software license fees can get; Onyx Software Corp., for example, is now at $1,950 per user in its named-user pricing model. Thats become difficult for enterprises to swallow, given the limp economy and the well-documented fact that about 50 percent of CRM implementations fizzle, according to experts.
The good news is theres plenty that enterprises can do to cut the fat from CRM projects. Rolling your own CRM system is just one answer. Those enterprises opting instead for packaged CRM software can also reduce costs by taking tough negotiating stances with vendors—especially now.
Another cost-cutting trick is to deploy only bare-essential CRM modules. Opting for a streamlined set of capabilities minimizes the time required to understand a companys needs, which eats up consulting time and money; minimizes the number of software modules that must be paid for; leaves fewer modules that require customization or integration; and entails lower training costs. The result: more for your money.
Leading up to Station Casinos decision about 18 months ago to construct its CRM system with internal talent, modest requirements and reasonably priced tools, the company, which operates 10 casinos in and around Las Vegas and Henderson, Nev., met several times with CRM vendors such as E.piphany Inc. and scrutinized the offerings of Onyx and Siebel Systems Inc. At the end of this due diligence, Andrew decided that the companys needs were too simple to justify spending the big bucks—from $6 million to $8 million, he said—that some CRM vendors charge.
Whats more, Andrew concluded, most of the packaged CRM products were not a good fit for what Station Casinos wanted to do. The CRM vendors tools were geared to doing things such as providing real-time customer buying histories to call center service representatives. What Station Casinos needed was simply a way to analyze spending patterns in its casinos so that it could more effectively target its marketing.
In the end, the companys IT staffers rolled up their sleeves and set about building a bare-bones CRM solution themselves. What resulted was an analytical CRM system built around IBMs DB2 database and ShowCase Corp.s Report Writer and Query tool, its Analyzer data viewing tool, and the Essbase online analytical processing tool from Hyperion Solutions Corp., a package of inexpensive tools that ranges from $20,000 to $40,000.
The system—called SPIN, or Stations Players Integrated Network—runs on an AS/400 system. Station Casinos IT and marketing staff can access the CRM platform from PCs. Using Analyzer, they can download data into Microsoft Corp. Excel spreadsheets or use a multidimensional database built on top of ShowCases tools to track customer buying patterns.
SPIN has already paid for itself, Andrew said. Once the company found out which customers spent the most money in its casinos, it was able to issue them more invitations to special events and to reward them frequent-player points at a higher rate.
Andrew was not able to avoid consulting help altogether, but he was able to minimize and get the most out of it. He brought in IBM Consulting Services for database and system design and for process flow work but only for three-month chunks of the project. And Andrew made sure there was constant knowledge transfer from the consultants to in-house staff.
But you dont have to develop your own system from scratch to cut CRM deployment costs. As officials at The McGraw-Hill Cos. found out, a committed staff and a tough negotiating stance with software vendors can go a long way toward trimming CRM cost bloat.
When company executives decided in June 1997 to replace McGraw-Hills clunky, part DOS-based, part paper-and-pencil-based customer management and order fulfillment system, they were reluctant to pay for high-priced consultants. Instead, they relied on a team of internal IT and business professionals to revamp customer and order management business processes so they could be automated with new software.
"They didnt let us invest in integrators," said Bob McLaughlin, who was vice president of sales for McGraw-Hill, in Chicago, at the time. (McLaughlin left the company in June.)
While the approach did allow McGraw-Hill to save money on consultants, there was a price to be paid: staff burnout. Everybody involved in the project—five employees in all—had two jobs for the 12 to 18 months it took to revamp the customer-facing processes. Some sales representatives, for example, sacrificed their bonuses to put in time on the CRM project, McLaughlin said.
When it came time to deploy CRM software, McLaughlin had another cost-cutting trick up his sleeve, and this one didnt pain his co-workers: He went looking for a hungry CRM software vendor that was willing to deal.
In late summer 1998, when the request for proposal for the CRM deployment went out, McLaughlin picked one young vendor whose Web-based solution seemed stable. Sales Vision—now known as Youcentric Inc. and owned by J.D. Edwards & Co.—was a relatively unknown supplier looking for credibility and a "pretty big company to use as a reference customer," McLaughlin said. So when McGraw-Hill executives decided Youcentric had what they wanted, McLaughlin bargained, and he bargained hard.
It worked. For a license with unlimited users but which initially sat around 300, the price was about $300,000. Thats less than half of what other vendors were ready to charge, McLaughlin said.
Many enterprises should be able to find similar bargains, particularly in the current down economy, experts say.
McGraw-Hill unveiled the CRM deployment in June 1999. Dubbed MESA, or Marketing Editorial Sales Automation, it features a shared customer and order fulfillment database that allows marketing and editorial staff to jump in and help with sales and marketing.
Whereas tight budgets motivated McGraw-Hill and Station Casinos to resort to CRM implementation cost cutting, that wasnt the case at Material Handling Services Inc., a Chicago-based company owned by Pon North America Inc. that sells and services gas and electric forklift trucks, among other things. In fact, when MHS steering committee sat down with five CRM vendors in July 2000, its initial budget was substantial—in "the low seven figures," according to Melissa Townley, marketing manager for MHS and a key member of the selection team.
Still, MHS ended up saving hundreds of thousands of dollars on its CRM deployment by avoiding what executives saw as overly complex—and expensive—CRM products and deploying only what the company absolutely needed. MHS evaluated CRM software from, among others, Siebel and Onyx. But so large and complex were those products, said Townley, they overwhelmed the selection team. MHS instead ended up selecting the much-more-focused GoldMine contact management system from Front-Range Solutions Inc., of Colorado Springs, Colo. Although it lacked many of the features of other CRM products, said Townley, GoldMine allowed MHS to do what it needed: track sales leads.
But, whereas the ease of use of the simpler product determined the choice, it didnt hurt that simpler also meant much less expensive to implement. For 35 users, implementation costs—everything outside of software license charges—came to about $50,000 for GoldMine. The total cost came to about $100,000—a bargain when compared with the seven-figure budget the company had been anticipating.
MHS saw big savings in training, consulting and ongoing maintenance costs by deploying the simpler product rather than Onyxs or Siebels. Because GoldMine is easier to use, MHS was able to get away with training just Townley—at a cost of $1,000—and having her train other users. Thats a pittance compared with the $50,000 it would have cost to train users on Onyxs platform, for example.
MHS saved on consulting, too. Siebels bid would have run MHS $37,000 for labor and consulting, Townley said. For the GoldMine deployment, MHS was able to hire a consultant, Advocate Consulting Group LLC, of Glen Ellyn, Ill., for much less. Advocate helped to get 20 members of the MHS sales staff, along with some management and marketing reps, up on the system about six months ago.
Big CRM software vendors are aware that many enterprises see the cost of deploying their products as too high. In fact, to address its appearance as being more expensive than its competitors, Onyx has changed its software pricing from a concurrent-user model to a named-user model. Another tactic vendors are taking is to switch to partial or vertically targeted module setups. Onyx is using a partial module solution, and Siebel Release 7 shipped with 20 vertical versions.
Will You Sell CRM Short?
But what are the chances that what looks like a CRM bargain today—rolling your own or buying simpler—will end up costing you more in the long run? After all, the bells and whistles of an Onyx or Siebel can look excessive when the economys limp or an enterprise is new to CRM. But that doesnt mean the many capabilities of such technologies wont seem like must-haves in the future. Will opting for a streamlined or homemade version of CRM paint an enterprise into a corner?
Its not a concern dismissed lightly by Station Casinos Andrew. "[Theres nothing that says] we wont become more sophisticated in the next six months, and we wont say, Now we need a billion-dollar product that we can beat to death." But for now, a billion-dollar tool isnt what the company needs, wants or can afford.
MHS Townley put it in plain terms: "Why buy a Jaguar when you can get by with a Chrysler? We dont need all that extra stuff."