Vinnie is fond of asking why ERP vendors, and especially implementers, don’t lower their pricing. Take a recent post, SAP’s Egosystem (nice play on words), where he asked
Why is systems integration still so expensive after 35,000 SAP customers and countless upgrades?
Maybe SAP’s value is not based on price, but instead on customer intimacy or product excellence. Here I am referring to the three value disciplines advocated by Treacy and Wiersema, The Discipline of Market Leaders.
If a company wants to get ERP at a low price, they should be considering some of the open source offerings, or the low-end accounting/ERP packages. However, if a CEO wants an ERP system that he knows will work, and can work for his type of company, perhaps he should consider those vendors for whom price is not the driving value.
Having worked on a number of ERP projects, and seeing how they so often seem to run over time and over budget, I was heartened by some news:
- - the late delivery of the Boeing 787 Dreamliner
- - the problems one of our customers has in delivering their designs and builds on time
- - stories from engineer friends of mine who are struggling to keep projects on track and on time
The common thread to me is that these are all projects involving the design and implementation of complex systems, much like ERP projects.
The more I deal with manufacturing companies making complex products, the more I begin to think that sponsors and managers have unrealistic expectations about projects before they start. There also seems to be a general human problem that prevents people from grasping just how complex a system will become, especially where there are multiple points of integration.
A couple of bloggers experienced with ERP projects are making the claim that ERP implementations could be done as a fixed price product:
I’m sorry guys but I must disagree.
The example used is that of the US hospital group that has ‘productised’ (awful word, by the way) some of its heart surgery procedures. The extrapolation being that if it can be done for heart surgery, why not ERP implementations.
While they are both complex procedures, one of them (heart surgery) is governed by physical rules – physics and chemistry – but the other is subject to the far more complex and vague rules of people and social interaction. It’s the same reason why sociology and economics aren’t considered sciences – because when you deal with interactions of people, things are far harder to understand and predict.
When I was one of Microsoft’s Dynamics NAV implementers, we tried very hard to push fixed price implementations with a packaged solution set called RIM (Rapid Implementation Methodology) because it was supposed to appeal to smaller companies. But once you got into a project you uncovered complexities that the customer didn’t even realise where there, and so variation orders had to be added to the fixed price. Perhaps for a basic financial system a fixed price project might suffice, but not for other areas of business; for manufacturing implementations specifically, Microsoft recommended that a fixed price project should never be quoted.
SAP’s Business One pushes fixed price implementations, but we heard from companies who have gone that route that they get a basic system which then costs them real money if they want the system to run like they need it.
The day I hear a lawyer offer fixed price court proceedings, or an accountant offer fixed price auditing, then I will consider fixed price ERP implementations.