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Blog, Tip of the Week

Determining the True Cost of CRM Ownership

When considering taking on the initiative to implement a new CRM for your business, it is always a good idea to consider the many factors that combine to form the “True Cost of Ownership”.

When most people think of the cost of ownership, they will often consider only the upfront price of the software or hardware and look no further.

However, this is not the whole story. Price alone does not take into account many of the harder to define (but absolutely real) costs associated with a new CRM solution, such as maintenance, support, training, user adoption, and efficiency. When you add in all of these other factors, the true cost of ownership becomes clear, and it may be dramatically different than you expected!

Generally speaking, there are 3 main ways we can break down the cost of ownership: Purchasing Cost, Implementation Cost, and Support Cost

Purchasing Cost

To illustrate the different factors, let’s take the example of purchasing, implementing and maintaining Salesforce. We begin with what people typically think of in terms of cost, the price. Of course, this is simply the price you pay to buy and use the software. The purchase here will be your Salesforce licenses and the products you are interested in, such as Sales Cloud, Service Cloud or Marketing Cloud.  

Also, because Salesforce has so many different options and products available, the planning, research, and negotiation usually take a couple of weeks. This time and effort should also be factored into your purchase cost. This may even include hiring a consultant to help you find the best solution.

Additionally, your purchasing cost may include the necessary pre-conditions to enable the new technology to function properly, such as new hardware or upgrades to existing hardware and software. Salesforce, being cloud-based, doesn’t have significant hardware costs, but we don’t recommend trying it with a 15-year-old computer.  Altogether, any one-time purchase would be counted towards the purchasing cost of the technology.

Implementation Cost

Once Salesforce has been purchased, it needs to be set up and made usable. If your company has a very knowledgeable Salesforce Admin and only needs a basic setup of the system, you may be able to get away with not hiring an implementation partner. So your costs here would again be the time and effort cost.

However, if you are like most companies, you will want to take advantage of the Salesforce tools to the fullest, and won’t have enough knowledgeable staff to handle this. So you will need to hire a consultant. Costs here can vary significantly, depending on how much custom development you need and what solutions the consultant offers.

Additionally, you should include the cost of training users on the new technology and the changes in both short-term and long-term efficiency. Most companies who implement a new CRM see a dip in efficiency right away, but overall improvements in the long term as the employees get the hang of things. In many cases with Salesforce, the day to day processes become significantly more efficient int he long term than they were before adopting the CRM.

This is also why choosing the right CRM is important, because if you don’t end up with good rates of user adoption, you may see overall decreases in your business efficiency in the long term, which would be a significant and unintended cost.

Support Cost

Finally, when considering the true cost of CRM ownership, we turn to the support cost. If you have gone with a cloud CRM like Salesforce, you do not have to worry about updates, upgrades and bug fixes, they will all be taken care of. But you will, of course, have to pay Salesforce a monthly fee for that service. If you have a local CRM but a support plan from the developer, that will also be a recurring fee, or if you have a local CRM, built in-house, then you will have costs associated with IT staffing and overhead.

Other support costs that may come into play are support contracts with external vendors, ongoing licenses and the potential costs of adding new features or enhancements. In the end, these all add up to allowing you to scale (or not). If you have a flexible system that can change and grow with you, you will be able to minimize many of these support costs down the road. However, if the system doesn’t have that ability then your support and maintenance costs will grow significantly down the road, and may eventually force you to replace the whole system.

So, when it comes to evaluating the true cost of CRM ownership, sometimes a system with a larger price tag, will actually cost less in the long run when you take the other factors into consideration. Salesforce is a great example, because while the system is admittedly not the cheapest option on the market, it can help you save money down the road due to high rates of user adoption, more efficient processes and simply put, if you get it set up right the first time, you will likely never need to buy and implement another CRM again.

No matter which direction you choose to go with your CRM, proper planning or budgeting using all of the above criteria will help you out significantly. Nobody wants to spend a lot of money on a system that they outgrow in a couple of years, and by taking into account the various factors of purchasing costs, implementation cost and support cost, you will be able to get a better idea of how to spend your money

 

-Ryan and the CloudMyBiz Team


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