I have been delivering ERP implementations for over 20 years. Until recently, most of them were either Visual Manufacturing (now an Infor product) or Microsoft Dynamics NAV. During the time that I have been implementing ERP many things have changed. The old “traditional” way was for very intense workouts; tracking down gaps for clients to “do homework”; followed by more intense sessions.
This article is probably just as much for my competitors as it is for any end-user company that is interested in implementing ERP. This is the technique we have developed. I help people who want to do this (as long as they choose a different target market) because I think the market is big enough for much, much more than just me.
It has been a major challenge for me to figure out a new way to do this kind of implementation. In particular, I have wanted to apply LEAN thinking and principles to ERP for many years. It’s taken a long time, but I think we’ve created a new and better way to implement ERP.
My experience now is with Dynamics 365 Business Central from Microsoft. I’m going to use that for most of my examples, but these approaches should work with almost any modern ERP. A cloud ERP system may be required as there are some elements that work better because Business Central is cloud based, but hopefully you can apply these methods to any system.
I was able to refine and eliminate the waste of typical ERP implementations such that I now exclusively use a flat fee for our Business Central projects. This is quite radical. The methods I discuss below are the “secret sauce” we’ve determined to make this work.
First, a little history.
Traditional ERP Implementations
Traditional ERP implementations carry extremely high risk, both for the implementing partner and the customer. That’s why hardly anyone offers the elusive fixed fee. The risks are too much.
The costs of the old Dynamics NAV project were high because legacy methods are expensive. The typical deployment follows a series of phases originally laid out by Microsoft in a waterfall project framework. Waterfall project management has been shown to be more expensive than the modern “agile” approach, which is based on LEAN techniques.
The approach that has been used by virtually everyone for as long as ERP has been around is “Time and Material” billing. This means that clients pay for the time the consultants put in, no matter how good or bad they are. This shifts the risk from the implanter to the customer almost entirely.
The reality is that there are still massive risks to the partner with these waterfall projects. I have seen MANY cases where partners were sued or threatened when these projects went horribly wrong.
I started thinking about how we needed to change this after reading a LinkedIn post that shared an article about why “Time and Materials Billing Is Unethical.” The arguments really caught my attention. The author asked a question that I think he summed it up fantastically well:
If a restaurant charged you for the time and material it takes to cook your steak, how would you feel?
This probably sparked my first real thoughts about how to stop being a time and material business.
ERP costs are incredibly unpredictable
One of the first videos I uploaded to YouTube was my explanation of why the traditional costs of ERP implementations were shockingly inaccurate. I’ve spent the years since figuring out ways to eliminate that inaccuracy.
Obviously, the best way to give accurate estimates was to set the rate. The problem is that the traditional approach is high risk for the partner. It is very scary to offer a fixed rate. if you don’t do it right, you’re in a lot of trouble. I have worked very hard to develop an approach that I believe is unique.
Apply LEAN thinking to ERP implementations
There is a movement to apply LEAN thinking to service activities. In general, LEAN is about removing waste from a physical product, but it can also be applied to projects.
I came up with my own variations of waste in ERP projects.
First: there is time invested for the wrong resource.
This usually happens when someone who costs too much does something that someone who is paid much less can do, or can do faster.
Second – there are unnecessary steps
I find this happens when people take steps to “cover their butts.” Much of project management falls into this. It also happens when consultants (paid in billed hours) push unnecessary work.
Third: there are wasted tasks
Sometimes clients want to do things that we as ERP consultants know won’t work. In a traditional implementation we have no economic motivation to stop it.
Finally, there is a “bleeding” of knowledge
This is usually on the client. This is usually when the customer doesn’t remember their training because they don’t spend enough time working on the system.
Why ERP Implementations Have to Change!
When we started doing cloud-based ERP implementations with Microsoft Dynamics NAV, it was common for customers to pay $100,000 for the software and $200,000 for its implementation.
Once you enter the world of the cloud, where Microsoft Business Central costs $100 per month per user, things change. It’s hard to tell a customer that they’ll spend $2,000 a month on software and still pay $200,000 for implementation.
So we did what our clients do. We set a price, thought the market would support it, and worked backwards to control our internal costs and make money doing it. Our clients are manufacturing companies. They need to estimate a cost and then stick to it. You can’t go to your customer and say “we have to bill you more because we were inefficient in our production process.” They would go bankrupt overnight.
The new approach to ERP implementations.
I am more of a manufacturing expert than a technology expert. Few manufacturing companies think in terms of projects with project managers (Engineer to Order is the exception). They typically think in terms of operations managers and standard work instructions.
I applied this thinking to ERP projects. It helps that all we do is implement ERP for manufacturing companies.
These are the main steps that helped us drastically reduce the risk (and costs) of ERP projects.
- We only do one type of project.Focusing exclusively on manufacturing and small facilities meant we could hone and improve with each project. We see the process as an iterative and repeatable process. This removes the initial design from the project plan, etc. Project management disappears and we reduce that waste enormously.
- We compensate the easy but tedious work for the clientWhen a $200 an hour consultant does what amounts to an administrative task, that’s a waste. We train clients to do some of the tedious tasks. It turns out that these are also made much better by the client. Business Central makes this a lot easier because it has great tools for end users to accomplish tasks that used to be difficult. There are 2 of these in particular that are key: Reports and Data Loading
- We empower clients to edit formsCustomers know how they want their bill to look. They know where they want the expiration date on their purchase order. It is much easier if we teach them to change these things than to do it for them.
- We train clients to load data into the systemLoading data is a task that we assign to a cooperative student after a few hours of training. The fact is, when clients “understand” how this is done, they do a much better job cleaning their data and things go much better!
- We keep the training sessions shorter and VideoPeople forget what they are taught. It is a fact of life. You have a lot on your plate. Also, the more time a person spends training, the more they become “distracted” and begin to lose focus. We keep the training sessions short and record them all as videos. People absorb more and can easily review what they have forgotten. This means we absolutely must train remotely. Travel time is a killer (and a total waste), which is why we can’t travel.
- We keep the project firm and discourage change.Traditional ERP partners encourage additional work. Extra work means extra profit. Not for us. When we do a Business Central project, we discourage any changes to the original project. Our projects are not very restrictive, but they do limit the features that we will implement in “Phase 1”. By keeping the plan tight, there is much less “drag” and the boss is usually much happier.
- We still charge for customizations, but we also discourage them. Customizations are the only thing we can’t predict, so we also discourage them. Given this new model, we find that customers are also asking for much less. They trust us more to know what we are doing. Occasionally a customization is just a no-brainer, and in those cases we support and even encourage them. Still, we have less than half the customization we used to.
conclusion
We do many implementations of Business Central, all in manufacturing. For our size, we probably do more than any other partner in North America. This has really helped us practice and perfect these steps. We were wrong in the first ones, but we respected our quotes and we lost our jerseys. We have now perfected the process to the point where virtually every client provides us with a testimonial (often in the form of a video).
We hope this article can help you work with your ERP partner to find out how to save costs and improve your project. Even if you are a company doing a time and materials project, many of these ideas can still be applied. Get ERP consultants to teach you how to edit reports and upload data. Avoid customization. Insist on short training sessions and saved videos.
If you are a member, do not hesitate to steal these ideas. If you want to contact us and ask for advice, do not hesitate to do so. We share these techniques openly and honestly. If you want to sell to manufacturers, you might have to buy me a beer or two.
We have been doing this approach for a number of industries.
With Business Central out of the box
- Job Shop Fabrication
- Production manufacturing (make-to-stock, make-to-order)
- engineer on demand
- Project manufacturing (a more integrated on-demand engineer)
With the PrintVIS MIS plugin
- Commercial Printing
- Flexible Packaging
- folding carton
- Label manufacturing
And it has been working very well. There are still areas we need to work out, but overall it has been incredibly successful.
