Andy Laderman
3760 Convoy Street, Suite 332
San Diego, California 92111
Phone 619-560-6999
Fax: 619-560-4629
E-mail: aladerman@xdconsulting.com
When implementing a major ERP system an organization will typically spend considerably more money on buying services from an ERP implementation vendor than on buying the ERP system. Choosing the right implementation partner is one of the most critical factors in determining the success of an ERP project. However, most organizations will spend far more time selecting an ERP package than selecting their implementation partner.
Given this background, this paper will shed some light on the following issues:
In the context of an ERP project, an Implementation Partner is a professional service organization that provides assistance to enterprises that are implementing ERP systems. They are customarily paid on a fee-for-service basis at time and materials rates or at a fixed fee for a fixed scope of services.
In this context, the word partner is somewhat of a euphemism. They are no more of a partner with their clients than any other services supplier (e.g., a CPA firm or attorney). To successfully hire and negotiate with an . implementation partner,. you must treat them as a vendor. The essential relationship you have with them is that they provide you services and you pay them commercial market rates for those services. Do not let their sales pitch mislead you into thinking you are entering into any other type of business relationship.
Implementation partners can provide a variety of services related to an ERP system implementation. They can take responsibility for performing any task that needs to be completed as part of an implementation. Typical tasks include:
A range of organizations, including software vendors, consultants, hardware vendors, system integrators and outsourcers currently provides implementation services. The size of the Tier 1 ERP implementation services market is even larger than the ERP software license market. Companies that purchase Tier 1 ERP packages (Baan, Oracle, Peoplesoft and SAP) will spend up to $6 in implementation costs for every dollar they spend on ERP license fees. The largest ERP implementation services providers include:
ERP implementation services providers typically distinguish themselves by focusing on specific vendor products such as SAP, Peoplesoft, Oracle and Baan. They also differentiate themselves by specific lifecycle phase expertise (implementation vs. maintenance); business functionality (manufacturing vs. finance) and vertical industry knowledge (healthcare vs. electronics).
The more time you have available for an implementation and the higher the competence level, prior ERP experience and availability of your internal staff, the less you need the services of an ERP implementation vendor. Unfortunately, the reverse is true.
Once an ERP project is defined, many enterprises realize they cannot effectively implement without a significant augmentation of resources. ERP project failures have been too common and business fatalities have occurred. ERP implementation challenges include dealing with highly complex software that requires extensive data conversion and integration, with massive changes to the underlying information technology and business processes. Many organizations hire an Implementation Partner with the hope that having resources on the team who . have been through it before. will reduce the learning curve and, perhaps more significantly, lower the risk of failure. At this point, the enterprise decides which roles and tasks are to be performed by in-house staff versus contracted resources.
The simple answer to this is: any responsibilities your organization does not have the capabilities or time to perform in-house. However, there are certain critical responsibilities than should not be outsourced. These are discussed in the next section of this paper.
Responsibilities that can be safely and effectively turned over to an outside party, include:
The Implementation Partner needs to be given enough responsibility for each assigned task so they can be held accountable from both a project management and a contractual viewpoint. However, your own staff must have sufficient involvement in each and every task to enable your organization to eventually become self-sufficient. (It is important to establish goals for this, which will vary by project. In a multi-phase implementation, you may target self-sufficiency to occur in Phase X. In a big bang implementation you may target self-sufficiency after Y days of live operation, etc.)
The biggest mistake organizations make in implementing an ERP system is to abdicate their project management responsibility to the selected Implementation Partner.
If you are unable to provide a full-time project manager from your in-house staff, you should not consider implementing a Tier 1 ERP package.
Other tasks that should not be given to an Implementation Partner include deciding business policies and being the project. s spokesperson to the Project Sponsor or Steering Committee.
In the majority of ERP implementation disasters we have seen, the moment failure changes from being a possibility to a certainty is when the project stops being your project and becomes the consultants project.
Now that we have defined the role of an Implementation Partner, including the services they provide and under what circumstances they can be useful to an organization, it is important to consider how to select the optimum Implementation Partner. There are three aspects to the selection:
Each of these aspects is addressed below.
The Implementation Partner selection procedure should begin simultaneously with the ERP system selection process. This is because information you discover during your initial evaluation of Implementation Partners may influence your choice of ERP systems. For example, if you find a great scarcity and high cost of Implementation Partners for a particular ERP system, that should certainly be factored into your choice of systems.
Another key timing issue is not to sign a contract for your chosen ERP system until you are also ready to contract with your Implementation Partner. This strategy gives you greatly increased negotiating power for both contracts and will help avoid the costly mistake of selecting the best ERP system for your organization but not being able to find an Implementation Partner that can work within your time and budget constraints.
A very structured selection process should be used. Such an approach fosters objectivity above subjectivity. Major steps in the workplan are:
There are a number of potential criteria that can be used in evaluating the ability of each of the potential Implementation Partners to meet your needs. The purpose of the criteria is to subjectively assess the likelihood that a vendor can help you achieve a successful, timely implementation within budget. You need to assign relative weights to the criteria based upon your priorities. Typical criteria include:
Firm Experience. the experience the Implementation Partner has with the specific ERP system and version you are considering, including their experience with your industry, geographical locations and size.
Project Team Experience. the experience the individual proposed team members have with the specific ERP system and version you are considering, their experience with your industry, geographical locations and size.
Workplan. the overall project approach being proposed, the team organization, number of FTEs, timing, scope, and billing method.
References. the similarity of the references with your organization and their satisfaction with the various aspects of the work performed by the bidder.
Cost. the proposed fees and hourly billing rates, whether time and materials or fixed price, and the circumstances under which the fees can be increased from the proposal.
Once you have followed the methodology described above and selected the optimum Implementation Partner, you must then cement all of your mutual understandings, agreements and expectations into a contract. This is one area where external help is essential unless your organization is large enough to have an in-house cadre of staff experienced in developing ERP implementation services contracts. Whatever was stated or promised during the sales cycle becomes totally irrelevant once a contract is signed. All that matters is what is documented in the contractual agreement. You must constantly be aware of this during contract negotiations.
Specific areas that must be addressed by the contract include:
A typical Implementation Partner contract will contain a large number of specific terms and conditions and may take several weeks to negotiate. If the contract is finalized quickly, it is probably heavily weighed in favor of the Implementation Partner.
To successfully select and utilize an Implementation Partner: