CRM Selection Proposal: Build vs. Buy for Growing SMBs

Introduction

ABC is a small company that needs a new customer relationship management (CRM) system. To ensure that the new CRM meets the company's needs, ABC must undertake the following steps. First, it needs to identify what features and functionality are required. Then, it needs to determine whether to build a solution in-house or to use a third-party CRM. This analysis will be conducted with the systems development life cycle (SDLC) in mind.

Analysis of the Current Situation

ABC has built an in-house CRM system and used it to grow the business to its current stage. Customer relationship management systems are used by the sales team not only to manage relationships with prospects, but also with existing clients. At its most basic, the role of a CRM is to record and store customer information. This includes basic contact details, but most CRMs also store the history of client conversations. Essentially, a CRM should put the full recorded history of every business relationship at the fingertips of the sales staff. On its blog, leading CRM provider Salesforce describes the core functionality of a CRM as giving "everyone across the business, including sales, marketing, customer service and business development a better way to manage the customer relationships and interactions that drive success" (Salesforce, 2017).

For the purposes of this scenario, the specific capabilities of ABC's in-house solution are not known. It should be assumed that (a) the capabilities of the current in-house solution are largely irrelevant, and (b) the current in-house solution is not particularly effective. The reason for the latter assumption is that it was likely developed quickly to serve basic functional needs. Many leading CRMs are quite expensive, and building a custom CRM takes developer time away from the core product — something company ownership would likely have been hesitant to do. In balancing the need to avoid the cost of an expensive CRM against the reality that developer time is better spent on the core product, ABC probably assembled a bare-bones CRM. This is precisely why it is no longer scalable and needs to be replaced. The focus at this point must therefore be on the company's needs going forward.

The current situation for ABC is as follows. The company is still relatively small, with fewer than 50 employees, but it has a large customer base, which means sufficient cash flow to look at external solutions. What ABC does is not specified, so developer capacity is also unknown. However, at fewer than 50 staff members, it is reasonable to assume that most employees are in sales and development. After accounting for finance, HR, marketing, and customer service, there are probably around 15–20 people each in sales and development, with some skewing toward the latter. Smaller software companies often concentrate heavily on the sales function. However, part of achieving operational maturity as a software company involves transitioning from a sales-focused to a marketing-focused organization. Integration of sales and marketing functions is a recurring theme in the literature on both software marketing and operational maturity (Burghgraef, 2012). CRM provider HubSpot has long advocated that marketing and sales must work together — particularly after the initial low-hanging fruit has been captured — so that a strong marketing function fills the funnel for the sales team to continue driving growth. Accelerating sales through the integration of marketing and sales is likely one of the primary objectives of the new CRM (Savery, 2017).

Another important consideration is that building a CRM is an incredibly complex undertaking. If the current homemade CRM is no longer sufficient, and ABC is not itself in the CRM business, then its development talent may not have the capacity to build a new one. Furthermore, doing so would represent a significant misuse of that talent. First, there is the core product to consider. Second, if ABC's team could efficiently build a superior CRM suited to a company of 50 people with a large customer base, then the product itself would be worth marketing commercially. Management must therefore weigh opportunity cost carefully when examining the build-versus-buy question.

Challenges and Functional Requirements

The major challenge ABC faces is the need for a new CRM. The current system was clearly built with startup-stage needs in mind, but the replacement must be designed for a company navigating growth and increasing operational maturity. The new system should begin with the marketing function. The workflow, broadly, is as follows: the marketing team uses various activities to attract leads into the sales funnel. The first step is for marketing to qualify those leads; those who meet the criteria become prospects and are passed on to sales. The rationale for qualifying leads before handing them off is straightforward — sales team hours are finite and costly, so salespeople should only work leads that are likely to convert. The conversion rate is a critical component of lead scoring (Vaughn, 2018).

Once leads are qualified and handed to the sales team, they are typically handled at two levels: an opener who further scores the lead, and a closer who specializes in completing the deal. However, the sales cycle does not end there. For most businesses, it is easier and cheaper to generate additional revenue from existing clients than to acquire new ones (Morris, 2016). There should therefore always be a segment of the sales team focused on business development within the existing customer base. Because ABC already has a large customer base, there is clearly an opportunity to work that base and increase revenue. As Myler (2016) notes, working both new leads and existing clients typically accelerates revenue growth.

The new CRM should function accordingly. It should allow marketing to easily build a funnel and define the appropriate workflows. The marketing team should be able to pull leads from a variety of sources and input them into the CRM with minimal friction. Maintaining data cleanliness is a challenge, but it is necessary both to prevent multiple sales reps from contacting the same company and to honor privacy requirements. If someone opts out of communications, the legal environment protects that right. Maintaining privacy will become even more important once GDPR takes full effect — assuming that a portion of the "large customer base" is located in Europe, where this strict data privacy regulation has been introduced (Nadeau, 2018).

From the moment a lead is imported into the CRM, there should be a complete record of all communications with that contact — whether an automated marketing email, a sales call, or a post-sale service interaction or feature request. All of this must be logged in the CRM so that the company can present a unified face to the client. For example, an existing client should not receive multiple sales calls about the same product. The CRM must have the functionality to assign a single point of contact for each client based on their lifecycle stage. Finally, as the current situation makes clear, the new CRM must be scalable. ABC is still a relatively young company with considerable room for growth. If continued growth were not anticipated, a new CRM would not be necessary — therefore, scalability must be a core requirement, and the new system must be capable of efficiently collecting and managing clean data as the company expands.

Conclusion

Building a CRM is, in terms of strategy, a poor decision. There is no logic to trying to reinvent this wheel when the core functionality will be the same as the leading CRMs on the market, and when the company is small and should not be using developer time for anything other than improving the core product. It may be technically interesting to build a CRM, but it is bad strategy to do so — regardless of how enthusiastic the development team might be about the project.

Most of the work ABC will need to do on this project involves adequately specifying its requirements going forward. The new CRM must be scalable to support the next level of operational maturity. ABC will also need to build a data migration integration to transfer its existing records to the new system. In that sense, there will be some in-house project work — the team will need to handle anything the third-party solution does not cover natively. The overall goal of the proposed solution, however, is to minimize operational disruption, resolve the CRM problem in a clean and efficient manner, and accelerate the company's growth trajectory. Building technology is valuable when no comparable solution already exists. When it has already been done — and done well — attempting to replicate it does not add value.

References

Bogaert, B. (2014). Security, scalability, stability: Why SaaS is more than a delivery method. Xpenditure. Retrieved March 11, 2018, from http://blog.xpenditure.com/security-scalability-stability-why-saas-is-more-than-a-delivery-method

Burghgraef, R. (2012). Are you marketing-focused or sales-focused? Spin Sucks. Retrieved March 11, 2018, from https://spinsucks.com/marketing/are-you-marketing-focused-or-sales-focused/

Morris, T. (2016). It is 6 times more expensive to win a new customer than to retain an existing one. Business 2 Community. Retrieved March 11, 2018, from https://www.business2community.com/strategy/6-times-expensive-win-new-customer-retain-existing-one-01483871

Myler, L. (2016). Acquiring new customers is important, but retaining them accelerates profit growth. Forbes. Retrieved March 11, 2018, from https://www.forbes.com/sites/larrymyler/2016/06/08/acquiring-new-customers-is-important-but-retaining-them-accelerates-profitable-growth/

Nadeau, M. (2018). General data protection regulation (GDPR) requirements, deadlines and facts. CSO Magazine Online. Retrieved March 11, 2018, from

Salesforce. (2017). What is CRM? Salesforce. Retrieved March 11, 2018, from

Savery, A. (2017). How to align sales and marketing for results (not just harmony). HubSpot. Retrieved March 11, 2018, from https://blog.hubspot.com/blog/tabid/6307/bid/31067/how-to-align-sales-and-marketing-for-results-not-just-harmony.aspx

Steinberg, J. (2017). New report: Businesses suffer serious, measurable damage from data breaches. Inc. Magazine. Retrieved March 11, 2018, from

Vaughn, P. (2018). How to score your leads so sales works the hottest prospects. HubSpot. Retrieved March 11, 2018, from https://blog.hubspot.com/blog/tabid/6307/bid/31279/how-to-score-your-leads-so-sales-works-the-hottest-prospects.aspx

Veracode. (2018). Software development life cycle. Veracode. Retrieved March 11, 2018, from https://www.veracode.com/security/software-development-lifecycle