THE
WORLD’S LARGEST software vendors determined long ago
that their bottom lines would be best served by focusing on developing
and licensing software, and they have, for the most part, abandoned
implementation services to third-party providers.
These
service providers have established strategic business relationships
with the software vendors, and are trained to install and configure
the software depending on the client’s business processes. Their
understanding of your business processes is therefore crucial to a successful
implementation and can increase the sell cycle significantly.
The
software should be flexible enough to accommodate most business workflows
by activating or deactivating the subroutines within the modules. This
is referred to as a ‘vanilla’ implementation: the software
can be optimized without custom coding changes.
The product modules were originally developed and are continuously modified
to reflect ‘best business practices.’ However, for many
clients, a vanilla implementation is possible only if the client undergoes
a business process redesign to match the software. This is often impractical
and/or cost-prohibitive.
Meeting
Halfway
The
usual solution is a combination of business process redesign where practical,
and customization of the software to match business workflows where
it is not.
This
spirit of compromise also appears in the cost structure of the SI services.
Typically the service provider will bid for the work on either a time-and-materials
or fixed-price basis.
Service
providers prefer the time-and-materials method for its lower risk to
them. This creates two problems for the client. First, how do you get
budget approval for an open-ended project? Second, what do you do when
you are 75 per cent into the project and you’ve already blown
the budget?
Fixed-price
may satisfy client concerns but the service provider will require a
highly detailed functional specification from the client. The client
has to have intimate knowledge of the software and the modification
options, plus sufficient knowledge of the many business processes to
determine which are retained and which are redesigned. This is an enormous
task, especially if you have other alternatives from competing vendors.
It’s just not practical and even if it were, the service provider
would build a 40 to 50 per cent contingency into the price to limit
its exposure.
An
effective solution is a compromise which limits both the client’s
and the vendor’s financial exposures and yet has both putting
some ‘skin in the game.’
Eyes
On the Prize
To
get the best hybrid of the two pricing methods, start early while there
is still competition for the business and don’t get down to details
until you have short-listed the finalists. You should already be comfortable
with the number and qualifications of the manpower resources offered,
and have the hourly or monthly rates locked up, depending on the experience
and proficiency level of the proposed SI team.
