How Much Will It Cost?

Now that we have a general idea of how long it takes to complete a CRM project, it's time to tackle the second most popular question: how much will it cost? The key idea around cost is that, although the cost of the tool itself can be frighteningly high, the technology cost is a small portion of the overall cost. Cost estimates range widely depending on the complexity of the project, but it's safe to say that you will spend at least one or two times the cost of the software in implementation costs alone, and this doesn't include such items as the cost of the hardware, IT staff salaries, training, etc. Let's start with an inventory of costs associated with a CRM project:

  • License costs. Assuming that you are buying licenses outright (you could choose an ASP strategy instead), this is probably the most obvious cost. We will see in , "Buying a CRM System," how to negotiate for the best price, but you should count on at least $2000 per seat just for the software with a mid-range package, going way up with high-end packages. You will pay relatively more per seat if your group of users is small.
  • Maintenance and support costs. They are tacked on to the license costs and, unlike them, are recurring (you get a new bill each year). Count on paying about 20% of license costs towards maintenance, starting at the time of the purchase (long before the solution is actually implemented, although this is one of the many items you can negotiate). Also, many vendors compute maintenance from the list price of the software, which can be much higher than your actual price depending on your negotiating skills and what the vendor's pipeline looked like the day you bought.
  • Hardware and other tools required for the CRM system such as a database. You will probably need to purchase a number of dedicated machines to run the system, including a separate one for the customer portal. If you don't already have the database system licenses the system will need, you will need to purchase them, too. You may also have additional costs such as a web server, middleware, a report writer, and other add-on tools. The costs can be higher than the CRM license itself depending on the requirements.
  • Implementation costs. This is a big one! For most systems, you will need to hire an integration partner, who will provide both technical staff and project management. If you are not hiring the CRM vendor to do the work, you may also want to invest in technical reviews by the vendor for both the implementation plans and the actual app prior to rollout. Implementation costs are very dependent on your particular requirements, but it's safe to assume that you will spend at least the amount you spent on the tool for a simple project and several multiples of that number for a complex project.
  • IT staff. Typically the integration partner can only do so much (and you don't want to leave your IT infrastructure unattended in any case). You may not think of IT staff's salaries as additional out-of-pocket expenses, but they add up and you may need to hire additional personnel to maintain the system.
  • Other staff. Although the integration partner will typically provide a project manager, you need to have some direct overseeing authority and responsibility throughout the project. This will be a dedicated individual (or team) for larger projects, potentially a part-time assignment for simple projects.
  • Training. The creation and delivery of training needs to be accounted for. Tool vendors usually provide training for the implementers and the administrators (for a fee) but not for the end-users since end-user training is (and should be) very process-oriented and specific to your implementation. The integration partner may be able to do the work, or your internal training group can do it, or you can contract it out. In any case, there will be some expense associated with the creation and delivery of end-user training, not counting travel expenses for the attendees, or their salaries during the training.

So what's the large number on the bottom of this addition? In a mid-2002 report by Deloitte (reported in on 7/11/02 under the title "Setting a Realistic Budget for CRM"[1] ), the following prices are quoted:


  • For a simple project, count on (take a deep breath) $15k per seat for 100 users to $10K per seat for 5000 users. It makes sense that the per-seat price decreases for larger number of users, since product pricing is better for more users. More importantly, although implementation work is more complex for a larger user base, the additional cost is not directly proportional to the size of the user base.
  • For a moderate complexity project, prices go up to $30K per seat for 500 users, graciously sliding down to $10K per seat for 5000 users.
  • Finally, complex projects require $50k per seat for 1000 users down to $15K per seat for 5000 users.

Should you believe these high numbers? Undoubtedly, there are companies out there that spend that kind of money on CRM implementations. It's also true that many companies fail to track expenditures properly so that they don't really know how much they spend, and therefore tend to seriously underestimate their costs. And finally there are companies that spend significant amounts of money on projects that never make it to deployment, which are the most expensive projects of all. That being said, it's absolutely possible to spend drastically less than the numbers above while deriving real benefits from the project. I have been a part of many implementations that did not even come close to the $15k per user that the study reports for simple projects. To minimize your cost, try the following approaches.

  • Consider a mid-range tool. Gone are the days when mid-range tools ran out of gas with more than a few dozen users. If you have no more than a couple hundred internal users, a mid-range tool should be able to handle it in terms of pure performance. You may or may not be happy with the more limited functionality, however. The beauty of mid-range tools is not only that the license fee is much less, but that the implementation is a lot cheaper because there are fewer features and fewer customization opportunities.
  • Minimize complexity. Scrutinize each customization and each integration by asking what the benefit will be versus the cost. Only allow those that have a good cost/benefit ratio.
  • Use a layered implementation approach. While the layered approach won't necessarily save you money, as discussed above, it will bring a more rational approach to the implementation through which you can decide at each step how much more to invest into the tool, and where that investment will do the most good.
  • Negotiate hard with the vendors. We'll give you specific tools to do that in , "Buying a CRM System." There's typically a lot of leeway in pricing for CRM systems. You can also negotiate with integrators (see ) although there's less flexibility with them.
  • Stay on top of the implementation. If your project is at all complex, the implementation is where the big bucks can be squandered. You must get regular, complete information about the project at least on a weekly basis. Using a layered approach will help here in the sense that you won't be more than one step behind, but you need to do better than that. gives a blueprint of how to conduct an effective implementation.
  • Consider using an ASP. You won't have to pay for the software upfront, so your implementation cost will be less. The ASP has lots of experience with the tool and you will have fewer customization options; therefore you should be able to roll out paying much less for implementation than your first-year subscription fee. Your other internal costs will be nil or greatly reduced. Over the long run—more than four or five years—ASPs are more expensive, however.

Now that we understand key success factors, typical timelines, and typical budgets for CRM projects, the upcoming chapters will focus on each aspect of the project, starting with the all-important project team.