GoldMine -
Implementing Sales Force Automation Solutions
By Russ Lombardo
FrontRange Solutions (formerly Goldmine Software Corp.)
Part 1: The Cost of SFA Solutions
This is part one of a three part series entitled "Implementing Sales Force Automation Solutions". In this issue we will discuss the various costs associated with the implementation of SFA systems. Part two will discuss the Return-On-Investment (ROI) of SFA Solutions, and part three will address How to Implement SFA Solutions.
The Cost of SFA Solutions
SFA conjures up a variety of definitions, ideas and fears in most people involved in automating their company's sales and marketing functions. Unfortunately, often times the costs associated with implementing such an important project are not understood, or felt, until it is too late. Statistics show that between 50-80% of all major SFA projects fail due to a variety of reasons - improper funding not being the least important one. Failure doesn't just mean the project was thrown out either. It includes projects that were delivered late, missing key functionality and/or excessively over budget. It's the budgetary issues that will be addressed in this paper.
Since a major part of the planning for an SFA solution must include costs, this is a critical concern within most companies. But what should the budget include? It's easy to assume that the cost of the software will comprise the major part of the budget. While it could represent a major percentage, depending on what product is chosen for implementation, it typical should be just one of the many pieces that make up the whole. In fact, depending on the company's exact needs, plans and requirements, the software cost could easily be the smaller percentage of the total cost.
Insight Technology Group, a consulting firm specializing in researching how companies are reengineering the way they sell to and service customers, recently surveyed more than 200 firms regarding how they budgeted for first-year expenses for hardware, software, customization and integration, training and support. The average cost was $10,385 per user. However, 37.5% of those surveyed stated that they ended up over budget and didn't deliver on all the intended functionality. Therefore, if we take into account only those projects that meet or exceeded expectations, then the first-year investment to successfully automate a salesperson is $17,000. Obviously, implementing an SFA solution is not something to take lightly.
Cost Breakdown
As mentioned earlier, the software cost is only one piece of the pie. Additional costs include hardware, customization, training and support - not mentioned other inherent costs associated with lost productivity of the individuals while they're learning to use the system, downtime associated with implementing the system, and other soft-dollars. Let's take a closer look at each of these costs items.
Hardware
It's not enough to say, "My sales reps already have laptops, so my hardware expenses are already taken care of." When you consider that the system may require these existing laptops, and even the desktops, to be upgraded with more memory, larger hard drives, faster modems, and more of the latest technologies to ensure their systems are fully featured, then perhaps they are not quite ready. Add to that the cost for servers, networks, modem pools, and other hardware necessary to ensure a proper infrastructure exists to support the users, then the costs for hardware can escalate dramatically. A good rule of thumb is that each user's hardware requirements could range from $5,000 to $6,000, which includes the latest technology, accommodates future growth and takes into account the sharing of the central system they will be accessing either locally or remotely. Most importantly, don't skimp on the hardware technology. There's nothing worse than a sales person losing valuable selling time waiting for their ill-equipped system to respond to a query, or even worse, come back from the repair center.
Software
There may be fifty ways to leave your lover, but there are over 600 ways to automate your sales force. That's how many products, by some counts, are available today that do some sort of sales automation and/or contact management. SFA software products vary dramatically in price and functionality. Prices for high quality and fully functional sales automation products range from around $300 to several thousand dollars per user. Add to this the cost of software for e-mail systems, presentation software, office suites, quotation systems, and the like, and you can easily see how a user can carry around $2,000 to $5,000 worth of software on their laptop.
Much of this software, such as office suites, comes with the system, which reduces the impact and cost dramatically. The biggest variable here, however, is the SFA product itself. In order to address the needs of a typical sales and marketing organization (if there really is such a thing as a typical sales organization), the proper SFA product should handle all contact management, forecasting, management reporting and analysis, reliable and fast synchronization, automated processes, imbedded e-mailing, Internet access, and more. It should also be scalable from a small number of users with a small database up to hundreds of users perhaps spread over multiple networks (which synchronize together) and all seamlessly accessing a huge database. This high-end scalability requires an SFA product that supports a client/server architecture. Products such as GoldMine can accommodate all these requirements at a cost of around $300 per user, or less depending on volumes.
One more thing to add at this point is the additional cost for installation and setup of the software, since the software price itself does not include this required effort. Depending on the product chosen, this can take just a few days, as is the case with GoldMine, or span several weeks or longer, which is the case for many higher-end products. Expert consultant rates for this type of work range from $1,000 to $1,500 per day.
Customization
Since every organization is different, and every department within an organization is equally different, it is imperative for an SFA solution to be tailored to meet the unique requirements of its users. These customizations vary wildly depending on the requirements of all the departments and users as well as the priority of these requirements, which will dictate when they need to become available. Clearly, it is advisable to roll out changes to the system in increments over time, thus allowing the sales and marketing organizations to absorb them, learn them and use them as they become available, without being inundated by too many new features and functions all at one time.
When looking for an SFA product, several key issues need to be considered, beyond the major functionality mentioned in the previous section. Customizations vary depending on the capabilities and flexibility of the product purchased, as well as how difficult it is to customize, who does the customization (you, the vendor, a value-added reseller, all the above, none of the above?), if modifications affect the core product versus being saved and automatically synchronized with the actual data, and whether the changes and additions can be rolled out in phases over time.
For example, GoldMine is not only easy to use, but does not require a programmer-type to customize. The more complex the end-user requirements, however, the more a trained, certified reseller may be needed to assist in the customization effort, thereby relieving the end-user from having to become an expert in the product. Typically, resellers initially perform customizations in GoldMine, and as the end-user becomes more proficient in the product, they do some, if not all, of the on-going enhancements. And, since these updates are saved with the data, thereby not affecting the core product, they can be applied incrementally and then automatically synchronized to the users as they become available, a little at a time. GoldMine offers tremendous flexibility and strong customization capabilities. However, it allows for a phased rollout approach so your company can scale your SFA project without causing major disruptions to the productivity of your sales and marketing organizations.
In conclusion, the costs for customization will vary and will probably accumulate over time. While this is difficult to estimate, you can limit some of the costs by controlling the amount of customization required initially, and plan for future changes, thereby phasing the costs over a period of time. The scope of costs for customizations can range from hundreds to thousands of dollars per user. One must be careful to remember that a lot of customizations up front not only increase the cost, but also can also dramatically delay the release of the SFA project to the users. And if we remember the earlier discussion about why many SFA projects fail, exceeding the budget and delayed projects are the two top culprits.
Training
Training is required - Period, end of story. Anyone thinking that they can release a powerful product that can potentially automate and streamline the operation and increase the productivity of a sales and marketing team without proper training is fooling themselves and risking a failed project. First, training might be required for basic system usage, such as Windows, word processing, presentations, e-mail, and the like. It shouldn't be surprising that many end-users out there, including sales reps, are still not very familiar with using PCs. Second, there's basic usage of the SFA product itself (What buttons do what, learning the basic interface, mail merging, email usage, etc.). Third, and most important, is the way the product should be used for your business. This includes what business processes should be followed, workflow and document management, opportunity management and how it is applied to your unique forecasting methodology (if you even have one yet), task delegations, and basically how the system should be used to reflect the way your company wants things done using this new technology.
Training costs can range from $500 to $1,000 per user depending on their pre-existing knowledge. Typically a half-day on basic system usage for the novice plus half a day on the new SFA product should cover the basics. Another full day may be needed for learning to use the system as your company intends on having it used (i.e. your business processes). Training rates can be from $1,000 to $1,500 per day for a class of 10-12 students, or based on a per student fee ranging from $250 - $350 per student per course. Don't forget to add a one-day training class for your System Administrator.
Support
Finally, support and maintenance should be included in your cost estimates. Typically, SFA products available today offer annual support and maintenance packages for around 20% of the manufacturer's suggested price. This includes free and/or discounted updates and upgrades as well as phone support for Technical Support issues. Additionally, or perhaps instead of, the reseller who helped install, customize and train your company on the SFA project can provide support for a fee. Either way, don't forget to factor in the additional costs for your own internal help desk (who your sales people call back at your headquarters when they need help), hot spares for their hardware, replacement units, and similar costs. Industry estimates for support can be between $1,000 and $1,500 per user per year.
Summary
At this point, you're either intrigued or frightened to death. Regardless, you should at least be somewhat concerned if not more aware of the costs associated with implementing an SFA solution. Yes, it does add up to a lot. But before you say forget the whole idea, think about what it costs to not have your sales and marketing organizations operating more efficiently and productively. Sales forces today are dealing with much more difficult circumstances than ever before. Tools and techniques that worked only a few years ago can no longer be relied upon to help make more sales. They need something to help them overcome the challenges of today's selling environment.
So before you say forget it, consider this as an investment, not a cost. Part 2 of this series will discuss the Return-On-Investment of an SFA Implementation. We will take a look at the costs versus the payback over time based on estimated productivity increases by your sales force and by improved, timely management information. In the meantime, you have a lot of work to do by calculating where all your costs will be coming from, now that you hopefully have a better understanding of just some of the major costs associated with implementing an SFA solution.
