As a rule, CEOs don’t worry much about business software initiatives. But customer-relationship-management (CRM) software—the systems that allow companies to plan and analyze marketing campaigns, to identify sales leads, and to manage their customer contacts and call centers—may be a different story. Good CRM software can influence how much customers spend and how loyal they remain. Some companies using CRM programs report double-digit gains in revenues, customer satisfaction, and employee productivity, along with dramatic savings in customer acquisition costs. Across the United States and Europe, nearly 40 percent of the companies in high technology, aerospace, retailing, and utilities have invested in CRM systems. Two-thirds of all US telecom operators and half or more of all US financial-services, pharmaceutical, and transportation companies are either implementing or already operating them.¹

CRM has become a senior-management issue because it consumes staggering amounts of money and, notwithstanding the success stories, has mostly proved a disappointment. Companies around the world spend $3.5 billion a year on CRM software,² and that is only a fraction of the total expense; implementation, training, and integration outlays can be three to five times higher. All in all, a highly complex CRM installation can cost more than...