Despite Your Wishes, the Vendor Matters - Customer Relationship Management

One of the first mantras I ever chanted when I joined the ranks of CRM pundits was “when you buy the application, you buy the vendor.” This came from a pretty simple logic and what was at that time a modicum of experience. The logic went something like this. CRM applications were functionally pretty much the same. For example, for sales force automation to be called sales force automation, for the most part it would include:

  • Contact management
  • Account management
  • Lead management
  • Opportunity management
  • Pipeline management
  • Integrated business rules, processes, and workflow
  • A single customer record for all the individual customer data

Beyond that, the rest were what are ordinarily called “differentiators” but as often called “useless” or “overkill.” But the above functions defined sales force automation whether Siebel, SAP,, NetSuite, or myriad other vendors offered it. You were sure to get thosefeatures for at least the vast majority of the SFA offerings.

So what distinguished the selection process for software applications? Why did it make a difference which application or vendor you chose if the features were commonplace? Several factors had to be considered—some technical, some operational, and some cultural.

Technical Factors
The most important technical factor is the architecture of the application you choose. This will affect how it integrates with your other systems (legacy or new), how you’ll access it (Web or on the desktop), and how futureproofed it is.

CRM has come a long way when it comes to interoperability and integration. Web services have allowed CRM applications to talk to—meaning effectively exchange data with—other CRM applications and even a wide variety of back office applications. It is no longer uncommon to find ERP financial data being accessed by a sales force automation application so that you can see not only the orders and invoices outstanding but the payment status of an account.

There are several architectures to choose from—with the sexiest being enterprise SOA and RESTful architectures. While SAP CRM and Oracle’s on-premise versions are based on enterprise SOA, SageCRM is based on a RESTful architectural model. Microsoft Dynamics CRM boasts of a single code base, which means its SaaS Live and its on-premise versions operate interchangeably.

But which architecture you choose will matter. If you have substantial legacy systems you are going to have to interact with, then you might not be able to use a system with an enterprise SOA. If you’re still using client/server architecture, there will be a severe limit on which systems you can use—that might be none.

As of 2009, though, CRM applications from the mega like SAP to the micro like Zoho are all using similar web services and development tools that can create reusable code “objects.” You’ll see Java, .NET components for Microsofties amongst you, XML, AJAX, JavaScript, and several others routinely used in the development of platforms and operating systems, applications, and APIs.

Whatever architectural choice you make, make sure that you do make one.

Operational Factors
In the next section, Bruce Culbert mentions several of the operational factors that have to be considered when it comes to vendor selection and implementation. The total cost of ownership (TCO), which I’ll leave to Bruce to discuss, is a mission-critical factor. The availability of resources to support the system once implemented is another important issue.

A concern that is not only becoming an overriding one, but something that’s causing CIOs and CFOs to lose sleep, is related to both TCO and architecture—how you want the software delivered and, in line with that, how you are going to pay for it. While there is already an entire chapter devoted to the cloud and SaaS if you’re a C-level person, it still pays to pause, step back, and reflect for a moment on what you are about to embark on and how you are going to spend money.

For example, architecture aside, do you want to pay a monthly subscription fee that allows you to control costs? That shifts the overhead costs to the vendor, but puts your data on the other side of your firewall? Or do you want the feeling of safety and security (whether real or imagined) that comes from having your own data on your own servers with a licensed version of the software as a fixed cost? One-time payment plus maintenance and upgrades? Ongoing payment, but no maintenance and upgrade costs?

Cultural Considerations
Not just your culture either. The vendor’s culture actually matters. Compatibility is the issue. This is by no means a trivial issue. Of course you have to do your due diligence when it comes to the vendor. Are they stable financially? What kind of track record do they have? What kind of references besides the ones that you’ve been given can you examine?

But they are your partners—not just a client. They are coming to your company and you are paying them to develop, install, and configure a system that can be the foundation for the growth—or the engine for the demise—of your business.

That’s a big deal, isn’t it? If you don’t think it is, sell this book to someone, because you really don’t get it and are not reading too carefully. If you’ve gotten this far, it’s way too late to return it.

Think of it this way. There is a contract signed that is based on a statement of work that has been mutually agreed upon by you and your partner vendor. What if something goes wrong? Are you going to get into the “they did it” blame game to cover your butt? Maybe. But the reality is that it would be much better if the partner vendor and you were able to work together to solve the problem without pointing fingers— which get chopped off before they become property in lawsuits.

In order for you to trust the vendor to be a partner in a crisis, you need to trust them before the contract and statement of work are drawn up and agreed upon. How do you go about finding out if you and your partner-to-be are compatible? Here are a few steps:

  1. Talk to customers who had implementation problems that worked with the prospective vendor.
  2. Visit the prospective vendor’s offices in the locales where you’ll be working with them or their headquarters if they don’t have a local office.
  3. See how open they are about what they can and can’t do, how they would deal with issues, and their financials. Find out if they are willing to admit mistakes.

The same characteristics that the social customer demands of you now—authenticity and trust—are exactly what you should be demanding of your prospective vendor.

I’ve just touched on the technical, operational, and cultural issues for vendor selection. I’m going to let Bruce Culbert give you the lowdown on how to go about it and give you a much deeper picture of what your concerns should be.

Bruce Culbert on Vendor Selection
Bruce Culbert is a major league thought-leader in CRM and an industry veteran with years of practical experience. He is also a wonderful guy and like a brother to me—and he is my business partner in the BPT Partners, LLC, CRM training venture. While near-brother is great for our personal friendship, it’s not what got him to this chapter. Bruce is a heavy-hitting serious expert when it comes to leading CRM thinking and execution. He was the head of the BearingPoint CRM and Supply Chain practice and then went to where he was SVP of professional services. And before all of that, he was the founder of IBM’s e-business practice. Now he’s the Chief Strategy Officer at Pedowitz Associates. He’s going to tell you about how to select a vendor and how the vendor thinks. This is an invaluable guide.

Knowing the Options
One of the critical parts of selecting a vendor, regardless of whether it is a technology or service provider, is to thoroughly understand what your options are. With so many developments in every aspect of the customer lifecycle, there are constant advancements in technology and approach that could potentially improve your company’s ability to meet and exceed customer expectation while driving improved results for the business.

There are literally hundreds if not thousands of sources of information on CRM. To further your knowledge, I recommend you subscribe to more than one industry newsletter and research your specific topic of interest on the various industry and vendor websites. Here is a starter list of some of my favorite sources of credible information on the developments in the CRM industry.

  • 1to1 Magazine
  • CRM Magazine/
  • CRM Talk Radio
  • InsideCRM
  • Technology Evaluation Centers
  • Customer Relationship Management Association
  • CustomerThink
  • CRM Advocate
  • Sales and Marketing Magazine
  • American Marketing Association

Some analyst firms worth investing time (and money) in:

  • Forrester Research
  • Beagle Research
  • The Altimeter Group
  • Yankee Group
  • Gartner Group
  • IDC

Another good way to gain exposure to the myriad solutions and the companies behind them is to attend industry- or vendor-specific trade shows. These up-close and personal looks at technologies and companies are extremely helpful in making sure you get good alignment with your solution needs and your solution provider. There is only so much research you can do online and it is always useful to discuss the details of your specific needs and the vision for the solution so you can get a feel for how a particular solution and company’s approach might best fit your needs.

Unfortunately, the breadth of open multivendor conferences has dwindled in the last several years and has been replaced by a very few large single-vendor events. Still, some important independent events happen around the globe. The annual Gartner CRM Conferences (typically one in Europe and one in the United States), the Forrester Conference on Social Computing, Enterprise 2.0, and O’Reilly Web 2.0 are all cutting-edge conferences on technology and customers. Other global events are sponsored by the national and regional chapters of the CRM Association. There are dozens of customer care, sales, and marketing conferences worth looking into.

The vendors also hold conferences, so if you are at the stage where you are selecting a small group of individuals and you have a bit of time, attending a vendor conference might be of some help. The largest of the conferences are:

  • Oracle Open World
  • SAP’s Sapphire
  •’s Dreamforce
  • SugarCRM’s SugarCon
  • Microsoft Convergence

And multiple other smaller conferences from specific vendors like NetSuite and RightNow are held throughout the year.

You can also subscribe to alerts and RSS feeds from all the sources above. There are many blogs out there that have been used by companies like yours to learn about the CRM industry. Those with a CRM slant include:

  • Paul Greenberg’s two blogs PGreenblog and ZDNet’s Social CRM: The Conversation
  • Chris Carfi The Social Customer
  • Denis Pombriant Denis Pombriant
  • Brent Leary Brent’s Blog
  • Dion Hinchcliffe ZDNet’s Enterprise 2.0
  • Vinnie Mirchandani deal architect
  • Jim Dickie CSO Insights
  • Jeremiah Owyang Web Strategy (Jeremiah is an Altimeter Group analyst)

Plus the more general blogs and sites such as TechCrunch, ReadWriteWeb , Seth Godin’s Blog, and the Church of theCustomer.

If you take some time to plug into the network of knowledge above, you should have enough information in 30 to 60 days to begin to zero in on what vendors and solution providers can help achieve your CRM goals.

The Pre-selection Checklist
Before we go too far down the path of evaluating technology and other solutions, let’s pause to make sure you are ready to select, implement, deliver, and support your CRM investment. A solid understanding of the business, process, and customer experience goals is imperative prior to selecting any technology. If you have been generally following the guidance laid out in the other chapters of this book, you may be ready to move forward. To make sure that your organization is in the best position to maximize the return on investment in CRM, you should answer the following questions about your organization:

  • Is there a commonly understood CRM strategy and vision for the organization?
  • Have you determined how your CRM initiatives will add value to the overall customer experience?
  • Is there buy-in for the strategy and approach by the people in the company most affected in sales, marketing, service, IT, and other areas?
  • Do you have a clear definition of the results you are trying to achieve with your investment in CRM?
  • Are the desired future business and customer processes identified and documented?

Answering these questions is an important step if you want to maximize your investment in something that supports the way you do business as opposed to making your business fit the way a particular solution works. This will allow for the conversion of business and customer engagement logic into technology and solution requirements that can be utilized in comparing potential solution provider sand in subsequent discussions with your prospective choices. It should help ensure that what you are purchasing can meet your needs now and into the future. More questions to consider:

  • Are the necessary budget and staffing available?
  • Is there commitment from senior management in place to support the success of your CRM initiative?

If you answer no to one or both of these questions, you probably are not ready to begin to evaluate technology solution investments and your efforts will almost certainly be sub-optimized, if not a total failure.

If you are able to answer yes to most or all of the above questions, you should be ready to take the next step in evaluating and selecting a technology vendor, solution provider, or both. Sometimes you might need solutions or support from more than one company to accomplish your objective.

The First Big Step: Request for Information (RFI)
Using the RFI approach allows you to request information from multiple vendors in a structured way so you can begin to receive consistent and comparable information from the many solution providers that serve the CRM market. The general goal of the RFI process is to find out how the various solution providers and their technology and service offerings best enable and support your CRM requirements. When requesting information on solution offerings it is very useful to give the companies you are soliciting as much information about your needs as you practically can. Tell them about your business goals, your customer experience objectives, and budget and schedule requirements. After you issue the RFI, expect to hear back from the companies you sent it to.

Depending on the size and complexity of your requirements, the solution providers may have a number of questions. Do not shy away from these conversations. Answer their questions and let them do their job of educating you on how their solution can best meet your overall needs. Depending on how many companies receive the RFI, you may want to structure the feedback and dialogue by asking for questions to be submitted in writing and holding conference calls with all interested parties at once to make the process more manageable. This is the perfect time to engage in an exchange of information and begin to narrow the field of possibilities while building the foundations for potential relationships to come. It’s highly likely one of these companies will become your business partner of sorts in the future, and this is a great way to begin to get to know them and build positive rapport. Generally you will want to have somewhere between three and ten companies on your RFI list. To get solid responses, allow at least 30 days for the submissions to come back and make yourself available to participate in dialogue about your needs with the companies interested in responding. In other words, don’t issue the RFI to 10 companies and then go on vacation. The type of information to request in an RFI can vary, but I find the following information useful at this stage of the selection process:

  • Overall company background and introduction
  • General solution description and overview
  • What is the solution to your specific needs as identified in the RFI, including timeline for implementation?
  • What does it cost—one to three year total cost of ownership (TCO)?
  • How will you be supported initially and over time? SLAs, training, ongoing user support, account management, customer support, etc.
  • What technology is involved?
  • What are the delivery options? On-demand, on-premise, both?
  • What skills are required to use and support the solution?
  • What other companies are successfully utilizing similar solutions?
  • What other clients can be references if required?
  • Future company and product roadmaps?

At this stage, as you can see by the categories and questions above, you want to be broader and less prescriptive than you will be later when you put together the final request for proposal (RFP). The goal is to get the most input possible so you can be exposed and educated to the possibilities in the market. This will help you gain momentum toward the final outcome of selecting a solution that maximizes your return on customer investment and a company to work with that is a good fit for your cultural, organizational, and business needs.

Interviews, Demonstrations, and Trials, Oh My…
After receiving back your RFI responses, it is usually obvious that there are some vendors that seem to be a better fit for your needs than others. Some companies may have realized that they don’t based on the RFI requirements and disqualified themselves. You will want to understand all responses, including why any companies disqualified themselves, before moving forward. After the dust has settled and all initial responses are evaluated, it will be useful to select the top two to four companies that have a legitimate shot at meeting all or most of your needs and have further discussions with them.

Before finalizing a buying strategy, it is generally useful to conduct interviews or demonstrations with the top contenders to see the solution and the people behind the response. The best place to conduct these demonstrations and interviews is in your own office environment. That way you can potentially have others from your organization begin to be exposed early as well, and the vendor can see firsthand the type of company and environment their solution will be deployed in. While I highly encourage seeing the people and product in action prior to buying, I want to warn you about a sales tactic that is very popular with the vendors: the free trial offer. Many companies will recommend a free trial as a way of getting introduced to their solution.After all, it is free, so why not?

When Free Is Just Not Free
A typical trial or pilot period lasts between 30 and 90 days. The goal of a free trial is to get you hooked, make you do a lot of work, enter data, and use the product in a real business setting with your sales, marketing, or services team.

Most vendors know that once you have invested the time and effort to learn their system and have begun using it live . . . well, you get it, you’re hooked and you won’t want to consider any other solutions now that you have invested so much time and effort getting the free trial up and running. What’s wrong with this picture?

Free trials are great, however, when you know what you want (solution) and who you want to work with (company). A free trial with avendor that you know you are most likely to use can be a very beneficial thing. Doing your homework to make the best of this opportunity is critical. Free trials can give an organization the time it needs to get its people exposed to the solution and make a game plan for moving forward without having the pressure of the meter running. On the other hand, using the trial opportunity indiscriminately can have a big negative impact on the organization. Too many “trials” and no “go live” plans will only serve to frustrate your customers and employees—not to mention you will be constantly hounded by the vendor sales staff in their attempt to convert the free trial into a sold deal. What is otherwise a very good e-newsletter solution has a whole business strategy premised on enticing people into taking their 30-day free trial and then working the sales process like crazy to get the prospective customer to convert to a paying contract by the conclusion of the trial.

Final Request for Proposal (RFP)
After receiving the RFI responses and engaging in dialogue with various companies as well as seeing the major contenders in action, you should have a pretty good idea of who will best meet your needs. At this point you must resist the urge to just select a vendor and run with them. Unless it is so obvious that there is a clear-cut choice or you are under severe time constraints, don’t skip the formal RFP process. In the RFP, you will go back and address some of the things in the RFI but with different levels of precision and more specific intent to move forward with purchasing technology and or services to support your CRM program strategy and deployments. Through discussions with potential solution providers, you should have been able to further refine your requirements and be able to articulate them in more concrete terms so that the outcome of the RFP process is something that meets the specific needs of your business and that you can move forward with.

You should construct your RFP much like the RFI, but this time you want to give more precise guidance on your CRM strategy, expected customer experience and process details, and desired business outcomes. Other details such as a specific timeline for implementation and results and specific budget expectations can and should be laid out in the RFP. This is the opportunity to clarify anything that came up in interviews and discussions during the RFI follow-up step. Other specifications or expectations as they relate to how you want to be serviced and supported by the vendor and its people should also be included in the RFP. The more detailed you can be about every aspect of your requirement, the better.

Perspectives on Pricing
There are many different solution options in the CRM market, and comparison shopping can be a bit tricky, especially when it comes to pricing. You need to do your best to level the playing field. You want to be able to compare the solution that can meet your needs and be sure you understand the pricing options specific to your situation—not necessarily the same as how the vendor prices and packages their solution to the general market. Therefore, I think it’s important to mention a few tips when examining pricing and why it is never a good idea to rely on the pricing you get at the RFI stage. The pricing at that point usually has too many assumptions built in so that it is either unrealistically low or unrealistically high—for instance, if the vendor assumed the requirements would be more extensive than they actually are.

What matters most is that you are able to communicate as precisely as you can what you want now and in the foreseeable future so you can make the best decision based on total business and process fit along with best value in total cost of ownership (TCO) and return on customer investment (ROCI).

The CRM industry is the leader in SaaS options, and thus the pricing for SaaS offerings varies widely. There are also hidden costs and limits placed based on the pricing. As a result, the price quoted for a license for one use—or as it is sometimes referred to, a seat—is not always what it appears to be. Most vendors when advertising their seat price are quoting the lowest priced offering, and they try to make it sound like a no-brainer. After all, who wouldn’t find value in an enterprise CRM solution for $25 to $40 a month?

A closer look reveals that these introductory or basic pricing options usually have significant limitations in functionality, number of users, scalability, and geographical deployment. Some may require significant custom development to meet your specific needs. The cost to add capability, either by adding more vendor modules or through customization, can add up very quickly and turn what looked like an inexpensive solution into a budget nightmare.

A thorough explanation and understanding of per-seat costs as well as total costs for your specific requirements need to be in place. You want to be able to calculate and compare six-month, one-year, and three-year total cost of ownership figures that have solid estimates for each element of cost. The total cost of ownership calculation should include the cost of the software license, any hardware or other software to support the CRM solution, customization/integration cost, ongoing support, internal resources required to develop, train, operate, and maintain the solution, external consultants and solution providers, and any incentives used to reward internal or customer adoption.

Competition is the key to getting the best price. The CRM solutions market is fiercely competitive, with more than 230 vendors in the space with solutions for all parts of the value chain. If you want the best pricing and therefore the best value in TCO for your CRM solution buys, be sure to explore more than one option. In the final RFP, have at least two or three companies (if possible) submit final, specific, and detailed solution and pricing proposals.

Some of the information you want to receive in the final RFP response:

  • What is the solution to your specific needs as identified in the RFI, including timeline for implementation?
  • What does it cost (six-month, one-year, and three-year detailed total cost of ownership)? Get firm, fixed price quotes if possible.
  • How will you be supported initially and over time? SLAs, training, ongoing user support, account management, customer support, etc. Who in the vendor’s organization are you specifically
  • interfacing with in these areas?
  • What technology is required (hardware, software, network, etc.)?
  • How will the technology being proposed fit with your current IT investment and strategy?
  • What are the delivery options? On-demand, on-premise, both?
  • How will it be deployed?
  • What skills are required to use and support the solution?
  • What are the specific roles and responsibilities of the solution provider? What is expected of you in achieving solution implementation, training, rollout, and support?
  • What other companies or business partners are required for solution deployment and support?
  • What other companies are successfully utilizing similar solutions?
  • Three references that can be contacted prior to final selection.
  • What are the performance guarantees and warranties, if any?

The goal of the RFP process is to arrive at a best fit/best value solution that meets the specific needs of your business. Some tradeoffs might have to be made based on cost versus performance and capability, but if you follow the RFI and RFP process you will be down to some obvious choices and in a good position to select a solution provider that best fits your needs.

Selecting the Winner
By this time, you’ll know pretty much who you want to be your vendor of choice. Once you’ve chosen that vendor, you’ll enter negotiations with them to finalize the contract agreements, develop the statement of work, and identify the teams that will begin the implementation. Just remember a couple of things in closing. First, don’t over-negotiate. You should know what the final terms will be by the time you’ve completed the selection process. Just make sure that the vendor adheres to them. Then start working closely with the vendor as your partner, not your armslength suspicious predator who happens to be helping you. It’s also in their interest that this implementation succeed—please take that into consideration. That will help you get off on the right foot, and the chances of the implementation succeeding will increase exponentially.

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