Proceed With Caution – Fixed Fee ERP Implementations Can Be Deceptively Expensive

In 25 years as a Microsoft Dynamics ERP and CRM implementation partner, we often find ourselves suggesting that clients follow the adage, “Be careful what you ask for.”  Especially when it comes to fixed fee implementations.   It’s understandable that companies want to control costs and avert what’s commonly referred to as “scope creep.”    But at the TM Group, we have found that fixed price implementations are extremely detrimental to clients.  Typically, the ERP vendor inflates the price of the implementation to support any number of issues arising that could cause them to miss their services revenue goal.  In addition, a fixed price guarantees the vendor a certain amount of money, even if the effort they expend is less than the price, and this causes the client to spend more than they should. 

 MEASURE TWICE – CUT ONCE

A much better approach to minimize risk and properly budget for an implementation, is to perform proper due diligence up front.  At the TM Group, our estimates are within 5-10% of actual usage when our consultants have the opportunity to work closely with the client to carefully scope the project from the very beginning.  We have not undertaken a fixed price implementation in at least 10 years, especially where CRM or ERP are concerned.

Instead, we recommend an initial discovery phase or Business Process Review at a fixed cost, to accurately document the desired solution for a new ERP or CRM system.  In our experience, this initial phase is of paramount importance to the success of a project.  Through the process of carefully developing a scope document up front (a Statement of Work); we also reduce total implementation hours required.  The investment for the client is money well spent and consists of two or more senior consultants on-site for several days to a week interviewing management and subject matter experts from each of the client’s department.  The information gathered is documented and analyzed for gaps.  Based on these findings, we are able to accurately estimate the effort required, and provide a detailed Statement of Work for the ERP and/or CRM project.  If desired, a Not to Exceed Quote can also be provided which limits the clients exposure to project overruns and yet ensures they only pay for the services they utilize, a much better deal for the client than a Fixed Fee Quote.

The TM Group, a Michigan Microsoft Dynamics Partner.

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