Over the last several months, many ERP software vendors have marketed their fixed-bid implementation services as a way to help their customers manage their enterprise software costs and risk. We have seen vendors such as Epicor and IFS offer fixed-cost service contracts in their bids to be competitive in the marketplace. Even if they don’t offer a fixed-bid solution, most vendors will offer implementation services to augment their software licenses.
However, what do these vendor implementation contracts really get you? That’s where it gets a little tricky.
First of all, it is helpful to understand what is meant by “implementation.” Installing and configuring software is very different than fully implementing ERP software in a way that is going to meet your business needs. In order to manage their own costs and risk, software vendors will typically include technical implementation basics in their scopes of work but often exclude other key activities that will result in problems if not addressed.
Below are ten key gaps we watch for when helping clients negotiate their ERP software vendor implementation contracts:
- Project management. Software vendors and VARs will typically provide a technical lead or project manager, but it is the client’s responsibility to manage the overall project. Activities such as budget and scope management, risk mitigation, and vendor oversight are not generally handled by the vendor.
- Functional scope. Most fixed-bid contracts are very clear about what is and, more importantly, what is not in scope. It is important to have a clear understanding of which of your business requirements are going to be addressed in their scope as opposed to modules that have been excluded from scope. In addition, vendors often include a clause that states the customer will not make changes to a pre-configured solution, which may limit your flexibility to change the software as needed.
- Business process and workflow definition. Software vendors will generally configure and, if necessary, customize the software as required. However, it is up to the customer to define the business processes and workflows so the vendor’s technical resources can configure and customize the software accordingly. Although not included in a vendor’s scope, this can be a complex and time-consuming internal process if not managed appropriately.
- Customization. Most fixed-bid contracts assume that the customer will use the software 100% as-is. Customization is generally not included in scope and will result in additional costs.
- Data migration. It is typically the customer’s responsibility to clean up data, define the mapping from the old to the new system, and migrate the data. We find this to be an area where clients create delays by delaying data migration until late in the project.
- Training. Vendor contracts generally call for the vendor to train the customer’s trainers using their boilerplate training materials. it is the customer’s responsibility to tailor training to meet the company’s specific needs, workflows, and roles and responsibilities. It is also usually the customer’s responsibility to train end-users and employees on the new system.
- Organizational change management and communications. This area is omitted from vendor contracts an overwhelming majority of the time. In order for an ERP implementation to be successful, key organizational change activities such as departmental process change discussions, process gap analysis, organizational and job design, and security/profile definition all need to be addressed.
- Forms and reports. The vendor will generally provide a wide array of forms and reports that can be used out-of-the-box. However, it is up to the customer to define which of them will be used and modify them if needed to meet their business intelligence needs.
- Internal controls and Sarbanes-Oxley (SOX) compliance. Vendors generally do not address any required internal controls that may be unique to your business. Although some ERP solutions protectively build SOX and regulatory controls into their software, it is up to your internal audit team to ensure that the software will address internal controls as designed.
- ERP benefits realization. Go-live is not the finish line for a successful ERP implementation. It is often the adjustments and improvements made after go-live that ultimately determine how beneficial the enterprise software will be to your organization. Post go-live audits, process improvements, refresher training, and configuration changes are important steps to optimize your return on investment.
Although the above activities are critical to ERP success, they are generally not included in an enterprise software vendor’s implementation scope. This is not necessarily a bad thing. However, it is important to factor these activities into your overall implementation duration and budget to ensure that your ERP project is successful.