Earning a Payback on CRM: Smaller Projects, More Homework

Customer-relationship management has been the Holy Grail of financial services since the 1990s. Tracking interactions across all channels in order to obtain a single view of the customer is a financial-services-executive's dream. It is one that has inspired major financial institutions to embark on enterprise-wide-CRM projects with vendors such as Siebel Systems, PeopleSoft, SAP, JD Edwards and others.

But these projects are not the plug-and-play kind. Often, difficulties with managing huge, multi-year-CRM projects, which can include complex data integration, expensive consulting fees and low-user adoption rates, have led to dissatisfaction, according to industry sources. Some end-users, unable to reach the desired return on investment, have been pulling back on CRM projects and blaming the software companies.

Many financial-services institutions, however, have experienced successful CRM implementations. How did these firms avoid the pitfalls? What are the keys to success? What does it take to get there?

"There's so many bells and whistles with the systems," says Edward Garry, vice president, CRM solutions at Quick & Reilly, a subsidiary of FleetBoston Financial. "You've got to identify what your top five problems are, and stick to what is going to solve the pain of the user," adds Garry.

The brokerage firm began implementing Siebel 6 (also known as Siebel 2000) CRM system in August of 1999, as part of a Y2K project to replace legacy systems. In the process, however, Quick & Reilly realized that CRM could help it transform its business from a discount-commission broker into a full-service brokerage firm tied into its parent bank, FleetBoston Financial.

During phase one, Quick & Reilly rolled out Siebel to its financial consultants with the help of PWC Consulting (now part of IBM Global Services). In phase two, it built a call center with help from Cap Gemini Ernst & Young. Today, 350 call-center agents use the system, called Socrates, as well as 900 financial consultants in Q&R's investors centers and Fleet Bank branches.

"By asking questions, you learn more about your customers," explains Garry, who says the firm is more successful because of the Siebel system. "We're doing well because of our ability to move our day-to-day transaction-operational aspects of our organization from the financial consultant to the call-center environment," says Garry. Financial consultants can more quickly explain products and services by looking up information on the Siebel system, he adds. As such, the firm will be rolling out Siebel 7, which is browser-based, in 2004.

Counting the initial software-licensing fee, as well as upgrades of hardware and maintenance costs, while factoring in that Q&R was part of Fleet Bank's larger contract with Siebel, Garry estimates, "I would be surprised if we (spent) over $4 million on that."

The Blame Game

Not everyone, however, is as pleased with their CRM endeavor, a study by Nucleus Research suggests. "We see a lot more scrutiny of projects, we see a lot more scrutiny for the integrator, we see a lot more demands for the customer to ask for very clear time lines and very clear results," says Rebecca Wetteman, vice president of research at the Massachusetts-based consulting firm.

Siebel, which has 77 percent of the global CRM market for financial services, came under scrutiny in the Nucleus study (see box). However, consultants say, it's not fair to blame lackluster CRM-project returns on a vendor.

Chris Selland, founder and president of Reservoir Partners, a CRM-research and consulting firm headquartered in Cambridge, Mass., says, "It's a dramatic oversimplification to blame Siebel, or any other company, because things screwed up."

Other CRM pundits agree. "I don't think the blame falls anywhere on the different vendors, whether it's Siebel or Vantive with PeopleSoft or it's an Oracle system, or whatever the case may be," agrees Q&R's Garry. "The difficulty is surrounding internal issues, whether it's your business process, or it's your organization's willingness to change and adapt to this new mindset that is customer focused, and that's the hardest part of it."

Garry says a CRM implementation can encounter several layers of difficulty, including not having the right team from both the business and technology sides. Also, correct analysis of the business process is necessary, otherwise the software won't work.

For example, say a firm has a 10-step business process, but it only identifies six out of the 10 steps to the CRM vendor. "When you go into production, and you realize that it doesn't work because you're missing half the steps in the process, that gets blamed on CRM, when really it's the analysis that's been done," he says.

The vague definition of CRM is also problematic. "CRM is still a fuzzy term," says Reservoir Partners' Selland. "Most companies define it (as) all sales, customer marketing and customer-services applications, all integrated. And that's extremely broad and (makes it impossible) to solve all of a company's problems."

Divide Projects into Small Chunks

Selland contends that companies need to take a "tactical approach, breaking their projects into smaller chunks and not boil the ocean."

Timothy Tully, chief information officer at Mellon Financial Corp.'s Private Wealth Group, says he spent a lot of time zeroing in on what CRM meant. "It's a catch-all phrase," he says. "It's like e-mail, it has a ubiquitous meaning for different people."

Mellon, which is currently rolling out Onyx's sales-force-automation and contact-management product, is tackling CRM in "small bites."

"We decided to take it in small, measurable chunks so we can avoid doing this multi-million-dollar investment out of the chute," says Tully, who expects to spend less than $10 million on the entire implementation. "Where most of the investment comes from is not the software license. It's from the development work you do on your own or with the consulting company, or all interface work you do with the surrounding systems," he says.

Mellon chose Onyx over Siebel and Salesforce.com (a hosted solution) because Onyx is based on a Microsoft Outlook interface. "That was key because our users really liked the Outlook interface. We thought it would be a smooth transition," says Tully, who is rolling out the product to financial advisers in early 2004.

In terms of ROI, Mellon's Tully came up with specific objectives relative to performance improvements in sales. He projected that if a sales rep met with an 'A' client three times within a year, "There is some predictability about how much you can increase sales. We wanted to be realistic. We didn't want to throw 40 percent out there and get shot down because that's unrealistic," says Tully, who adds he's encouraged by the early results.

Meanwhile, in a recent CRM report, Gartner analysts say 75 percent of CRM projects will not produce measurable ROI due to poor business-executive decision-making.

"It's easy for these things to fail," says Gregg Beltzer, project manager, Sevin Rosen Funds, a venture-capital firm based in Dallas, Texas. Sevin Rosen recently consolidated all of its customer-contact and relationship data in Interface Software, the CRM maker of Interaction. "You need somebody at the top, one of the partners, the CFO, who is a champion of the project, who is working with all groups. That does a lot to get buy in," says Beltzer.

It's not that firms are unable to roll out the project, but that CRM entails a cultural change, says Ira Lehrman, director, Debt Capital Markets (DCM) Deutsche Bank, who is overseeing CRM for the Global Markets DCM group. Not only is it disciplining individuals to enter account information and call reports, but it's instituting a whole new way that people work with clients, communicating across departments, he adds.

"It's people, process and technology," says Lehrman. "Technology isn't the hardest part," he adds. The hard part is making sure you have the torch bearers that are going to carry it on."

Lehrman agrees that a firm needs business leaders at the highest levels of management to embrace the project for success. It's up to each firm to decide how they want to use CRM, he says.

In the DCM group's case, the firm wants to achieve a better understanding of its multinational conglomerate clients, such as how much business they are doing in the areas of debt, foreign exchange and derivatives, explains Lehrman. The leaders of the debt-capital-markets project who come from a heavy sales background, are running the project. They will use the CRM application as a tool to monitor and track performance of the origination force as they work with customers.

"Our objective is sharing information and cross selling," says Lehrman. The CRM tool will integrate a series of data that is both internal to the firm as well as external. This could include credit ratings and research reports, thereby "creating a dashboard for a centric view of the client," he says.

Data Integration

One of the traps with CRM is that it necessitates data integration. "Firms historically have not had a central data store with information from multiple systems feeding into the data store. The premise of CRM is a single data file. If you didn't have that originally, you have to build pipes into all those systems. So you're cleansing, mapping and sorting data," says Jaime Punishill, senior analyst at Cambridge, Mass.-based Forrester Research. "What happens is as part of a CRM project, you end up with a central data-management project," he adds.

But Selland says such a project is futile. "One database, one data store is the Holy Grail that one company of any size is not going to reach. It's an unattainable goal. There are mergers, there are acquisitions, it's just not possible. It's such a huge change of the business, it causes massive disruption, massive costs."

Ultimately, the success of a CRM project hinges on end users adopting the system and entering their data.

"Particularly in financial services, when a firm's goal is more than the basic cutting out of costs from the call center, you really have to focus on making sure the users can use the application," says Nucleus Research's Wetteman.

This can lead to rewriting the user interface, which in Siebel's case "some firms did at great expense," she contends.

Motivating financial professionals to use the system is key. "You've got to have that hook that is going to make (users) go to the system every day," says Garry. For Quick & Reilly, the hook was a new account-opening system. "We're one of the only Siebel CRM customers in the financial-services industry that has rebuilt our account-opening process back into our Siebel system and have that communicate in real time back to the legacy system," he says.

Instead of taking 27 steps to open an account, "You now have six steps and instead of reading code, you're using a feature called Siebel Smart Script," he explains.

Though he did not quantify the ROI, Garry says, "I can tell you that I went from 20 minutes for opening an account in two separate systems to six minutes in one system. There's ROI with that."

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Show Me the ROI

Although ranked number one by Gartner Group with regards to functionality, Siebel Systems has become the target of CRM critics.

Last September, Nucleus Research fielded a CRM study that found 61 percent of Siebel customers listed on the company's Web site did not believe they achieved a positive return on investment. (Of the 66 customers listed on Siebel's Web site, 23 agreed to participate.) But Siebel disagrees with the methodology. "Siebel systems has over 3,000 customers, of those, 23 customers spoke to Nucleus. That is statistically insignificant and should not be used to discuss customer satisfaction of Siebel customers," says the spokesman.

Timothy Tully, chief information officer at Mellon Financial Private Wealth, says that Siebel is expensive to implement.

"I would put Siebel in that PeopleSoft, ERP (enterprise-resource-planning) implementation methodology; with boatloads of implementation providers charging you a lot of money," he says. "Too many people talked about how expensive it was to implement Siebel," he says. "At the end of the day, it was a gut call," says the CIO who chose Onyx.

The Siebel spokesman responds, "We do work with professional-services firms to make sure our systems are implemented successfully. This usually comes at a price point."

Meanwhile, Siebel is the information cockpit of Merrill Lynch's $1 billion wealth-management platform. On top of a 2,000-seat call center, Siebel, which cost the firm $25 million, will be rolled out to more than 25,000 financial advisers.

Byron Vielehr, chief technology officer of Merrill Lynch's Global Private Client Group, speaks positively about the Siebel relationship, but notes that the scale of the implementation posed some difficulties.

The Siebel spokesman says, "Integrating systems across one company is a very complex task. We are addressing this with a new technology initiative that we call the Universal Application Network, which helps companies ease those pains." Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio