Question

CRM Technologies Build Versus Buy Analysis and Program Management

You work for a large Boston based investment firm.  They are currently using an older CRM (Client Relationship Management) system.  It was home grown/built in house 10 years ago and has served them well but like all old systems, newer technologies have come along that are slicker, more integrated and higher functioning in general.

Your boss has come to you and asked you to begin the process of researching solutions.  You could

1. Build a new one – probably from scratch to use newer technologies
2. Analyze commercial purchase-able cloud based solutions

Your task is to create a framework to evaluate all/any short term and longer term costs associated with software ownership.  Build versus buy.

Creativity and original ideas and concepts are encouraged.  Use google, use lecture material and use your intuition.  The delivery is a framework that identifies what you have to analyze.  The resulting work will be presented to the class as a team.

Answer 1

In the case in question, the Company is a large investment firm which already has an in-house in-built CRM which has gone obsolete. Now, we have two choices :

1. Build a new CRM software-probably from scratch in-house. This will ensure you have a CRM suited to your specific business needs and managed by you in-house with less dependence on outside service providers. However, there will be installation costs, training costs,additional staff,etc.

or

2. Buy commercial cloud-based solutions. This is basically where service providers provide Software as a Service (SaaS) packages to businesses and charge businesses per user for usage, support, software upgrades,etc.

Here, the framework to consider the cost of ownership (build or buy) presented as below:

1. Installation costs : The installation costs are huge for build your own CRM,so it will entail a large upfront expense, while for SaaS, the cost is spread over a larger period since service provider charges per user basis.

2. Usage costs : Since the SaaS service providers charge per user basis, it is convenient for a small organisation but becomes expensive for a large organisation with large no. of users. On the contrary, for a large organisation, in-house CRM suits since the number of users is large, so the costs of installation and maintenance per user reduce due to large no. of users.

3. Training and technical support costs : In case of build your own CRM, you will need to spend on training in terms of hiring staff for same or outsourcing it to specialised team. Further, you will need to set up a technical support department to manage the technical issues faced by employees/downtime etc. On the other hand, in case of SaaS, these are generally included in the package in usage costs. It needs to be evaluated which option is cheaper overall.

4. Cost of upgrading system : It needs to be seen that which option is more futuristic in terms of expansion capabilities. If we are investing large sum in an in-house CRM, is it capable of modification/expanded capabilities to meet our changed requirements 10 years from now? Similarly, for cloud-based systems, what is the approximate additional cost schedule for the next level of requirements, additional cloud space, features upgrade,etc.that we may have later.

5. Infrastructure costs : These costs apply more for in-house CRM since you need to establish an infrastructure for it, the staff, the department. These costs are not of much significance for SaaS option, since the services will be provided from a remote location.

6. Cost-benefit per user : Calculations need to be done for the cost - to - benefit ratio based on known approximate costs and estimated benefits accruing from each of the two options.

7. Downtime costs : In case of an in-house system, the downtime can be corrected swiftly but the cost factor arises in terms of the technology team which you have permanently set up for these sometime incidents, while in case of SaaS, you are dependent on the service provider for resolution of downtime, which has indirect costs in terms of work hours lost. So, an evaluation of whether your organisation can afford downtime or not at all, needs to be made.

8. Longevity of the option : It needs to be evaluated which option is serving us for a sufficiently longer time period before becoming obsolete and requiring additional financial investment on technology.

There are several other considerations like custom requirements of your business, etc. however, above points quite sum up the costs involved which need to be evaluated for this decision-making.