We have found that on average the one-time (on premise) license fee is 3 times the annual fee based on our experience in evaluating RFP responses from vendors. One might think that the ratio between license and annual fee should be greater but that does not take into account the additional hosted services provided by the SaaS vendors including maintenance fees which are billed annually by on premise vendors at approximately 20% of the license fee. It’s still early days for SaaS and as competition heats up the annual fee:license ratio will increase. We recommend that even if the SaaS costs are high that you don’t rule out SaaS vendors just on cost. They are willing to negotiate and there are other factors that should be considered in making a decision.0 Comments
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Reduce Risk of ERP Implementation Failure: Pre-Contract Business Needs AnalysisJune 8th, 2016Contract Negotiations, ERP, Software Selection
You naturally want to minimize risks and avoid cost overruns before signing a long-term contract for a new ERP system. Your prospective vendor also wants to minimize risk, but is usually not in a position to do anything other than give an implementation estimate based on lots of assumptions about scope, roles and responsibilities. These assumptions could be fairly accurate, but could also be way off, which could lead to surprises and costly change orders during the implementation. Neither you nor the vendor want this to happen. Wrong assumptions that lead to change orders will create frustration, friction and could lead to you being an unhappy, non-referenceable client, or even worse, one who wants to abandon the project.
Everyone would prefer to avoid this. So we encourage you to consider a pre-contract Business Needs Analysis (“BNA”). A BNA provides the vendor with more detailed information about your environment that it can use to firm up its understanding and provide a fixed fee for the implementation. In the absence of a BNA, this work would normally be done by the vendor during the implementation, after the contract is signed.
The more analysis done in the BNA, the lower the risk. 180 Systems’ approach to the BNA is to identify the requirements that are the most challenging and/or unique and make sure they are clearly understood by the vendors so they can figure out how to handle them in detail before the contract is finalized. Although the vendors charge for their time to complete the BNA process, it is time they would be charging during the implementation anyway, and by doing the work upfront, the risky parts of the implementation can be built into the implementation contract and therefore reduce the likelihood of surprises.
A BNA should include
- Implementation scope linked to requirements in the RFP
- Conceptual design with agreed upon design decisions
- Functional specifications for any requirement requiring customization
- Statement of Work
The vendors may resist as they would rather just close the deal or are reluctant to assign resources to a client that may not sign a long-term contract. But if the risks are high, both the vendor and the client are protected using the BNA approach.0 Comments
I recently spoke with Andy Amalfitano CPA, CA, Director of Sales Central Region for Prophix about changes at Prophix and his perception of the cloud. Prophix (http://www.prophix.com/) is one of the leading solutions for Corporate Performance Management (CPM). Prophix includes:
- Budgeting, analysis and forecasting
- Financial, statutory and management reporting
- Financial consolidation
- Profitability modeling & optimization, cash flow and revenue planning
- Operational and strategic planning
Prophix targets organizations with revenues between $50M and $2B who want to evolve from being dependent on Excel for their key financial processes. Prophix recently announced the latest version of its CPM solution, one that will provide their customers with more choice in terms of how they implement the software. Some users will want to continue to have part or all of their financial processes on premise, while others will find it advantageous to move to the cloud. Andy pointed out that one reason customers choose an on premise solution is so that they will be able to drill down to transactional detail. Andy also noted that customers are becoming more comfortable with security in the cloud but they will have the option of an on premise solution or a blended approach, where the most sensitive data is stored locally.0 Comments
180 View – We live in amazing times and in the years ahead will use technology we know nothing about now but will depend on and enjoy then. I have seen so much change in technology since my first job working on an IBM mainframe with green screens and now my cellphone is way more powerful than these mainframes that were expensive and filled a room.1 Comment
The SOW is a key document from your vendor that can make or break the implementation. The vendors will do their best to reduce their risk by limiting scope to a high level list, assuming that you will follow best practices, and making a lot of other assumptions about you doing work that you don’t know or understand the effort to complete.
As the vendor risks go down, the customer risks go up. We recommend the following:
- Scope is tied to the requirements in the RFP which need to be specific
- Best practices should only be applied to processes that are considered basic. It should not be tied to ones that allow a company to differentiate themselves from the competition or address critical success factors (what an organization must do well in order to be successful strategically). You should limit the best practices to a few basic processes such as accounts receivable and accounts payable.
- Ensure you understand what is involved in your roles and responsibilities. Many organizations don’t have the experience or qualifications to do some of the tasks that may be assigned to them without a lot of help from the vendors. An example of this is developing to-be business process documentation. If you don’t have a resource on your team with the skill set to do this, you may be setting yourself up for a vendor change order.
A good way to limit scope for both the vendor and the customer is by arranging a “paid-for” business needs analysis (BNA) or discovery process prior to signing any long-term contracts. This should not delay the implementation process as it is work that would need to be done anyway. It should also not be a full-blown design phase by the vendors. It should be enough work for the vendors to define scope clearly and provide a fixed or not-to-exceed fee to do the implementation. It will also involve deciding what to do with all the requirements that are not met out-of-the-box by the vendors which include customization or custom reports, 3rd party modules, changing the process and workarounds.
The vendors would rather close the deal without doing the discovery if possible but we think this is short-sighted. In the end, the vendors don’t want unhappy customers and taking this extra step will help reduce the risks of unexpected and costly surprises during the implementation.0 Comments
December 1, 2015 from CPA Magazine – “…Below you’ll find a short primer on the cloud and how to decide if the technology is right for your business needs. We’ve also designed a short survey to see how many of you are using the cloud in business – and if so, how…”
180 View – I (Michael Burns) wrote this article with a lot of help from Margaret Craig-Bourdin who is the editor of the online edition of CPA Magazine. The first version of the article was considered by Margaret to be way too technical for the readers of CPA Magazine and she worked hard to simplify the article for CPAs. Hopefully it’s not too simplified for the readers of our newsletter.1 Comment