Beware the e-business budget burners

CRM and enterprise portals promise cost savings and a strong return on investment. But unless you take care at the planning...

CRM and enterprise portals promise cost savings and a strong return on investment. But unless you take care at the planning stage, you will need an ever-increasing budget to meet your targets.

Two of the hottest subjects in the second wave of e-business are likely to be customer relationship management (CRM) projects and enterprise portals because both are being marketed as essential to business survival and competitiveness. Before you embark on a project that involves either one, however, beware that both has the potential to be a bottomless pit, which absorbs resources while offering no demonstrable return on investment.

Analysts at the Butler Group spelt out the potential pitfalls recently, warning: "CRM is often portrayed as the systems solution that no self-respecting organisation can afford to be without, but it is also in fact a technology graveyard, an arena where far too many well-intended projects appear to flounder on the rocks of corporate uncertainty."

Pitfalls and prospects
The Gartner Group was even more blunt about the prospects, warning this summer that 80% of CRM deployments in Europe were likely to fail in the next two years.

The reasons for this level of failure will prove depressingly familiar, according to Gartner. It cites poor planning, substandard data and unrealistic expectations of CRM capabilities as the prime causes.

"No one builds a house, a bridge, or anything that is the least bit complex without a plan," said a spokesperson. "Yet most enterprises still undertake CRM with no idea of what they are hoping to build in the long term."

Left holding the budget
If they are not careful, IT departments can be left holding the budget and the responsibility for poorly planned CRM implementations and then having to explain the return on investment, or lack of it.

Antoine Bousquet, an analyst at Datamonitor and the author of the Global Personalisation Technologies report, warns: "It is one of the hardest areas in which to measure return on investment because it is difficult to differentiate from marketing, servicing and the general experience of the company."

If measuring ROI from CRM can prove problematic, measuring the gains from enterprise portals is even more difficult.

Enterprise portals promise cost savings and productivity gains by allowing organisations and their closest partners to work "smarter".

But like CRM implementations, portal projects can suffer from wishful thinking, wooly planning. At best, portal projects offer intangible benefits.

Measuring the real ROI
A detailed report on portal implementations among the world's top 3,500 companies by analysts at Forrester exposed many of the problems.

It found an astonishing 41% of organisations that were implementing portals were not measuring the real rate of return on their investment. A further 20% did not know if they were even measuring ROI.

For Forrester analyst Frank Gillett, author of the report Making Enterprise Portal Pay, this inability to measure returns is shocking but not surprising.

It is, he says, a function of confusion about what the portal should actually do and who should own any implementation.

The potential scale for confusion was evident when the survey revealed four in ten portal managers were integrating seven or more systems into a portal, while one in five was planning to integrate 20 or more systems.

The sheer number of systems being integrated inevitably creates conflicts of interest and expectation, unless there is clear ownership and management of the project.

After confusion, says Gillett, comes an inability to measure real benefit. This in turn is likely to be followed by slashed budgets. "In these tough economic times, budgets will dry up without evident payback," he warns.

The problems with implementation
Do not underestimate the problems associated with portal implementation projects "Installing and integrating portal technology isn't easy - but it pales in comparison [next to] the challenge of organising a large company to take advantage of enterprise portals," Gillett's report insists.

It might be easier to sit back and use the economy as an excuse for not implementing second wave e-business projects, but it would also be folly.

CRM is not only vital for retaining customer service, it is the key to defensive business in times of economic slowdown, says Richard Lees, managing director of The Database Group, which carried out a major survey of the CRM plans of the UK's top 500 companies.

"With tightening economic circumstances, top UK companies are looking to extend existing customer relationships as their first priority, over and above the expensive business of new customer acquisition," says Lees.

However, that puts enormous pressure on an organisation's ability to build a complete view of the customer. Many are having to recognise that the seemingly straightforward principles of CRM are not always that simple to put into practice."

The pressure to develop portals will not go away either. Which chief executive has not heard Oracle boss Larry Ellison boasting about how internal e-business has saved his organisation $1bn a year? And which IT director has not been asked why he or she is not doing the same?

The answer, as with all IT projects is easier said than done - align the business needs and processes to the technology, ensure top level ownership of the project to get buy-in across the organisation. And you will need to establish clear metrics for the project and make sure you can deliver a demonstrable return on investment.

Remember, if you are being asked to provide a technological silver bullet to solve your organisation's business problems, the earlier and louder you tell the board it can't be done, the better. Good luck.

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