What Are the Costs of ‘Free’ CRM Solutions?

So-called “free” CRM solutions have been on the market for a number of years now, yet have seen only moderate – at best – success in the marketplace.  While many of these free solutions require paid upgrades, the free core products often offer very strong feature sets and at least a starting point for CRM.

So what, then, explains the limited success of free CRM?  Perhaps the answer lies in the costs of all CRM – including so-called “free” solutions.  What are some of those costs, and the reasons that customers continue to pay for CRM when so-called free solutions are available?  Perhaps free CRM really isn’t free after all.

The price of free CRM solutions includes costs that generally apply to any CRM solution. The purpose of outlining these costs isn’t to indict or downplay free CRM –they are simply here to illustrate some of the costs you might encounter regardless of the license price of a particular system.

So what are these costs?

1. Cost to implement: As CRM consultants have (correctly) asserted for as long as I can remember, “CRM is not a technology strategy, it’s a business strategy.”  Implicit with that statement is the suggestion that CRM rarely, if ever works “out of the box” (or perhaps “off the site” is a better term for the many Web-based solutions these days).  CRM almost always needs to be customized for the unique business requirements of your organization, and that customization can bring substantial costs whether done through internal or external means.

2. Cost of data migration: CRM systems are only as good as the data that resides in them, thus regardless of what the CRM “container” looks like, there are absolute costs in migrating, integrating and maintaining the data in the system.  For a company with no CRM at all (often, although not always, a very small enterprise) these costs may be minimal but are still real.  However, for larger entities for which the benefits of CRM are more apparent, these costs can be very large as the migration from whatever the current system(s) of record are for customer data can be high.

3. Cost of support: In terms of free CRM, an analogy can be drawn to the case of Linux: Free Linux operating systems have been available for many years, yet many (although certainly not all) customers continue to pay for Windows and other desktop alternatives.  While there might not be a license cost, there is an absolute support cost with any system, in particular an enterprise-focused system like CRM.  In addition, many (although not all) free CRM vendors do charge maintenance.

4. Opportunity costs: A less-considered yet very important corollary to the above costs is the cost of your time in implementing a free solution. This could involve you and your team spending a large amount of time and energy implementing, integrating and customizing the solution.  What else could your people do with their time if they weren’t tied up in this CRM implementation?  How much more quickly and cost-effectively could a pre-packaged solution deliver value, even if it were not free?

5. Cost of failure: Although this may depend on several uncontrollable factors, it’s absolutely worth considering the financial stability of your CRM vendor. Vendors with a free model may not be doing their customers as big a favor as they think. If your CRM vendor goes belly-up, the above costs are multiplied and the disruption to your business will cause even higher expenses.

Buyers have learned a great deal in the approximately 15 years since the term “CRM” became adopted and in the 5 years that free solutions have been on the market.  In particular, buyers have recognized that the costs of CRM go far beyond the license fee of the software itself.

The bottom line is a smart customer won’t adopt free CRM because it’s cheaper.  But they will adopt it if it’s better — after accounting for all costs involved in implementing, integrating, supporting and managing the implementation.

Again, these costs do not only apply to free CRM. Most of these costs apply to any CRM implementation. It is therefore critical to understand and evaluate the total costs associated with CRM, of which the license fee is often only a small component.