System Integrators (SI), or ERP Implementation Partners as they like to refer to themselves, comprise between 30% – 70% of your total ERP spend. When you consider that any overspend on your part results in increased revenue and increased profit on their part, it becomes a stretch to think of your partnership as driven by mutual interests.
In Building Your ERP Team – Part 1 – The Least Understood Success Factor, we explored the overarching characteristics and attributes that position a team for success. In Parts 2 and 3 we examined the selection of the internal ERP team and the important role independent consultants play in strengthening and supporting the core team.
In Part 4 we will drill down on the SI firms. These firms can be like high explosives – if applied while utilizing the appropriate precautions, your SI can deliver the goods efficiently and quickly. In the wrong hands, however, the damages caused by the explosion can lead to long term crippling effects on your company.
First we need to consider two critical elements that provide a foundation for developing your SI staffing strategy: the SI’s value proposition and the drivers or circumstances that create negative and positive spend vs. budget variances. First, let’s remind ourselves of what the SI brings to the party that we might and might not be willing to pay a premium labor rate for:
- Detailed / robust / tested process or methodology to be used for ERP implementation
- Deep understanding of business process best practices that are relevant to your industry
- Broad /deep / geographically available ERP skill set
- Large scale program management skills and expertise
- Expertise on system integration
What you should NOT be paying a premium for:
- ERP software configuration / technical skills
- Clerical skills required to manage a program
- Substitute personnel for client capacity shortfalls.
The second element in establishing our guidelines for SI staffing are the drivers that cause budget variances. Let’s start with the ugliest one first – overspend. Overspending the SI budget is typically driven by one or more of these factors:
- Loosely managed scope control. SIs are fabulous at inflating the work that needs to be done once they are in the door. Often this comes through the “discovery” of new and better solutions to those that were originally proposed. Without a strong hand controlling the work to be completed, scope and fees will balloon before your eyes. Check out the White Paper 4 Steps to Gain (& Keep) Control of Business Transformation Programs to maintain ownership of your project’s scope.
- The inability of the client to meet the staffing obligations & decision making timetables agreed to within the contract. Two things can happen in this circumstance: a) the SI offers to bring in more staff to make up the difference, or b) the project is delayed and the client needs to pay the SI because the delay was a direct result of the client’s inability to comply.
- Not meeting the efficiency or productivity assumptions in the estimate. This usually shows up when junior associates are used in place of more senior players in an effort by both parties to keep costs low. In this case you normally end up ultimately paying for it in late delivery of a poorly coded system that will require additional (unbudgeted) support following the go-live.
Believe it or not, budget variances on your SI budget can also be positive. Drivers to achieving the positive variance include:
- Leveraging all of the assets that the SI can bring to the table. IT departments often require compliance from the SI in formatting and producing documentation. The SI is more than happy to comply and bill you for the time to create the documentation in your requested format. The SI usually factors this into their estimate as inefficiency. Utilizing the assets of the SI will likely cut your costs. You can have the documentation reformatted later at a much lower cost if this is a requirement of your shop.
- Getting the design right the first time. A best practice design for your situation is probably already operating in somebody else’s shop – You just need to get your hands on it (or at least on the people who designed it).
- Staffing the team with athletes. These are multi-skilled resources that you pay a premium for – but can assign to work for two or more teams. One athlete eliminates the need for two full-time staffers.
After constructing the foundation described above, you can proceed to build your SI staffing plan by following these four steps:
1. Construct a staffing model that is aligned with the hour/cost estimates that were provided in the proposal. This staffing model should not specify the names of individuals, but rather the job grade that is required to execute the work. The staffing model needs to clearly outline both the project team capacity and the assumptions of user contributions outside of the direct project team. This staffing model should be vetted through a competitive bidding process or through the use of a neutral third party.
2. Negotiate with the SI the minimum number of positions they need to fill to honor the on-time delivery (OTD) incentives they have requested as a part of the contract. The external force of the SI driving for OTD is something that, in my book, is not worth giving up until your internal team is confident in its own abilities to deliver on time.
3. Evaluate the proposed staff to fill the positions deemed critical to OTD metric with the following criteria:
- Their knowledge of the SI’s implementation process – how it works and why it works
- They have previously worked well together as a team
- They can articulate and demonstrate how to access the talent and knowledge capital of the SI organization
- They demonstrate experience in developing and configuring best practice processes in your industry
- They recognize that business processes go beyond software configuration
- They understand Change Management
- The team is comprised of a mix of junior and senior staff that will allow you to lever down costs in the future and maintain continuity.
- They are willing to act as mentors to your internal team – they’re not just doers.
4. Fill the remaining staff. The remaining staff positions should be filled by the best available / cost competitive talent, taking into consideration internal, independent, and SI talent.
There is no set guideline as to what percentage of the total ERP team should be comprised of SI team members. That percentage will be driven by scope and availability of internal talent skills.
Once you have your team configured, refer to these 6 additional best practices to ensure your internal staff is trained to maximize the value of the external consultants you bring onto your team. Afterward, be sure that you’re confident knowing when it is time to say goodbye to these consultants.