• by Masha Geller , March 31, 2003

Remember CRM? That acronym everyone was talking about at every industry gathering up until about 6 months ago? Whatever happened to Customer Relationship Management? Well, some companies have set up successful CRM programs. Some have become a statistic in a recent Gartner report.

Although lowering costs is the most common benefit cited by businesses for implementing CRM applications, Gartner says that 41.9% of the total number of CRM software licenses bought by businesses go unused. Do they sit in the supply closets, collecting dust, while customer relationships go unmanaged? Well, not really. It turns out businesses are buying more software than they need and it may be costing them quite a lot of money.

"Buying more software licenses than needed may seem like a wise investment in the short term, but over time it costs more," said Beth Eisenfeld, research director for Gartner. "Through 2005, businesses that continue to buy more CRM software licenses than they need - and those that deploy less than they purchase - will incur a 20% to 30% increase in total cost of ownership compared to businesses that carefully plan their CRM software license purchases."

More often than not, businesses purchase more licenses than they need for one of three reasons, according to Gartner. One reason is that the software vendor offers a larger discount if the business increases its initial purchase. Another reason is that the software vendor may want to position new modules in the market and offers a reduced license fee to businesses that take additional licenses. The third reason is that the software vendor entices the buyer by stating that it is less expensive to buy now than to add on later when the business will need additional software.

According to Gartner, all CRM applications do not produce the same level of benefits, so businesses pursuing the advantages of a CRM strategy should target specific CRM tools.

Bottom line? Don't buy what you don't need, even if it's cool-sounding CRM software. Don't you just love research?