True Story: When Fixed Price Dynamics GP ERP Software Implementations Go Bad

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Everyone has heard horror stories about project budgets for ERP software implementations spiraling out of control. So many companies feel that the best way to avoid this nightmare is to insist on a “fixed bid” or “fixed price” cost proposal for implementing ERP software such as Microsoft Dynamics GP.  In theory, the idea is good. Get a detailed list of what will be done with a specific price tag. At the end, you will get everything on the list and know exactly what you will pay.  Unfortunately, it does not always work that way.   

This is a true story of a professional services company as told by the Controller:

“We purchased Dynamics GP from a Dynamics VAR in (another state).  The driving factors were simplicity and speed.  The VAR offered a fixed price implementation in a short time frame.  But unfortunately, the implementation did not go as smoothly as planned”

“I believe the VAR gave us a fixed price proposal without fully understanding the complexity and scope of our project, so there was a lot of cost overrun. Once we went over the fixed amount I think they might have been directed to just not do anything else for us unless they absolutely had to.  It was so bad that it got to the point where they refused to answer any more questions or fix any issues.” 

“When we went live there were so many things in the system that just didn't work.  But they insisted it was user error, not the system. It was very awkward.  They eventually sent someone down to my office to actually sit and watch me work; they realized we knew what we were doing, and they had to admit it was a problem with the system setup that they needed to fix under the terms of the original proposal. They were not happy.”

And so the relationship really just kind of soured.  We decided that it would be better to find a new Dynamics partner.”

It‘s understandable that many buyers want the perceived “guarantee” of fixed fee pricing, especially in a tough economy. You want to know exactly what you will get and what you will pay for it. But fixed fee pricing is a misnomer. You are never guaranteed you will pay one price regardless of what happens during the implementation. You are only promised that the partner will do what THEY feel was included in the original proposal, which can be very different than what you thought was included. But as changes come up, and they always do, those changes will be considered extra work and you will pay hourly anyway, just as you would with a time and materials proposal. These changes are called “out of scope”.  In a former post, Why do so many ERP projects go over budget?, we explain 3 very legitimate reasons why a project goes “out of scope”. But it is still a very hard pill to swallow.

So if you don’t have a fixed bid ERP proposal, how can you control costs? One important step is to be an educated buyer.  I recommend that you download this white paper: Beyond Software:  How to Estimate the Cost of ERP Implementation Services. This white paper outlines 1) The 4 cost involved in ERP software projects 2) A definition of what is included in “implementation services” 3) Guidelines for calculating a ballpark cost 4) Eight factors that can increase your total price and 5) A comparison of Time & Materials versus Fixed Fee pricing model.

At CAL Business Solutions we prefer to give “time and materials” quotes for all our Microsoft Dynamics GP ERP software implementation projects.  We do a thorough discovery of your needs and present a detailed proposal based on this information and our experience with hundreds of similar projects. Our proposal includes a detailed explanation of what you will receive, and the estimated number of hours to complete the project. Any additional costs would be communicated to you in advance for approval.

While you are not guaranteed a certain price, as long as both sides stick to this plan, it should be the price you pay. If you are willing to pitch in more work along the way, or some type of customization proves to be less complicated than anticipated, you could pay even less.

If you would like to see a sample implementation cost estimate of Dynamics GP from CAL Business Solutions based on the time and materials method of pricing download: Beyond Software:  How to Estimate the Cost of ERP Implementation Services (page 10).

If you are considering new accounting software and want an honest cost estimate for Microsoft Dynamics GP implementation services contact CAL Business Solutions.

By CAL Business Solutions, Connecticut Microsoft Dynamics GP Partner



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