Fixed Cost Warning Label

[Former Member]

The goal of this write up is simple; I want potential customers of SaaS ERP to be aware of some common hazards with implementations and to serve as a guide for successful engagements.  The thoughts here are not really new as they can apply to on-premise ERP as well, but in the face of SaaS fixed price implementation opportunities, I wanted there to be an awareness of key issues that might jeopardize what should be a successful deployment.  There is an old saying, “you can pay now, or you can pay later”.  Trust me it applies to this kind of effort.

For small to medium size enterprises who have not operated their businesses with an ERP platform, know that you are not implementing a software, you are engaging your organization in something business transformational.  This should not be taken lightly.  SaaS ERP is providing an enterprise class solution for managing the operations of your entire organization at a cost and with a level of agility that until now have not been available to this market.

SaaS ERP deployments can be delivered at a fixed cost.  The business processes are built-in; therefore there is no reason for extensive process engineering.  The deployments do not require teams of developers in order to bring you a fully integrated solution.  Considering these facts, it would appear that fixed cost implementations are a reality. They are with respect to the system build.  However, getting your organization to actually adopt the system is a different matter.  It would be difficult to see how this fixed price will encompass all that is needed to manage the greatest variable which is your company itself.  So if a value added reseller (VAR) is not engaging you with an understanding of the following, I think that the possibility of achieving a fixed cost implementation is remote.

Executive management commitment is strong and well communicated throughout the organization. 

I can’t stress enough how important it is that your company’s leadership communicates and potentially incentivizes everyone in the organization, who will be effected by the change.  This is an investment in the future of the business and more importantly will provide the capability for the organization to manage growth.  That means that Executive management must also is be willing to make the necessary investments for it to be successful.  Through their commitment, then everyone needs to be a responsible to this project for its success.

If you think that a fixed cost is the only way you will get approval with Executive management, be careful.  Executives in many cases don’t mind spending money, if the value is apparent.  What they hate are surprises that will impact budgets and maybe more importantly the KPI’s for their own success measurement.  Disrupting those KPI’s could be a killer for more than just the project; it could impact your future.  This is a delicate issue and be sure the change is communicated well among executive management, that way adjustments at their level can be made accordingly.

Culture Change Management. 

There is nothing more powerful in an organization than fear.  Change can represent a threat at every level of the organization.  For the executive who until now has been responsible for the structuring of business processes, they will feel threatened.  How about the executive who is looked upon to set strategic direction for the business because of what they know about their industry.  Suddenly, there is a system that institutes best practices for operations and it also can report accurate information about the state of the business, for strategy formulation.  Ouch! For these executives this could be a threat.  There is also the employee that uniquely knows where their product levels are, and can dictate the rate of replenishment.  Now there is a system that will do this without their care and feeding.

The trick here is to show these folks how they are going to be able to bring the company even greater value when their time is freed up for more strategic efforts.  This will require VAR involvement that a fixed cost bid may not have within its scoped.  This is business consulting.  You should expect that a VAR will be able to speak to this and understand where the impact points might be.  It’s extremely important that this education process occurs.  In fact, because of the ease of deployment of SaaS services, this should be the most time consuming and important work that can be done to make this business transformation a success.

It takes more time than you might think. 

Along with presenting realistic cost expectations, you need to do the same with respect to time.  In the past, IT was the road block to getting new business processes instituted.  This is no longer the case.  Cloud computing is providing a new agile approach to system integration and fulfillment.  So the real roadblock is with company adoption.  The challenge is with employees becoming enabled with the knowledge they need to fulfill new processes in the new system.  Take your time with testing and make sure each individual who is asked to work within the new system has time to run through the transactions.  This goes beyond just key personnel with responsibilities within the project.

A VAR may measure their deployment time from the point the solution is built, tested and deployed.  Users actually being enabled will be a much longer process.  So make sure you know how you will measure system competence and that you and your organization are willing to sign off on the method.

Individual success will translate into company success.

To achieve fixed cost implementations, VARs will implement and train employees using a “train the trainer” approach.  For the record this will not be enough.  This approach is about identifying one person per department to be participants in the project.  This is not a problem; in fact it is a great approach.  It assures that every group is being represented.  The challenge is expecting that this same person will have the time or ability to give their co-workers the necessary training to be successful in the system.  There might be some bright spots where this is actually successful, but I can tell you from experience, this is not a complete strategy for success.

Don’t be tempted to cattle call entire departments into a conference room and show them the solution and then call them trained.  This will not work.  If you ask everyone in that session if they feel comfortable with what they have learned, they will shockingly respond with a “yes”.  Again fear will take over and people do not want to admit that they do not understand something.

You cannot escape individualized training.  Only then will your folks actually ask the questions they need in order to competently perform within the system.  They also need to understand the overall process that they are participating in.  Do not think for a minute that you can escape this reality.  Productivity and adoption will not occur unless you are willing to make the individual successful.  So make sure your VAR is willing and able to provide this level of training support.

When selecting a solution make sure it’s a platform for long term business success

Cloud computing is about agile deployment of services.  SaaS ERP platforms should have best practice processes built-in.  Those processesmay not be enough to meet the unique process need of your business.  So from a total solution perspective you need a SaaS ERP solution that also offers a complimenting platform (PaaS) for developing customized solutions in an agile fashion that will fully integrate with your SaaS ERP.  The net effect is that you now have a platform for implementing what I would call applied consulting. Next generation consulting is about agility and rapid execution for the business.  Be sure your platform is a real service oriented architecture for this type of enablement.  A platform like this will dramatically impact your ability to control costs and streamline integration.

The key here is to be aware and properly calculate the total cost and effort of a SaaS ERP implementation.  If the VAR does not present these issues as at least as a point of discussion, be wary.  Where the SaaS solution is concerned, deployments can be done at a fixed cost.  However, there should be variable cost consideration for the needs of getting your users enabled.  If you do receive a fixed cost proposal make sure the above items are identified and you understand how much time and materials are included to support those efforts.  If you don’t feel adequate consulting time is built in, negotiate for the variable rate of services required for your company’s success.

With cloud engagements no one (customer, VAR, or provider) will be successful unless everyone is.  Unified Success article Do not ignore the need to get buy in from your organization, as this will be an essential component of your success. Once you get that buy in, make sure every effort is made to enable your people and give them the understanding of how they are part of this business transformation.