Calculating Total Cost of Ownership for CRM Migration/Onboarding

Confidently calculate the Total Cost of Ownership (TCO) for CRM migration or onboarding with this succinct, step-by-step guide. Discover the key cost components and how to estimate each accurately to make informed CRM investment decisions for your enterprise.

Step-by-Step Guide to Calculating TCO

Step 1: Identify and list all current cost components

Gather and list all relevant cost components for your organisation's current CRM system or process. If you do not use a CRM or automation, estimate how much organisational time and subsequent labour cost is wasted using and making Excel lists of customers, prospects, and reports. Be thorough to achieve an accurate TCO estimation.

Step 2: Research your options

Look at different CRM options. Weigh up which solution will work best for you locally vs the most internationally renowned system. Use websites like G2 to look at how these platforms benchmark in each area of your business.

Step 3: Calculate the initial costs

Add up one-time costs, such as software, hardware, implementation, customisation, and data migration expenses, of all the different options. You might want to create at least three plans using different software stacks.

Step 4: Calculate the ongoing costs and account for qualitative factors

One of the critical factors to consider when choosing a CRM solution is the cost of support and maintenance. Businesses often underestimate the potential maintenance costs if they choose a developer-heavy CRM solution rather than a more user-friendly option. 

It is also important to consider qualitative factors such as ease of use, time saved through better UI/UX, and the level of developer support required, which can impact your CRM investment's overall efficiency and effectiveness.

A developer-heavy CRM typically requires significant expertise to maintain, update, and modify. Sometimes, businesses may need to hire an in-house specialist or work with an external agency for ongoing support. This can drive up the maintenance costs and make the solution more expensive in the long run. 

On the other hand, user-friendly CRM solutions, like HubSpot, are designed to be more accessible and easier to manage for non-technical users. These solutions usually have intuitive interfaces built with modern technologies, reducing the need for in-depth technical knowledge. As a result, the maintenance costs tend to be lower.

To make an informed decision on which CRM solution is best for your business, it's essential to weigh the potential maintenance costs of each option and account for qualitative factors that can affect the overall success of your CRM implementation. Consider factors such as:

• The complexity of the CRM solution: More complex systems often require greater technical expertise to maintain and update, resulting in higher costs.
• The ease of making changes: If a CRM solution is challenging to modify or update, you may need external support or hire a specialist, which can add to the overall maintenance cost.
• Integration with other systems: Choose a CRM solution that can easily integrate with your existing tools and systems. Poorly integrated solutions may lead to more maintenance and support issues.
• The need for customisation: Some businesses may require extensive customisation of their CRM solution. This can add to the ongoing support and maintenance costs, mainly if the customisations are complex or require frequent updates.
• The impact on team productivity and collaboration: Evaluate how the CRM solution will affect your team's daily operations and their ability to collaborate effectively. A CRM that is difficult to use or doesn't integrate well with existing workflows can hinder productivity and teamwork.

Involve your teams in the evaluation process to gather relevant feedback on the user experience of different platforms. For example, if you compare Adobe Marketo Engage and HubSpot Marketing Hubs, involve your marketing team for their advice on which tool they prefer. Picking a CRM system that works well for one department but not for others will be problematic for onboarding and adoption.

Step 5: Consider downtime, opportunity costs, and qualitative factors

Estimate costs associated with potential disruptions to business operations during the migration/onboarding process. Remember to include qualitative factors' monetary value in your TCO calculation. By considering these factors, you can better understand the true cost and benefits of adopting a new CRM or automation system

Step 6: Calculate the total TCO

The calculation below combines initial, ongoing, and downtime/opportunity costs to arrive at the total TCO.

Example TCO Calculation for Enterprise-Level CRM

Let's assume you are considering a cloud-based CRM solution for your enterprise. Here is a sample TCO calculation, broken down into initial and ongoing costs:

This table presents the initial and ongoing costs, followed by the qualitative factors and their monetary values. The total TCO (3 years), including qualitative factors, is calculated by adding the total monetary value of the qualitative factors to the previous TCO.

To incorporate this method into your TCO calculation, you can follow these steps:

1. Identify the relevant qualitative factors for your organisation, such as "ease of use for the team," "time saved through better UI/UX," "native integration between sales and marketing teams," "level of developer support required," etc.
2. Estimate the additional hours required per year for each factor based on the CRM system being evaluated. You can gather input from your teams and stakeholders and refer to any past experiences or industry benchmarks.
3. Calculate the average hourly cost rate for your organisation. This rate should consider the salaries and overhead costs of the employees involved in using and maintaining the CRM system.
4. Multiply the additional hours required per year by the average hourly cost rate to estimate the financial impact of each qualitative factor.
5. Add the financial impact of qualitative factors to your initial TCO calculation to arrive at the total TCO, including the qualitative factors.

Using this method, you directly link the qualitative factors to the time and resources spent by your organisation, making it easier to understand the financial impact and incorporate it into your TCO analysis.

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