The purpose of this article is to examine the relationship between systems integrator performance and client loyalty and to identify loyalty drivers.
The Selection Process Short-listing and selecting an ERP systems integrator can be a long, arduous process, and oftentimes the client keeps their fingers crossed that they've made the right decision.
The goal, of course, is to identify the best integrator for the project.
Because having ERP means upgrades, enhancements, etc.
, the ideal scenario is for a client to develop a long-term, mutually beneficial relationship with their systems integrator.
From the client perspective, they want their systems integrator to...
This research reveals that there is a strong relationship between how a systems integrator performs and client loyalty.
Client Loyalty Because of the size and complexity of ERP systems integration projects, the reasons for retaining a systems integrator for future projects (or not) can extend beyond effective delivery.
Therefore, this research includes two different measures of client loyalty - one at the company level and another at the individual level.
Future Consideration:The likelihood of the organization re-engaging with the provider...
Scale Will not shortlist (abandonment) Will shortlist (consideration) Will engage again (retention) Likelihood to Recommend:The likelihood of a key stakeholder to recommend the systems integrator to a colleague...
1 - 10 scale 10 - Extremely likely to recommend 1 - Not at all likely to recommend Using the classifications identified in Fred Reichheld's best selling book The Ultimate Question, clients can be classified into one of three groups: Promoters (score of 9 - 10), Passives (score of 7 - 8), and Detractors (scores of 1 - 6).
It is more difficult to gain the individual recommendation of a key stakeholder than it is to gain repeat systems integration business.
As mentioned earlier, there are several reasons why a company would re-engage their systems integrator that aren't performance related (more details to follow).
Having an individual put their own personal reputation on the line with a fellow colleague requires a higher level of performance.
Performance and Loyalty Go Hand in Hand It makes sense that a systems integrator's performance and client loyalty go hand in hand - but to what degree? One of the key measures of a systems integrator's performance is the Overall Performance Score - a metric that is used to describe the systems integrator's performance across the delivery lifecycle.
The metric is weighted in accordance with each client's delivery priorities.
Looking at the three classifications of an individual's loyalty by those with high and low Overall Performance Scores reveals that performance is a strong driver of individual loyalty.
The two groups are virtual mirror images of one-another.
Three-quarters of clients that provide a low performance score for their ERP systems integrator are considered Detractors - meaning they will not recommend their integrator and may actually bad mouth them when asked.
Conversely, two-thirds of individuals that report strong performance from their ERP systems integrator are considered Promoters - those highly likely to recommend their integrator to colleagues.
How much do Promoters influence their company's decision to retain their ERP systems integrator? The industry average for client retention across all ERP systems integrators is 55% (note the gray bar below).
The Passive group below is just about at the industry average while Detractors and Promoters have a notable impact their company's decision making.
When an ERP systems integrator performs well and creates a Promoter, the likelihood of that company retaining their systems integrator increases by nearly twenty percent.
When the integrator fails to perform at a high level it may create a Detractor, and the likelihood of that company retaining their integrator decreases by 12%.
The relationship between performance and client loyalty extends to the company level, though the relationship isn't as striking as it is at the individual level.
The chart below compares retention levels by those providing varying performance ratings.
Clearly systems integrator performance drives client loyalty, but loyalty levels remain fairly high despite some weak performance by systems integrators.
Why there is a stronger relationship between performance and loyalty at the individual level than at the company level? The simple answer is that there are many components to selection decisions on projects that have such a strong impact on a company's operations.
Study participants that will shortlist or retain their systems integrator were asked to provide the primary reason for doing so.
Separating the Detractors from the Promoters reveals compelling differences between the two groups.
Promoters heavily cite performance as a key driver of retention - three times the frequency of the Detractors.
Detractors are more likely to report their company has made too strong an investment in their integrator to take the risk of changing to another firm.
In summary, ERP systems integrators that perform well for their clients are more likely to retain their clients in the future.
Perhaps more importantly, they are more likely to develop individual advocates for their services that not only impact their own selection decisions but those of other firms as well.
Loyalty Drivers Neither the client nor the integrator wants an ERP systems integration project to go badly.
It is in everyone's best interest for the project to be an overwhelming success.
Unfortunately, the reality is that some projects do go south while others are successful.
So what is it about how an integrator delivers that breeds client loyalty? While that question is like asking 'how long is a piece of string?' the data provides insights that prove helpful in answering this question.
Clients need to see measurable benefit from their ERP project.
There is a strong relationship between goal attainment and individual loyalty.
The chart below shows three levels of goal attainment (falling short of expectations, meeting expectations, exceeding expectations) for each of the three classifications of individual loyalty.
Falling short of a client's goals is an easy way to create a Detractor.
Across all of the projects completed in 2006, 12% reported that their systems integrator fell short of their expectations for goal attainment.
This represents 94 projects in total.
Of those 94 projects, 85 are classified as Detractors.
Virtually none of the Promoters report that their ERP systems integrator fell short of their expectations for overall goal attainment, and five out six had their expectations exceeded.
When the integrator went above and beyond expectations they created a Promoter.
Meeting a client's expectations doesn't guarantee their loyalty.
When clients hire a systems integrator they expect that their goals will be accomplished.
Fifty-seven percent (57%) of Detractors report their goals were met.
Therefore, other factors must impact loyalty as well.
The data reveals that Promoters experienced four problems with a significantly lower frequently than everyone else.
The four problems can be separated into two groups: management of the project and management of client expectations.
Poorly managed projects have a strong impact on a project's success.
Project management includes not only managing processes and scope, but also how resources are deployed.
An ERP systems integrator's methodologies and their project leader's ability to effectively execute can play a decisive role in client loyalty.
Surprising the client with hidden costs or the inability to measure benefits has a notable impact on client loyalty.
Surprises like these can deteriorate the trust a client has in their integration partner and can negatively impact loyalty.
These finding suggest that when a systems integrator effectively manages the project and avoids surprises they are more likely to develop Promoters of their services.
Loyalty Leaders When looking at the 2006 data in aggregate there are 354 Oracle projects and 343 SAP systems integration projects.
Each one of these clients worked with one of the leading multinational or India-based systems integrators.
While the India-based systems integrators have been winning more business in North America in recent years (a subject for another paper), Performance Monitor has far more data on the multinational systems integrators than for the India-based firms.
Infosys is the only India-based ERP systems integrator for which we were able to identify and interview more than 35 ERP clients.
Therefore, the data below is based only on the multinational companies, with specific notations made for the India-based firms where appropriate.
The chart below summarizes the percentage of Promoters across the leading multinational integrators - Accenture, BearingPoint, Capgemini, CSC, Deloitte, IBM, Oracle Consulting, and SAP Consulting.
The average ERP systems integrator creates Promoters of approximately one-quarter of their clients.
The results are similar for the India-based integrators.
There is a wide range of results across the multinational integrators, however.
The range of results spans from 19% to 38%, meaning that one integrator creates Promoters at twice the rate of one of their competitors.
The range for Detractors runs from 23% to 45% within the multinational systems integrators, with the average being 34%.
The results among the India-based integrators are similar.
The table below highlights the ERP systems integrators that are most effective at creating Promoters and avoiding the creation of Detractors.
*Infosys' performance is line with these multinational leaders - though the database has fewer clients on which to base their results.
Conclusions ERP systems integrator performance drives client loyalty.
When an ERP systems integrator performs at a very high level they are more likely to develop Promoters of their services.
Promoters not only positively influence internal decision making, but often can serve as references for their peers.
The converse of this is true as well.
Poor performance by an integrator can create Detractors; people that will not recommend an integrator's services - or worse - people that will work to hire another firm in the future.
Everyone has the best intentions in mind at the outset of a systems integration project, but not every project will be successful from a delivery standpoint.
How an integrator delivers on a client's goals has a strong impact on their loyalty.
Detractors are created when the systems integrator falls short of their expectations for goals and Promoters are created when the systems integrator exceeds expectations.
Goal attainment isn't the only factor that impacts loyalty, however.
Projects that suffer from poor project management are less likely to create loyal clients.
Similarly, when a client is surprised with unexpected outcomes their trust, and loyalty, are likely to suffer.
For one reason or another, not every ERP systems integrator is effective at creating Promoters for their services.
The companies identified as having the highest percentage of their clients as Promoters are (in alphabetical order) BearingPoint, CSC, Infosys, and Oracle Consulting.
This article contains multiple charts and graphs, which can be viewed at: http://www.
performancemonitor.
net/mm.
php?content=september_2007.
About This Research This research was conducted by Performance Monitor, an independent research firm.
This research includes 1,864 SAP and Oracle systems integration projects by the leading multinational systems integrators, including Accenture, BearingPoint, Capgemini, CSC, Deloitte, IBM, Oracle Consulting, and SAP Consulting, as well as the leading India-based systems integrators, including Cognizant, Infosys, Satyam, Tata Consulting Services (TCS), and Wipro.
Visit Performance Monitor for more details.
The Selection Process Short-listing and selecting an ERP systems integrator can be a long, arduous process, and oftentimes the client keeps their fingers crossed that they've made the right decision.
The goal, of course, is to identify the best integrator for the project.
Because having ERP means upgrades, enhancements, etc.
, the ideal scenario is for a client to develop a long-term, mutually beneficial relationship with their systems integrator.
From the client perspective, they want their systems integrator to...
- Deliver what they say they can deliver
- Complete the delivery on time (or within a reasonable window)
- Bring measurable long-term benefits
- Keep coming back for future projects
- Be a reference when selling to other clients
This research reveals that there is a strong relationship between how a systems integrator performs and client loyalty.
Client Loyalty Because of the size and complexity of ERP systems integration projects, the reasons for retaining a systems integrator for future projects (or not) can extend beyond effective delivery.
Therefore, this research includes two different measures of client loyalty - one at the company level and another at the individual level.
Future Consideration:The likelihood of the organization re-engaging with the provider...
Scale Will not shortlist (abandonment) Will shortlist (consideration) Will engage again (retention) Likelihood to Recommend:The likelihood of a key stakeholder to recommend the systems integrator to a colleague...
1 - 10 scale 10 - Extremely likely to recommend 1 - Not at all likely to recommend Using the classifications identified in Fred Reichheld's best selling book The Ultimate Question, clients can be classified into one of three groups: Promoters (score of 9 - 10), Passives (score of 7 - 8), and Detractors (scores of 1 - 6).
It is more difficult to gain the individual recommendation of a key stakeholder than it is to gain repeat systems integration business.
As mentioned earlier, there are several reasons why a company would re-engage their systems integrator that aren't performance related (more details to follow).
Having an individual put their own personal reputation on the line with a fellow colleague requires a higher level of performance.
Performance and Loyalty Go Hand in Hand It makes sense that a systems integrator's performance and client loyalty go hand in hand - but to what degree? One of the key measures of a systems integrator's performance is the Overall Performance Score - a metric that is used to describe the systems integrator's performance across the delivery lifecycle.
The metric is weighted in accordance with each client's delivery priorities.
Looking at the three classifications of an individual's loyalty by those with high and low Overall Performance Scores reveals that performance is a strong driver of individual loyalty.
The two groups are virtual mirror images of one-another.
Three-quarters of clients that provide a low performance score for their ERP systems integrator are considered Detractors - meaning they will not recommend their integrator and may actually bad mouth them when asked.
Conversely, two-thirds of individuals that report strong performance from their ERP systems integrator are considered Promoters - those highly likely to recommend their integrator to colleagues.
How much do Promoters influence their company's decision to retain their ERP systems integrator? The industry average for client retention across all ERP systems integrators is 55% (note the gray bar below).
The Passive group below is just about at the industry average while Detractors and Promoters have a notable impact their company's decision making.
When an ERP systems integrator performs well and creates a Promoter, the likelihood of that company retaining their systems integrator increases by nearly twenty percent.
When the integrator fails to perform at a high level it may create a Detractor, and the likelihood of that company retaining their integrator decreases by 12%.
The relationship between performance and client loyalty extends to the company level, though the relationship isn't as striking as it is at the individual level.
The chart below compares retention levels by those providing varying performance ratings.
Clearly systems integrator performance drives client loyalty, but loyalty levels remain fairly high despite some weak performance by systems integrators.
Why there is a stronger relationship between performance and loyalty at the individual level than at the company level? The simple answer is that there are many components to selection decisions on projects that have such a strong impact on a company's operations.
Study participants that will shortlist or retain their systems integrator were asked to provide the primary reason for doing so.
Separating the Detractors from the Promoters reveals compelling differences between the two groups.
Promoters heavily cite performance as a key driver of retention - three times the frequency of the Detractors.
Detractors are more likely to report their company has made too strong an investment in their integrator to take the risk of changing to another firm.
In summary, ERP systems integrators that perform well for their clients are more likely to retain their clients in the future.
Perhaps more importantly, they are more likely to develop individual advocates for their services that not only impact their own selection decisions but those of other firms as well.
Loyalty Drivers Neither the client nor the integrator wants an ERP systems integration project to go badly.
It is in everyone's best interest for the project to be an overwhelming success.
Unfortunately, the reality is that some projects do go south while others are successful.
So what is it about how an integrator delivers that breeds client loyalty? While that question is like asking 'how long is a piece of string?' the data provides insights that prove helpful in answering this question.
Clients need to see measurable benefit from their ERP project.
There is a strong relationship between goal attainment and individual loyalty.
The chart below shows three levels of goal attainment (falling short of expectations, meeting expectations, exceeding expectations) for each of the three classifications of individual loyalty.
Falling short of a client's goals is an easy way to create a Detractor.
Across all of the projects completed in 2006, 12% reported that their systems integrator fell short of their expectations for goal attainment.
This represents 94 projects in total.
Of those 94 projects, 85 are classified as Detractors.
Virtually none of the Promoters report that their ERP systems integrator fell short of their expectations for overall goal attainment, and five out six had their expectations exceeded.
When the integrator went above and beyond expectations they created a Promoter.
Meeting a client's expectations doesn't guarantee their loyalty.
When clients hire a systems integrator they expect that their goals will be accomplished.
Fifty-seven percent (57%) of Detractors report their goals were met.
Therefore, other factors must impact loyalty as well.
The data reveals that Promoters experienced four problems with a significantly lower frequently than everyone else.
The four problems can be separated into two groups: management of the project and management of client expectations.
Poorly managed projects have a strong impact on a project's success.
Project management includes not only managing processes and scope, but also how resources are deployed.
An ERP systems integrator's methodologies and their project leader's ability to effectively execute can play a decisive role in client loyalty.
Surprising the client with hidden costs or the inability to measure benefits has a notable impact on client loyalty.
Surprises like these can deteriorate the trust a client has in their integration partner and can negatively impact loyalty.
These finding suggest that when a systems integrator effectively manages the project and avoids surprises they are more likely to develop Promoters of their services.
Loyalty Leaders When looking at the 2006 data in aggregate there are 354 Oracle projects and 343 SAP systems integration projects.
Each one of these clients worked with one of the leading multinational or India-based systems integrators.
While the India-based systems integrators have been winning more business in North America in recent years (a subject for another paper), Performance Monitor has far more data on the multinational systems integrators than for the India-based firms.
Infosys is the only India-based ERP systems integrator for which we were able to identify and interview more than 35 ERP clients.
Therefore, the data below is based only on the multinational companies, with specific notations made for the India-based firms where appropriate.
The chart below summarizes the percentage of Promoters across the leading multinational integrators - Accenture, BearingPoint, Capgemini, CSC, Deloitte, IBM, Oracle Consulting, and SAP Consulting.
The average ERP systems integrator creates Promoters of approximately one-quarter of their clients.
The results are similar for the India-based integrators.
There is a wide range of results across the multinational integrators, however.
The range of results spans from 19% to 38%, meaning that one integrator creates Promoters at twice the rate of one of their competitors.
The range for Detractors runs from 23% to 45% within the multinational systems integrators, with the average being 34%.
The results among the India-based integrators are similar.
The table below highlights the ERP systems integrators that are most effective at creating Promoters and avoiding the creation of Detractors.
*Infosys' performance is line with these multinational leaders - though the database has fewer clients on which to base their results.
Conclusions ERP systems integrator performance drives client loyalty.
When an ERP systems integrator performs at a very high level they are more likely to develop Promoters of their services.
Promoters not only positively influence internal decision making, but often can serve as references for their peers.
The converse of this is true as well.
Poor performance by an integrator can create Detractors; people that will not recommend an integrator's services - or worse - people that will work to hire another firm in the future.
Everyone has the best intentions in mind at the outset of a systems integration project, but not every project will be successful from a delivery standpoint.
How an integrator delivers on a client's goals has a strong impact on their loyalty.
Detractors are created when the systems integrator falls short of their expectations for goals and Promoters are created when the systems integrator exceeds expectations.
Goal attainment isn't the only factor that impacts loyalty, however.
Projects that suffer from poor project management are less likely to create loyal clients.
Similarly, when a client is surprised with unexpected outcomes their trust, and loyalty, are likely to suffer.
For one reason or another, not every ERP systems integrator is effective at creating Promoters for their services.
The companies identified as having the highest percentage of their clients as Promoters are (in alphabetical order) BearingPoint, CSC, Infosys, and Oracle Consulting.
This article contains multiple charts and graphs, which can be viewed at: http://www.
performancemonitor.
net/mm.
php?content=september_2007.
About This Research This research was conducted by Performance Monitor, an independent research firm.
This research includes 1,864 SAP and Oracle systems integration projects by the leading multinational systems integrators, including Accenture, BearingPoint, Capgemini, CSC, Deloitte, IBM, Oracle Consulting, and SAP Consulting, as well as the leading India-based systems integrators, including Cognizant, Infosys, Satyam, Tata Consulting Services (TCS), and Wipro.
Visit Performance Monitor for more details.
SHARE
