Value Assessment

IVK: Customer Relationship Management

TA4: Value Assessment

Contributors:

Jeremiah Clinchoc, Scott Sieber, Evan Fraundorfer, Jonathan Hanna, William D’Andrea

When analyzing whether implementing a new system is a good investment, it is important to analyze the added value that the system will give to your organization.  This value can come in the form of tangible or intangible.  Tangible benefits are those measured in monetary value and are quantitative in nature.  These benefits will vary from organization to organization.  Some of the tangible benefits of IVK implementing the Salesforce CRM software are:

Tangible Benefits	Estimated Values
Salary Savings	$200,000
Payback Period	2.62 years
Profit	$202,964
Internal Rate of Return	26.2%
Profitability Index	1.48

• Salary Savings - $200,000 per year for five employees that earn $40,000 per year.
• Payback Period - 2.62 years. IVK would benefit from a project that has a payback period under three years.  Therefore, it seems feasible for the company to move forward with the project
• Profit - IVK is estimated to see an increase in profit of $202,964 at the end of year five if they were to implement the software rather than not.
• Internal Rate of Return - 26.2%. With a corporate hurdle rate of 9%, the IRR seems to favor the investment.
• Profitability index - When using the present value of cash flow of 9% and the initial investment, the profitability index would be 1.48. This calculation shows IVK the overall future value of what every dollar IVK invests in this project will be worth in the future.  This means that at the end of the project,  for every dollar IVK spends today, each dollar would worth $1.48.

Based off of the numbers calculated from the ROI, it is clear that IVK will benefit from a new CRM leased through Salesforce. We determined that it would take IVK less than three years to earn back their investment and after five years, it would produce over $200,000 in profit. This is due to Salesforce increasing marketing streams, increasing customer relations, and giving  IVK a more agile system to manage its financial customers (Jashnani, 2017). Therefore, the ROI supports that the investment for a CRM is financially sustainable for the company and will increase revenue overall.

Intangible benefits are those that cannot be measured in monetary terms but have a significant business impact and are qualitative in nature. These benefits can be similar across organizations. Some of the intangible benefits of IVK implementing the Salesforce CRM software are:

• Providing services and products that are exactly what your customers want
• Offering better customer service
• Cross-selling products more effectively
• Helping sales staff close deals faster
• Retaining existing customers and discovering new ones (Wailgum, 2017)

• Customer service agents can make more calls with transparent and reliable data from the CRM
• Identify what marketing campaigns and events work and ones that don’t work
• Business decision making improvement - targeting customer segments, price setting, and manufacturing/development changes
• Users can put more focus on the data rather than the entity that manages the data (Ledingham & Rigby, 2004)

Ledingham & Rigby (2004)

The above picture shows the intangible benefit of a CRM allowing marketing, sales, and support to combine their resources into one location and maximize the benefits that the customer gains.  Salesforce is one of the largest CRM systems on the market and carries a number of general benefits that can help any organization.  These benefits are detailed at: https://www.salesforce.com/hub/crm/benefits-of-crm/

The tangible and intangible benefits that are gained by implementing the software reinforce the notion that IVK should move forward with this investment.  According to Austin, the grand IT budget is nearly 18.5 million dollars (p. 69). The current needs for an upgraded infrastructure, that is needed to run Salesforce software, is in the budget under capital budget purchases. The major cost associated with the CRM upgrade is leasing the system and will be added to the budget. However, the overall cost of IT can be decreased due to this new agile software. Avedillo, Begonha, and Peyracchia (2015), discuss how making a more agile system will increase savings of 15-20 percent on IT and improves time to market information by 40-50 percent. This will improve IVK’s success in a saturated market of financial institutions, increase IT savings, and increase marketing. Finally, it shows that if IVK invests in a CRM it will improve their company as a whole and is worth the total investment of $420,000 initially and $270,000 annually thereafter for licenses. Overall the investment will allow IVK to be the emerging leader they once were before their IT infrastructure fell behind the rest of the competition.

References

Austin, R., Nolan, R., & O’Donnell, S. (2016). Chapter 1: The New CIO. In The Adventures of an IT Leader (pp. 7-24). Boston, MA: Harvard Business Review Press.

Avedillo, J., G., Begonha, G., & Peyracchia, A. (2015, August). Two ways to modernize IT systems for the digital era. Retrieved from https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/two-ways-to-modernize-it-systems-for-the-digital-era

Jashnani, G. (2017). How does salesforce software assist modern businesses. Retrieved from https://financesonline.com/salesforce-software-assist-modern-businesses/

Ledingham, D. & Rigby, D., K. (2004, November). CRM done right. Retrieved from https://hbr.org/2004/11/crm-done-right

The 6 Biggest Benefits of CRM. (n.d.). Retrieved October 23, 2017, from https://www.salesforce.com/hub/crm/benefits-of-crm/

Wailgum, T. (2017, July 14).  What is a CRM system: Your guide to customer relationship management. Retrieved from https://www.cio.com/article/2439505/customer-relationship-management/customer-relationship-management-crm-definition-and-solutions.html