The Cost Factors of a CRM System

All companies planning a CRM implementation must not only analyze functional requirements, but also address the cost issue of CRM systems. The following article is intended to help you with your planning to oversee the most important cost factors.

Internal cost factors

The internal costs of a new CRM system are difficult to grasp, but of importance. Even before the CRM software goes live, some or all of the staff should be released for the successful implementation of the CRM project. Otherwise, the project runs the risk of sinking halfway. The members of the project team already dedicate themselves in the selection phase to the requirements analysis, the preparation of the specifications, the planning and execution of presentation appointments as well as reference customer visits. With the introduction of CRM, training courses for users and administrators are on the agenda. Users also want to be supported during ongoing operations. The opportunity costs resulting from this temporarily reduced productivity are of course not considered in the calculations of the offers of the CRM providers, but are still relevant for a cost calculation.

From a technical point of view, when purchasing the CRM system as a purchase solution, personnel is also required for application support. In addition, investments for support and operation of the IT infrastructure or server are planned. When deciding on a cloud or SaaS solution, the provider converts the costs incurred for application support and technical infrastructure into the monthly fee.

External cost factors

As external cost factors, you can summarize all costs and fees that are charged to you by the CRM provider. You should look at your potential supplier’s offer not only in terms of license and usage fees and service costs, but also in terms of possible hidden costs. As an example, we can mention the compulsion, popular with some providers, that users have to upgrade to a much more expensive edition in order to be able to use a few additional functions.

The license and usage fees as well as the service costs are primarily determined by the number of users notified and the required range of functions as well as necessary adjustments.

So check with priority:

  • license costs incurred with a purchase solution
  • user fees that are due monthly for a Cloud / SaaS solution
  • expenses for the provider’s services, e.g. training, workshops, project coordination, customizing, roll-out or migration of legacy data
  • ongoing maintenance and customer service fees
  • financing models for CRM systems

The classic purchase solution: When purchasing CRM software, the different license models of the providers must be taken into account. As a rule, these are either so-called concurrent user licenses (determination of the maximum number of users who can simultaneously access the CRM system) or named user licenses (determination of the number of users by name). As already described, a purchase is accompanied by initial investments in infrastructure, consulting and customizing.

In concrete terms, this means that the CRM solution belongs to you immediately after the purchase; running costs are essentially incurred through a maintenance contract that includes upgrades, patches and services. For this a higher initial investment is due.

Leasing: Not only a car, but also software can be leased. The license fee is spread over the period of use. Your advantage here is “Pay as you earn”: The leasing instalments are paid from the current income resulting from the use of the new CRM software.

In concrete terms this means that leasing is certainly an interesting financing instrument for companies that want to conserve their liquidity. It is an ideal means to finance your CRM investment via the capitalized earnings value. In addition, you benefit from tax advantages in contrast to the use of your own funds or classic financing.

Purchase: Various CRM manufacturers also advertise the advantages of the hire purchase over the classic purchase. The costs of the investment are spread over a certain period, e.g. three to five years. At the end of the contract period, the software then becomes the property of the company.

In concrete terms, this means that the initial investment hurdle is eliminated in the case of hire purchase (often corresponding to an installment purchase). The costs are spread over an agreed period of time and provided with a market interest rate. In the end, the software becomes your property.

The Cloud / SaaS solution: As a customer, you usually pay a monthly usage fee and often also a separate service fee. An initial investment hurdle in the form of costs for licenses or IT infrastructure is eliminated. Beware! The sticking point in the selection for some providers is the offer of different CRM editions, each of which is linked to different features and support variants, but also to integration restrictions.

In concrete terms, this means that a higher initial investment is not required, but the software does not become your property. You pay the usage or service fee as long as you use the software.

Our advice

In all your considerations, don’t forget the perspective of the CFO in your company. From a financial and tax point of view, the decision for a CRM dissolution, leasing, hire purchase or the “lease” of the CRM system in the SaaS model is of significant importance.

When the solution is purchased, the price can be deducted from the tax, while the value of the company increases as a result of the investment. Leasing instalments are usually fully tax deductible, as they are deducted from your company’s operating expenses. In addition to the actual license and usage fees, implementation and adjustment costs can also be integrated into the leasing contract. In contrast to leasing, the software has to be capitalized in the balance sheet and depreciated over its useful life. The operation of CRM in the cloud, on the other hand, preserves liquidity and enables financial planning security through fixed installments.

Conclusion

Preparation is everything: Think through the various cost factors and the financing model that is right for you in advance. Openly and clearly negotiate your price expectations with your CRM provider. In this way you prevent possible misunderstandings. However, it is undisputed that the use of the right CRM solution within the framework of a CRM strategy quickly pays for itself.