Enterprise Software

CRM failure rates: 2001-2009

Data indicates that substantial numbers of CRM customers are dissatisfied with some significant aspect of their implementations. Michael Krigsman says CRM technology vendors and consulting companies should take this message seriously.

This is a guest post from Michael Krigsman of TechRepublic's sister site ZDNet. You can follow Michael on his ZDNet blog IT Project Failures, or subscribe to the RSS feed.

Discussions about failed CRM projects often begin with statistics describing failure rates. To facilitate those conversations, here's a summary of CRM failure stats for the period 2001-2009.

This is the basic list; see down below for more detail:

  • 2001 Gartner Group: 50%
  • 2002 Butler Group: 70%
  • 2002 Selling Power, CSO Forum: 69.3%
  • 2005 AMR Research: 18%
  • 2006 AMR Research: 31%
  • 2007 AMR Research: 29%
  • 2007 Economist Intelligence Unit: 56%
  • 2009 Forrester Research: 47%

This table lists the year, organization conducting the research, and reported failure rate. As described below, measurement differences make comparing rate changes across years difficult at best.

RESEARCH DESCRIPTIONS 2001 Gartner Group: 50%. Gartner released numerous CRM-related reports during the 2001-2002 period. Significant among these was research (September 2001) claiming that:

Through 2006, more than 50 percent of all CRM implementations will be viewed as failures from a customer's point of view....

Several years later, in a 2004 interview with CustomerThink, Gartner's Vice President and CRM Research Director, Ed Thompson, qualified this statistic by saying:

We were asking, ‘Did it meet expectations?' That was the question. And, the answer we picked up fairly consistently, was that a lot of organizations failed to meet expectations.

As I describe below in the analysis section of this post, the definition of CRM failure in not always clear, making it difficult to compare studies accurately across years.

2002 Butler Group: 70%. This dramatic number is perhaps the single most quoted statistic on CRM failure.

Despite a lengthy search, however, I could not find the source document. Butler Group's Senior Research Manager, Maxine Holt, kindly attempted, unsuccessfully, to find the document for me. In an email, she suggested that perhaps the number "was quoted by one of our analysts in discussions with the press and that's how it has been circulated."

Butler did release a report, in July, 2001, describing conditions that cause high rates of CRM failure, however it did not include this statistic. That report, Real CRM: Pitfalls and Potential, begins:

[T]he massive potential for conflicts of interest between the business world, the CRM vendor community, and ultimately the customer needs to be acknowledged.

Although the source statistic is not readily available, I accept the number for four reasons:

  1. Butler did substantial work on this issue during the 2001 period.
  2. It closely matches the Selling Power number described below.
  3. Microsoft marketing materials specifically quote Butler as saying: "70% of CRM implementations simply fail." It's unlikely Microsoft would make a direct quote without verifying genuine source data.
  4. Top CRM author and analyst, Paul Greenberg, includes this number in the third edition of his generally acknowledged industry Bible, CRM at the Speed of Light (page 3). Given Paul's stature and my own personal respect for his work, I accept his numbers as fact.

2002 Selling Power, CSO Forum: 69.3%. Paul Greenberg also reported this number and I could not find additional references. I accept this number based on Paul's credibility as described above. 2005 AMR Research: 18% 2006 AMR Research: 31% 2007 AMR Research: 29%. In 2007, AMR reported these numbers for the period 2005-2007 in an document titled, Ending CRM Failures: Get in the Loop. The figures describe the "percent [of] respondents that have experienced any implementation failures that kept them from ‘going live'...." The followed graph shows the data:

2007 Economist Intelligence Unit: 56%. The Economist Intelligence Unit also released a report in 2007 stating that:

CRM success continues to elude most companies. Eighty-six percent of survey respondents say that CRM will be important to their companies over the next three years. Despite this, more than 40% of respondents do not have a formal CRM strategy in place. Of those who do, 44% say that they have seen only "acceptable" results from their efforts, and another 22% say that it has been a disappointment.

2009 Forrester Research: 47%. In a report titled, Answers To Five Frequently Asked Questions About CRM Projects, Forrester Vice President and Principal Analyst, Bill Band, presents evidence that under 50% of CRM projects fully meet expectations. The following table summarizes:

THE PROJECT FAILURES ANALYSIS

Although not an exhaustive list of studies, this collection provides a useful indicator of CRM failure during 2001-2009.

When examining the data, be aware that dramatic year-to-year changes probably result from research differences rather than market shifts. Multiple organizations produced this data over time relying on different methodologies, assumptions, respondent company size, CRM project size, and research goals. In addition, most (but not all) failed CRM projects actually deliver mixed results and achieve partial objectives, making the definition of "failure" quite subjective.

I asked IDC Group Vice President for Software Business Solutions, Michael Fauscette, to reconcile these differences:

Despite potential weaknesses, the data remains extremely useful for two reasons:

1. Each data point alone tells us something about the state of CRM at that time of the study

2. The aggregate weight of this data clearly suggests strong dissatisfaction with CRM projects

Different organizations collected this data over a period of almost ten years. Without examining the research methodology for each study closely, we don't know what they actually measured. For example, their definitions of failure and success may not be the same, let alone how they characterize CRM.

My take. In the spirit of not throwing babies out with bath water, please be aware that many organizations do achieve acceptable ROI from their CRM implementations. Still, the data clearly states that substantial numbers of CRM customers are dissatisfied with some significant aspect of their implementations. CRM technology vendors and consulting companies should take this message seriously.
6 comments
Oz_Media
Oz_Media

I'm certified to sell MS CRM sollutions to enterprise, however I have sold not a single copy, due to ususally implemeting other alternatives, WHICH alternative used is entirely dependent on the company's needs. Also CRM is a loosely use dbuzzword that tries to segregate one product from another, while both are avaiable CRM solutions in thir own way. CRM also often need to be CLOSELY tied to AIDC and Asset Management systems in order to be effective, which some of teh mroe popular CRM software cannot do but some of teh cheap databases do, thus making THEM better CRM solutions. Having designed/omplemented such systems since the mid 90's, I saw the buzz when CRM was touted as a new venture into customer retention that everyone needed, however MOST CRM providers didn't even match the standard sales dataases used for a decade before. CRM is just a joke as an 'industry' in its own, what benefits one will be a drag to another, it's almost like suggesting there are lanket sales systems that work for all usinesses, which is pure rubbish of course. Use software designed specifically fo ryour industry type or develop existign software to work for you, MOST such software is easily adapted to and integreated with a full asst management system.

cnpsupport
cnpsupport

Realistic Expectations, priority based configuration/deployment strategy and a solid value based approach are key factors to "almost" guaranteed success. In our consulting practice we will not sell our solutions if it is not a perfect match. "In parallel universe of dating matrimony: Why introduce a friend to another if they are destine for divorce?" "It is easy to fall in love but not always easy to fall in love with the right one. Let's take the lust out and get a cool head. Then make sure the passion meter is right." Given the failure rate and horror stories we hear, there is no point in heading down a path of failure. Perhaps because we are real people that take this relationship business both personal and with the highest level of professionalism. Most salesman are focused on the revenue they can create vs the value they can create for their customers. We have drawn a line in the sand where value to the customer and sincerity in our approach is a firm commitment. That means we do not want to have any customer unsatisfied or waist our time on projects that we can identify as a high risk for failure. The customer has to have the right commitment level, realistic expectations, adequate resources and then the technical solution have to be matched with the clients business problems or pains in the marketplace and anticipated needs within a 2-5 year period. While it is nearly impossible to guarantee success our Value Builder Methodology dramatically increases the potential for a greater return on investment and smoother transition to integrating your people with the technology and configuring the technology in a way that will not cut you off from the product evolution and maps directly to the highest priorities of your organization. For more information on our Customer Relationship Business Management solutions and our consulting practice for building value with your technology investment drop by our site http://www.cnpintegrations.com for my ramblings and insight on our blog visit http://www.cnpintegrations.com/myblog/

Pioneer0943
Pioneer0943

I've worked on several ERP projects where customer expectations were unrealistic but in their defense, they were driven by the sales process where a product salesman sold the company on product capabilities that were not achievable unless the software was heavily modified - which everyone knows can cause serious issues. In some cases these modifications were not achievable within the budget, which resulted in users making compromises that reduced satisfaction rates.

CG IT
CG IT

and also companies dissatisfaction because of the high cost of tayloring it to a business [or the cost of a consultant to do it]. But I worked for a company that used CRM/Clarify and it actually was a very good implementation. Whether it took massive amounts of $$ to get there I do not know, but for both sides, customer and vendor, it worked and well.

Justin James
Justin James

It's not just CRM that is this way... it is *ANY* "enterprise class" software... CRM, ERP, HR management, payroll, inventory, you name it. Every company has its own process. They are either unwilling or unable to chane their process to match what the software does (can you blame them?). So they spend a fortune on customizations which the vendor won't support and half the time make the application "upgrade resistant". We just did a CRM implementation (thankfully, my end of the project was merely on the server side... installing the base package, fixing problems on the server, etc.). The consultant we brought in did a good job. The problem was, instead of being a 2 month project ("a few minor changes...") it was something like a 7 month project. And, by and large, our users aren't happy with it. Their issues lie in the core functionality of the product, which cannot be changed. Some of them are outright bugs, some of them are deliberate design decisions. Regardless, my users aren't happy and we spent a huge pile of money on this project. I think if the users aren't going to be happy, we could have just done without and used the company money to buy me a Lamborghini. :) J.Ja

NotSoChiGuy
NotSoChiGuy

At my previous employer, we had just finished implementing a significant ERP system (that had CRM as one of the core bolt-ons). While problematic at times, the end result was pretty good, due to a controlled list of specific mods made along the way, and the fact that we went with vendor consulting services (yes, more pricey). When I switched employers last year, I walked into the tail end of a CRM. The system was highly customized; to the point where the vendor won't support most of the core functionality. The consulting firm that was brought in to do the mods apparently didn't have stringent requirements for note taking, so the staff on hand (most of the "consultants" that performed the mods are long gone) have to take time just to get up to speed. All in all, a total screwjob. If you consider all of the costs now associated with the modifications made, it could have been put towards either vendor-supplied consulting or process realignment internally (mitigating the need for modifications) and we would have saved more long term. Considering both examples, it doesn't surprise me that the dissatisfaction rate is so high.

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