Kathy Harris

I’m at Gartner’s  U.S. CRM conference in Phoenix this week and our attendees will hear research on a broad range of strategies and issues. In fact, by noon on Monday (just in the first four hours of the conference), they will have heard about which CRM strategies to cut and which to keep; Web-centric customer relationships; managing customer experience in a recession; and Web 2.0 and e-commerce. So, in 2010, CRM will demand attention and investment on multiple IT fronts — managing costs, enhancing relationships, growing the business and leveraging new Web capabilities.

Meanwhile, in a Gartner briefing just last week, IT leaders from a wide range of industries indicated that their 2010 budgets are unlikely to grow above 2009 levels. A few even said their budgets may be lower than 2009 levels.  This means that although you’ll have many opportunities and needs for investing in CRM in 2010, you probably won’t have sufficient money to do so.  Prioritizing and controlling spending are critical to resolving the dilemma of increasing demand for CRM technology coupled with a flat IT budget. Simply put, to spend money, you’ll have to free up money. But, how?

Start by understanding how you currently spend on IT and how “healthy” your spending profile is. Gartner recommends using a framework for gaining insight into current IT spending to determine the percentage of the IT budget that is consumed by simply “running the business” of CRM vs. growing and transforming CRM capabilities.  Run-the-business activities are defined as those that “support or improve essential, non-differentiated business functions and capabilities that do not directly produce revenues”. And, as a rule of thumb, enterprises whose IT run-the-business costs exceed 65 percent of the total IT budget are at risk of under-investing in the future. Therefore, these companies are at risk of inhibiting change, growth and their ability to respond to evolving market conditions. During 2008, on average, organizations were spending just over 66% on running the business.

So, if your spending level for running your business is at or near this unhealthy range, aim your innovation efforts at restructuring this spending to a lower percentage of the overall IT budget.  Some key mechanisms that can reduce the cost of CRM IT are application portfolio management, software as a service (SaaS), project portfolio efficiency/effectiveness, single data warehouse, and virtualization. Explore these and other ideas to free up money to invest in the future. Also, see other blog entries on reducing or managing the cost of IT: “Innovation in Applications Support – Can it Be?” and “Innovate, Invest, Cut Costs — Courageous Decision-Making”.

Meanwhile, stay tuned for other news from the CRM conference.