Davis Humanics (DH) is a company founded in 1982 that provides human resources services to about 7000 companies with a total of nearly 100,000 employees. These services include payroll processing, tax filing, health insurance and claims management, and retirement plan management. DH has annual sales of $2 billion and about 1000 employees. DH has grown rapidly and has clients of all sizes, ranging from smaller companies with fewer than 50 employees to Fortune 500 companies.
As DH grows, it is having trouble maintaining a consistent quality of service. Account managers each must handle more clients, and it is becoming difficult for those account managers to maintain a high degree of personal contact with the human resources executives who control DH's contracts. In the past, account managers worked with a small set of client contact people, but now account managers must work with more people, many of whom they have never met. In addition to account managers, client personnel have regular contacts with DH operations staff (who handle input tasks), DH systems staff (who help customize the interfaces between DH systems and client systems), and DH professional staff (lawyers, actuaries, and human resources professionals who consult with DH clients and their legal counsel regarding the operation of their retirement and benefits plans).
Because DH's clients are so different in size and how they operate, DH has to be flexible in handling input data. For example, DH's payroll processing service allows clients many different ways to send in time card data. The largest clients arrange for customized computer-to-computer transfer of information. Some large clients use EDI transfers. Most medium and smaller-sized clients e-mail or fax the time card information, but a significant number mail paper lists that DH must scan into its systems. The health insurance claims handling operation is even more troublesome. In addition to having clients send information in various formats, the insurance companies demand that information be submitted in specific formats, each of which is different.
The complexity of DH's operations is growing as rapidly as the company adds new clients. Sandi Higbee, DH's director of Operations, asks for your help in outlining a Web-based customer relationship management (CRM) system that will help manage the account managers' ever-increasing levels of customer contact. Sandi reviewed the products offered by several leading CRM vendors and believes that one might work as a base product, but no matter which product is chosen, she believes that substantial customization will be necessary because DH's operations are so complex and different from most companies that sell products or simple services to customers. A good CRM system for DH would need to monitor all types of customer interactions with DH account managers, operations staff, systems staff, and professional staff. In addition, the system's Web interface would allow DH clients to access parts of the CRM system so they could track DH's follow-up on their work requests and pending inquiries.
DH evaluates all capital projects, including IT projects, using ROI. Sandi is worried about this because she believes that many of the benefits of this CRM project will be hard to quantify. On the other hand, the costs of the CRM project (software and hardware purchase and cost of consultants who will customize the CRM software to meet DH's specific needs) will be very easy to quantify and will be large. Sandi expects the vendor-consultant teams to submit bids of between $1 million and $2 million for this project.
Required:
1. Prepare an outline of the benefits that DH expect to obtain from this CRM project. Use categories to organize your list of benefits; for example, you might identify benefits that will accrue to DH's account managers, operations staff, IT staff, and professional staff. Since DH's clients will also benefit, you might be able to identify benefits that will accrue to DH's marketing and sales departments or to DH's new product development department. Be sure to include any long-term benefits that you think might occur after the CRM system has been in place for several years.
2. Estimate the dollar value of each benefit you identified in the first part of your answer.
3. Prepare a one-page memorandum to the DH Board of Directors in which you argue against using ROI as the primary method for evaluating this project. Keep in mind that these directors have very little time to review your arguments and are very much inclined to use ROI for all project evaluation.