Michael MaozMany organizations talk about the return on their software investments, but most of them are just jawboning. They have no clue, really. Take the vaunted “software as a service” or SaaS / Cloud model. Most of the Cloud is the cloud of smoke around ROI. At least 90% of large organizations using sales automation in a SaaS model cannot show a true and accurate five year picture of spend on their SaaS system versus what an alternative would have cost them. They also cannot show you the return on that application beyond saying: “Well anything is an improvement over that system X we replaced.”
Now comes Social CRM. For every one organization with a solid ROI around their initiative are ten organizations with none. And they are unlikely to prove ROI this year or in another three.
There are two questions to ask: 1) why not? and, 2) does it matter? Maybe the ‘return’ is not money but something intangible, like responding to customer interest in participating in the process of marketing and selling and service. That is hard to model on a spreadsheet in the same way that putting a value on giving folks access to Microsoft Outlook is hard to evaluate in an economic model. That makes the answer to “Why not?” easy – it is not, at this point, about the tangible but about the intangible element of satisfying the customer. Does ROI matter? Yes, and the sooner you redefine “Return” into something broader like ‘change in lifetime customer spend’ or ‘lifetime customer opportunity,’ the closer you will get to the elusive ROI.
Any opposing positions out there?
Category: CRM Customer Centric Web Innovation and Customer Experience Leadership SaaS and Cloud Computing Sales Force Automation SFA Social CRM Social Software Tags:
1 response so far ↓
1 Axel Schultze June 2, 2010 at 8:05 pm
ha ha ha – right up my alley ! Being a social media guy, a CEO of a Social CRM company and having a controller diploma (weird combo anyway) I have not really an opposing opinion but I have an opinion.
My experience in the past years:
1) Customer asks for an ROI when they try to find a reason to NOT do something.
2) Customer accepts even “eyeballs per estimated time recorded as random IP addresses on a weblog” as ROI if they really want to do it.
3) CFO will do their very own internal ROI calculation absolutely no matter what any sales pitch included. And that is raw $ in over $ out with no intangible flavor of anything.
OK and now the PRO on ROI.
A customer mentioned to me recently: “We just spend over $1 million in CRM upgrades and team training. I can’t believe anybody would approve throwing this out and start with a brand new Social CRM system from scratch.” A few days later the VP Sales stated:”A pity that we wasted $1Million but we spend $40 Million a year for our 240 people sales team. I can’t believe we will protect a million dollar investment by putting a $40 Million team in jeopardy.”
Learning:
1) The ROI calculation may only be valuable for a moment in time
2) A follow on calculation (like here) actually need to take the $1MM as baggage into the calculation “shit happens” and prove to even offset the fail investment on top of all
3) There is a cost of doing business that may just not work with an ROI thinking: What is the ROI of a CEO, of the office building, of the parking lot, the coffee machines for the team…. or the investment in a better customer experience!
Axel
http://xeesm.com/AxelS