Failed CRM Implementation: Can You Claim Against Your Software Supplier?

A failed CRM implementation can create much wider problems than an inconvenient piece of software. CRM stands for customer relationship management. A CRM system is often intended to sit at the centre of a business’s sales, customer service, marketing and reporting process. If the implementation does not work properly, the business may face unreliable customer data and poor reporting. Staff may have to rely on spreadsheets or manual processes.

For small and medium-sized enterprises, startups and owner-managed businesses, the commercial impact can be significant. The business may already have paid substantial implementation fees, committed staff time to the project and moved away from its previous systems. The main focus is usually whether the problems amount to ordinary implementation difficulties or whether the CRM supplier has failed to deliver what it agreed to provide.

This guide looks specifically at failed CRM implementations, when a claim against the software supplier may arise and the practical issues businesses should consider before deciding what to do next.

What does a failed CRM implementation usually look like?

The system does not support the business process the customer bought it for. A CRM may technically be live but still fail to meet the purpose for which it was purchased. For example, customer service workflows may not function properly or management reports may contain unreliable information. It is important to work out whether the CRM performs the functions that the supplier agreed it would provide.

The project never reaches a stable go-live. Some CRM implementations fail more obviously. There may be repeated missed go-live dates, unresolved defects or continuous requests for further configuration before the system can be used properly.

Where the supplier repeatedly pushes back delivery without a credible recovery plan, management may need to consider whether the project remains realistically capable of being completed.

Can you claim if your CRM does not do what you were promised?

Potentially yes, a claim may arise where the supplier has failed to provide functionality or implementation services required by the contract and that failure has caused the business loss.

The starting point is to identify what the contract required the supplier to deliver. The signed contract, statements of work and any documents incorporated into them may assist with ascertaining the supplier’s obligations. CRM projects also often have a detailed sales and procurement history, including proposals, demonstrations, requirements documents and discussions about how the software would support the customer’s existing process. Those materials are not automatically part of the contract, but they may still be legally relevant, as explained below. Where possible, the business should compare what the parties agreed with what the supplier actually delivered.

Does the law imply any obligations if the contract is silent?

Where a supplier provides implementation, configuration or similar services in the course of business, section 13 of the Supply of Goods and Services Act 1982 implies a term that those services will be carried out with reasonable care and skill. The contract may modify or exclude that term, subject to the Unfair Contract Terms Act 1977 (UCTA).

This is not the same as a guarantee that the CRM will be fit for the customer’s purpose. A fitness-for-purpose obligation will usually need to be an express term of the contract, although in some circumstances it may be implied where the customer made its particular purpose known and reasonably relied on the supplier’s skill. That is why the contract’s description of the functionality, specification and acceptance criteria is so important.

What if the supplier demonstrated functionality before you signed the contract?

Sales demonstrations can become important evidence. CRM platforms are often sold through demonstrations based on the prospective customer’s business requirements. A supplier may say that a particular process can be automated, that the CRM can integrate with existing software or that a certain reporting function is available. If the business relied on those statements when deciding to purchase the system, they may become relevant when the delivered CRM cannot perform as represented.

Legally, a statement made before the contract was signed may give rise to a claim for misrepresentation under the Misrepresentation Act 1967 if it was a false statement of fact (rather than an opinion or general sales enthusiasm) that induced the customer to enter the contract. In some cases, a statement may amount to a collateral warranty.

However, many supplier contracts contain entire agreement or non-reliance clauses, which may limit or exclude those claims. Whether such a clause is effective can depend on its wording and on whether it satisfies the statutory reasonableness test. The legal position will therefore depend on exactly what the supplier said and what the final contract provides.

What if the CRM does not integrate with your other systems?

A CRM may need to exchange information with accounting software, marketing platforms or other operational software. If those integrations do not work, the CRM may be technically operational but commercially ineffective. The supplier may argue that the problem lies with a third-party platform rather than its own implementation. The business should therefore establish who contractually assumed responsibility for the integration and whether there were any stated dependencies on third parties.

Several suppliers may work in the wider technology environment, but the focus is usually on which party agreed to deliver the relevant outcome.

If the CRM supplier expressly took responsibility for implementing the integration, it may not be enough to say that another system caused the problem.

Who should the claim be against?

CRM projects often involve more than one contract. The software licence or subscription may be with the CRM vendor. A separate partner or reseller may provide implementation, configuration and training under a different contract.

A claim will generally lie against the party that owed the relevant obligation to the business under its own contract. It is therefore important to identify which contract covers each failure. Liability caps, notice requirements and termination rights may differ between the contracts.

What if the staff cannot use the CRM properly?

Poor adoption is not always the supplier’s fault. The CRM can fail commercially even where the software itself works. The supplier may argue that employees were not properly trained, that the customer failed to provide sufficient resources or that staff resisted new processes. These claims can be legitimate.

However, the business should still check training and implementation obligations. If the supplier agreed to provide training, configuration, workflow design or change-management support, the business should consider those obligations.

The business should therefore assess the project by distinguishing genuine customer adoption problems from failures in implementation or configuration.

When should you consider terminating the CRM contract?

Termination may be appropriate where the supplier has committed a serious breach and cannot or will not put matters right. However, the contract may require formal notice and a period in which the supplier is allowed to remedy the breach.

In sufficiently serious cases, there may also be a common-law right to accept a repudiatory breach and treat the contract as ended for the future. Broadly, this requires a breach that deprives the business of substantially the whole benefit of the contract, or conduct showing that the supplier does not intend to perform it.

Terminating without a valid right can itself be a repudiatory breach, which could expose the business to a counterclaim. Subscription or minimum-term fees may also remain payable unless the contract or the law provides otherwise.

The business should also consider what will happen to its customer data, access to the platform and any integrations that are still functioning.

A business should avoid ending the contract before it understands how it will export customer records and other important information.

If the CRM holds personal data, the business will usually remain the data controller under the UK GDPR. It should check what the supplier, as processor, must do when the contract ends, including returning or deleting the data and keeping it secure during any transition.

Can you recover money from the CRM supplier after a failed CRM implementation?

Potentially, where the supplier’s breach has caused financial loss.

However, the amount the business can actually recover will depend on the contract, causation, remoteness, mitigation, the nature of the losses and any contractual liability cap or exclusion clauses.

Liability caps and exclusions are common in supplier terms. Depending on the contract and how it was agreed, they may be subject to UCTA, including a statutory reasonableness test for certain exclusions of liability for negligence (which includes a failure to exercise reasonable care and skill in performing a contract) and for terms in written standard terms of business.

For a detailed explanation of the types of losses that may be recoverable, see our separate guide to Failed IT Project Claims: What Losses Can Your Business Recover?

What evidence should you keep after a failed CRM implementation?

Keep the sales and procurement records

These may show why the CRM was selected and what the supplier said it could deliver. Although pre-contract statements are not necessarily part of the contract, they may support a misrepresentation or collateral warranty claim and may show what the supplier knew about the intended use.

Important documents can include proposals, demonstrations, tender responses, requirements documents and correspondence with the sales team.

Record the business impact

If staff are spending additional time correcting data, manually processing leads or recreating reports, keep a record. Staff time is only likely to be recoverable where the business can show that employees were diverted from their normal work, so contemporaneous records are important.

Similarly, preserve invoices from consultants or other suppliers brought in to investigate or fix the implementation.

Can a dispute over a failed CRM implementation be resolved without going to court?

Yes.

A commercially negotiated solution may be preferable where there is still value in the project or where the business needs the supplier’s cooperation to exit safely.

The parties may agree that the supplier will remedy defined issues, reduce outstanding fees, provide additional implementation support or assist with transition to another platform.

Mediation can also be useful where discussions have stalled. Courts expect parties to consider alternative dispute resolution and can order it. The court may also take an unreasonable refusal to engage into account when deciding costs.

Negotiating or mediating can be particularly valuable because the solution may need to deal with practical matters such as data migration, ongoing access and technical handover as well as financial compensation.

Is there a time limit for bringing a claim?

For many claims founded on a simple contract, section 5 of the Limitation Act 1980 sets a six-year limitation period from when the cause of action accrues. Where the relevant obligation is contained in a deed, the period may be 12 years. Claims for misrepresentation or negligence are also generally subject to a six-year period, but the starting point may differ.

The contract may also contain much shorter notice or time-bar provisions, for example for notifying defects or disputing invoices. These should be checked early, before negotiations break down.

How the Jonathan Lea Network can help with a failed CRM implementation

Assessing what the supplier agreed to deliver

We can review the contract, statement of work, project documentation and relevant sales materials to identify what the supplier was required to provide and where the implementation may have fallen short.

Resolving scope and payment disputes

Where the parties disagree about missing functionality, change requests or additional charges, we can help assess the contractual position and negotiate with the supplier.

Managing remediation or exit

If it is still possible to recover the CRM project, we can assist with formal notices and revised delivery arrangements. Where the relationship has broken down, we can advise on termination, data access, and transition arrangements.

Pursuing or resolving financial claims

Where the failed implementation has caused significant loss, we can assist with negotiation, identifying and appointing an appropriate mediator, and formal proceedings where necessary.

Frequently asked questions: failed CRM implementation

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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.