Cost of ownership model for a CRM system

Authors:
So Young Sohn;Ji Soo Lee
Affiliations:
Department of Computer Science and Industrial Systems Engineering, Yonsei University, Seoul, Republic of Korea;Department of Computer Science and Industrial Systems Engineering, Yonsei University, Seoul, Republic of Korea
Venue:
Science of Computer Programming
Year:
2006

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Abstract

A procurement decision about a CRM system is heavily influenced by the initial purchase cost rather than the effect of the operating cost and utilization over the lifetime. In this paper, we propose a Cost of Ownership (COO) model for a CRM system which takes into account not only the initial cost, but also the operation cost, and the opportunity cost due to customer mismanagement over a life-cycle. In particular, the opportunity cost due to customer mismanagement, which is related to the performance of the CRM system, is used as a key cost factor to reflect the financial impact of the system. We employ an engineering economy model to compare various systems with different life spans. A numerical example is given for comparison of the COO of alternative systems along with sensitivity analysis for an optimal procurement decision.