Fixed Fee for your ERP Implementation? Maybe not

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Businesses looking to implement Microsoft Dynamics GP or SL have to make many considerations - the last of which usually is the price of the proposed solution. Implementing and configuring the software is an expensive proposition, and usually on a time and materials basis with the Value Added Reseller who will do the work. Many companies look to have a Fixed Fee agreement so they have some cost certainty in place, and perhaps get the project approved more easily from stake holders who must approve financial purchases. But there are drawbacks to consider:

Fixed Fee means Fixed Scope – if an implementation partner is going to have a fixed limit on what they can bill, they have to limit what the scope of the project is. Otherwise they will be entering an open ended commitment that could be a huge drain on resources. The deliverables of the project will be narrowly defined, and items you uncover during implementation may get skipped because of these limitations.

You still may be overpaying – if a partner has to come up with a number they are sure will work and cover all potential unexpected possibilities that may arise, it is fair to assume they are giving you the high end of their estimate range. In a time and material project, you may come in at the low part of the estimate, and therefore pay less.

Phase II work may be harder to get approved – if your company is structured so that purchase must get approved by a board that is not active in day to day operations (often the case at Non-Profits), there can be a perception that Fixed Fee was covering “all the bases”. Asking from funds for a Phase II project may raise questions of why the work was not done in the first go around.

There are times when a fixed fee is a must, and certainly it is a legitimate thing to request. Just make sure you understand the potential downside.

By Intellitec Solutions, a Dynamics GP partner serving clients in Delaware and Pennsylvania

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