Evaluating software, byzantine software like CRM, is an informationtechnology phenomenon unrivaled in its intricacy by any other businesstask. It's an amalgam of science, art and politics - a Shakespeareandrama plunked down in the middle of your business.
You know the plot. Committees form and set requirements. They createmetrics. The IT department works out ROI charts. VPs golf with vendorsand negotiate. There's haggling, scheming and major power plays, tosay nothing of the vendors' activities.
Alas, alack! In the end, you're left with a list of reasonablyequivalent choices and a sense that all's well that ends well. Buthere's the rub: The choice you make will have little to do with thisevaluation process. A good number of customer relationship management(CRM) projects will fail right here, when the winning vendor isannounced, and then they'll move full force into the deployment phaseanyway.
This may sound like a farce, but the history of IT is rife withhigh-profile projects that devolved into colossal failures. First camethe migration from mainframes to client/server. Next, datawarehousing. Then, enterprise resource planning (ERP). In each case, amust-have IT investment turned out to be more complex thananticipated, led to user revolt and required massive infusions ofmoney to sustain.
Often, the projects collapsed anyway.
And here comes a new IT darling, CRM - promising profit by enablingcustomer-focused operations. It turns out, though, that CRM is no morelikely to succeed than past hot technologies. CRM failure storiesalready abound, a despondent echo of past IT debacles. Gartnerpredicts that through 2003, the CRM failure rate will increase to 70percent, up from 55 percent in 2001.
This IT entropy is happening again because in many cases, you don'tdrive the software evaluation process, the vendors do. They're betterat evaluating you - and how to get money out of you - than you are atevaluating them. Vendors can oversell simplicity and functionalitybecause customers let themselves be oversold. You may be the players,but in a broad sense, they direct the play.
Understanding how vendors exploit your software evaluation process isthe first step to wresting some control from them.
Why you are not in control
Simple math explains the vendors'advantage. They sell this stuff every day. Buyers go through theprocess maybe twice in their careers. CRM vendors, like ERP vendorsbefore them, pitch a staff of Pedro Martinezes against rookie hitters.
Martin Siebold certainly felt overmatched. He's CEO of Wetzel GmbH, asmall but solidly profitable manufacturer of printing and embossingrollers. The 500-person, $50 million business is tucked inGrenzach-Wyhlen, Germany, near the Swiss border.
Several years ago, Siebold led a hands-on evaluation of enterpriseresource planning software that produced a decision matrix of options.The matrix showed that SAP - the dominant ERP application - was too muchsoftware for his small company; other alternatives fit his needsbetter. Still, Siebold did something experts say is far more commonthan one might expect. He just went for it and chose SAPanyway.
As it turns out, the cost to scale down SAP has proved higher thanexpected. Siebold also fesses up to owning pieces of SAP's softwarethat he simply has no use for.
Today Siebold attributes his choice to the vendors' ability to makehim see things their way. "In the end, you're very much in the handsof those guys," he says. "With all their training and experience withso many clients, they have a big, big advantage, knowing you'reprobably new at this."
Well-trained troops
You work hard at your job, and sales reps workhard at theirs. They follow detailed sales methodologies designed totake advantage of buyers' inexperience and emotions. Some attendseminars like the Software Sales Rep Boot Camp, which is regularly runby a Boston-based training company called Provant. In April, Darwinsat in on Boot Camp in Durham, N.C., as two dozen software sales repsgathered to learn "how to negotiate without caving in on price," and"how to shorten the sales cycle."
Boot Camp has a 20-year track record, and Edd Brown, the Durhamsession's drill sergeant, says it's about honorable selling. Ittransmogrifies statistics about buyers' habits into scripted tactics.For example, scripts called capability visions prompt the buyer tostate her problem in a way that suggests the salesperson's softwarecan fix it.
Reps also learn how to shorten the sales cycle; they're taught toencourage customers to sign the final contract at a draft proposalmeeting - before they "have their negotiation shoes on," as Brown putsit. Brown firmly believes Boot Camp is about creating win-winsituations for vendor and seller. He also says plainly, "We're goingto help you pull [buyers'] pain from the back of their mind and put itin the forefront. Sales is a hurt-and-rescue operation. You're hurtingthem in order to rescue them. But you have to hurt themfirst."
Of course, the best sales reps deftly walk a complex, sometimescontradictory line between being the customer's "partner" and being asalesperson with quotas to meet. Paul Bayne, a salesman who has soldboth ERP and CRM packages, is one such rep.
Bayne advocates for most of his colleagues' honor,insisting that software failures emerge as much (or more)from unfocused buyers as from aggressive sales. He hasattended workshops like Boot Camp and says they're reallyabout getting the buyer to understand his needsclearly. Through this process, Bayne says he has evenrecommended that prospects purchase software he doesn't sell- and ended up getting business from them later on. Still,Bayne says he has also witnessed salespeople who wouldfabricate functionality or availability to get the buyer tosign on the dotted line. Think Alec Baldwin in GlengarryGlen Ross.
Guts over reason
Bayne says in the long run those salespeople aredoomed. But he admits, "they do OK in the short term." And in thatshort term, customers fall victim to dishonorable sellers. Thesesellers exploit one fact about the buyer above all: When choosingsoftware platforms, such as ERP or CRM, buyers invariably operate onguts, not reason.
Despite possessing sound empirical evidence of what package is best,when the big decisions are made, many executives act instinctually.Without meaning to - and without being able to stop themselves - theycan render the evaluation process moot.
"It's a very emotional process, and the vendors carve into thoseemotions," says Marvin Balliet, CFO of Merrill Lynch's technologydivision in New York City. "When we moved retail [financial services]to the Internet, emotions carried our decisions. That led tosuboptimal technology decisions - which we've since fixed - becauseemotions don't necessarily lead to the most efficient processes ordecisions. And the vendors know this," Balliet says. "They work onthis."
Bayne concedes as much when he says, "Part of [a buyer's] gut instinctis just really good marketing."
The enthusiast effect
Sellers also seek out enthusiasts within thebuyer's IT department. Enthusiasts are technical staff who buy in to avendor's vision. Vendors love enthusiasts for providing a hinge onwhich the door to sales opens. They let themselves be oversold. When avendor says CRM can transform the business, the enthusiast willrejoice in having found an ally. To a different end but with the sameverve, enthusiasts unwittingly deliver the vendor's pitch with an airof objectivity the vendor could never hope to attain.
In Boot Camp, these IT enthusiasts are called sponsors, and attendeeslearn that 70 percent of sponsors will help the rep recruit a "powersponsor" - an enthusiast authorized to spend big chunks of money."When a vendor influences an IT manager, more or less they have theirfoot in the door," Wetzel's Siebold says. "The IT manager's reportingback to us. Would we choose a different product if the IT manager isthat passionate?"
Fear factor
Vendors also ply a buyer's fear. For example, the goal ofthe biggest vendor is to make the buyer fear the consequences ofshunning the market leader. "You won't get fired forbuying...."
Siebold recalls having this notion planted in his head. "In thosedays, if you asked yourself, Who will be with me in five years? it wasSAP or Baan," he says. "It was a gut decision. We thought, Yeah, SAPis bigger."
Competitors know they're up against this "go with the in-crowd"mentality. So they instill a fear that to go with the market leader isto be had - on price and on support. In turn, these vendors promisewhatever functionality the market leader has or more, but for the same(or less) money and with better customer service. As Merrill Lynch'sBalliet observes, "The sales guy is telling us he'll solve A, B and C,but he'll also give me D, E, F and G at the same price."
Bayne's done this. "You say, 'We're a small company. Here's my numberand the numbers of four people you can call any time. Here's the CEO'snumber. The big guys, they'll put you in to a call center.' I've shownmy strength is my size. I've said the market leader's a big companythat couldn't do this for you, and I never had to say the marketleader's name."
Too much, all at once
Vendors, not buyers, end up dictating theselection criteria - and they're talking about too many features. "Thiswill lead buyers to choose a hell of a lot of functionality even ifthey don't need it," says Jim Shepherd of AMR Research, an analystfirm in Boston. "It puts the buyer on the path of doing too much, allat once."
"I have five things I want CRM to do to start with," says Jay Pieper,vice president of corporate development and treasury affairs ofPartners HealthCare in Boston, who is now evaluating CRM applications."Everyone who comes in here has 25 other things CRM has done for othercustomers. We have trouble even putting together a spec sheet becausethe vendors won't talk about just the five things we need."
"It's a very difficult process to stay on," Balliet says. "They'lltell you all the things they can do. Even if you tell them, 'I don'twant to talk about all that,' you won't get a presentation that onlytalks about what you want."
Vendors up the ante on features because, frankly, they're competing.If one vendor offers a feature, everyone else must too. Also, the morea software company sells up front, the better. Incremental deploymentsare anathema to vendors because, quite simply, they are lessprofitable.
What's more, the ramifications of feature overload aren't beingbrought to light in the evaluation. Why would a sales rep bring up theneed for new hardware, new policies and retraining if the buyer's notasking?
The big bang myth
It's not hard to see why few, if any, big bangdeployments succeed. David Bradshaw of market analyst firm Ovum inWakefield, Mass., notes the happiest ERP and CRM customers start withmodest goals. And those with the highest ROIs use any number ofdifferent vendors' applications - even competing suites - in differentdepartments.
"The impression you get when you talk to CRM vendors is that theircustomers are using their software to mediate every interaction withthe customer," says Bradshaw. "That is fiction."
So why do CRM vendors continue to score the big bang projects and whyare CRM failures on the rise?
"This is where vendors are really better than buyers," AMR's Shepherdsays. "They structure their products and pricing to preventincremental deployments. They'll make a strong case that if you buyjust the piece you need now then come back for more, the money may notbe there." More fear.
So here's where we stand: The software evaluation now includes severalvendors, all of whom offer too much functionality in configurationsthey won't scale down. Enthusiasts inside the buyer company areup-selling. Executives overseeing the evaluation are about to becaught unawares by their own emotional decision making. The vendorswill exploit this and may well be planning a sneak attack contractsigning.
"The fact is," Balliet says of the software evaluation process, "youmay end up with a product selected that has seemingly inexplicabledecisions behind it."
A sales job
As it's happening, the sales process doesn't feel thiscallous. This Machiavellian. All along, the vendors promise hugebenefits from a cross-enterprise platform. All this functionality,they say, will create decisive competitive advantages. The worde-business will come up as a badge of honor, as in, "This CRM projectwill make you a true e-business."
In a fantastically ironic moment, the vendor will probably tout itsCRM platform's ability to increase the bottom line by homing in oncustomer buying habits in order to up-sell them.
"They're successful vendors, which is why they're in your evaluationin the first place," AMR's Shepherd says. "There's a lot of emotioninvolved, and that's where the skill of the salespeople becomesimportant. They're probably pretty good at convincing people of whatthey want to convince them of. I mean, that's basically what asoftware sales rep does, right?"
Wetzel's Siebold can relate. He is still running on SAP, and it mostlyworks. But did he pay too much? How much of the software is unused?Why did he, almost by whimsy, choose a platform he knew wastoo big?
Seven years later, Siebold still calls his decision makingquestionable. Today he's developed one or two CRM applicationsin-house but knows he must eventually start evaluating vendors'software in order to do it right. With CRM, Siebold isstalling.
How to take back control
Here are ways to offset the vendors'advantage when evaluating major software packages like CRM.
Knock the vendors off balance. Vendors havea script. Weeding out the posers can be as simple as askingunexpected questions that get them off the presentationslides.
In his CRM vetting, Partners HealthCare's Pieper makes a minor sportof this. He likes watching sales reps' faces when he takes them "offmessage."
"The first thing I ask is, What have you learned from your otherclients? What have they tried to do that failed?" Pieper says. "Mostof the time, they've never been asked this. You quickly sort outpeople with good experience."
Learn from history. What's most strikingabout Pieper is his definitive grasp of IT history. Piepercan hold forth on another company's software implementationfrom a decade ago, citing successes and failures. Pointbeing, this knowledge is put to good use when confrontingvendors. The more one knows about landmark projects like theearly ERP systems of Frito Lay, Sabre or FedEx, and how theyeventually affected their companies, the better.
But this means homework. There's no easy way for executives to acquirethe expertise, short of hiring a Pieper. But with a long view, you'vegot something the sellers don't want you to have: leverage. If you cancite 10 massive implementations that failed, they'll have a hard timeselling you one.
Multiply the cost by 3. Several analystsrecommend doubling or tripling whatever dollar number youhear in the evaluation stage to avoid constantly having toreaffix your jaw.
Just ask Dan Ginsburg, president and COO of the Massachusetts GeneralPhysicians Organization in Boston, who recently installed an importantbilling application. "We underestimated the resources it would take toroll out something like this," he says.
Seek out cynics. The vendors are courtingenthusiasts; the buyer can offset the enthusiasts' giddinessby injecting cynics into the evaluation. In Ginsburg's case,this meant putting technology agnostics in charge of thebilling project. The IT department played second fiddle,which kept technical enthusiasm from dictating choices.
Cynics temper enthusiasts by harping on pesky things like budgets anduser need. They also create more intense internal dialogue, which canyield more thoughtful decisions.
Pay for an independent consultant, whatever itcosts. Salesman Bayne, while balking at the termcynic, recommends adding "realistic" voices to theevaluation process. "Your readers need to find someone theytrust who has done what they want to do," Bayne says. "Anddon't say, 'Oh, God, this will cost me 300 bucks an hour.'It's not a waste of money. They get paid a lot for areason. Bring them on early in the process."
To illustrate the point, Bayne mentions a CIO he's working with nowwho lacks such a voice of reason and is convinced he needs a datawarehouse. Bayne believes he needs only a business intelligence toolthat costs a quarter of a million dollars less. "And it's getting hardto turn him down," Bayne says. "I can only tell him so manytimes."
Be wary of consensus. With all these voicesin the evaluation process - enthusiasts, cynics,consultants - it might seem impossible to reach adecision. Surprisingly consensus often comes too easily, andyou should fret if the evaluation committee arrives at aunanimous opinion. It means either they're going with theeasy, safe choice or a clique within the committee has takenover, and everyone who's miffed about it is sulking. "If thebusinesspeople [on an evaluation committee] aren't emotionalabout this, I wonder if the project is worth it," MerrillLynch's Balliet says.
It's a tricky balance. A good evaluation will include heated debateover how to approach something like CRM, but that debate can just aseasily tangle itself into a skein of internal politics that bring downthe project.
That was happening to Ginsburg's billing project, but ultimately hearbitrated compromise and today he considers the project a success: Itwas on time and on budget.
The Golden Rule: KISS. Keep It Simple,Stupid. It sounds blatantly obvious. But as long as thereare grand software failures, it's worth repeating: Smallerrollouts succeed more often than bigger ones. Applicationsthat do a few things yield better results than those thattry to do everything.
Partners HealthCare's Pieper is so committed to the KISS principlethat he no longer listens to vendors unless they limit their pitch tothe five tasks he wants to accomplish with CRM. "You should be saying,'I want to start fairly simple, see how it works, and if I like it andit produces the results I need, then I will expand horizontally andvertically," says Pieper. "If it doesn't, then it was just a smallexperiment that didn't cost me too much."
Pieper's perspective seems nothing short of valiant. And asShakespeare quipped, "The better part of valor is discretion."