Which ERP Implementation Type Should You Choose?
Set yourself up for ERP implementation success by understanding which type of implementation would work best for your company. ERP experts, Brian Paquette, CEO of Kwixand Solutions, and David Doyle, Director of Sales and Marketing of Kwixand Solutions, offer insight into the different kinds of implementations and what first-time buyers should know.
ERP implementation can be a scary word. Chances are you have done the research, read the horror stories, and are familiar with the statistic that 50% of ERP implementations can fail the first time around. Not to mention the prevalent belief that ERP implementations either cost too much, take too long, and always seem to go over-budget or over-schedule.
So, it is not surprising that many businesses considering their first ERP solution, become overwhelmed, especially in the selection process. When the stakes seem so high, it can be paralyzing to know that your decisions around an ERP solution and partner could either result in business success or failure.
Fortunately, you can set yourself up for ERP success in a few ways. Firstly, by understanding which type of implementation would work best for your company. And secondly, by selecting the right partner to help you with that implementation.
In this blog post, Brian Paquette, CEO of Kwixand Solutions, and David Doyle, Director of Sales and Marketing, offer expert advice and insight into the different kinds of implementation and what small business owners should know.
3 Types of ERP Implementations
There are a few types of ERP implementations out there. Still, the most common ones we’ve encountered include a typical time-and-materials ERP implementation, a lean implementation, and a fixed-fee implementation.
Here’s a brief rundown of how each of these looks like:
How the typical (time-and-materials) ERP implementation works
In a typical ERP implementation process,
The salesperson will collect high-level requirements from you and consult with their implementation and professional services team.
Then they provide a high-level ballpark estimate for the implementation services. The estimate is commonly quoted in time and material.
The next part of the process includes interviews with your company’s stakeholders and team members to elicit business process requirements and challenges.
Additional requirements may get uncovered during the initial review process, which wasn’t accounted for in the high-level review or the original price. That is when the salesperson returns to you with the updated costs and asks whether you want to continue with the project.
“That’s a primary reason why ERP implementations have such a bad reputation for going over-time and budget,” explains David, “Many times, ERP consultants don’t stop after that initial process review and share their findings with the customer. They just keep going, and they don’t advise their customer upfront.”
In terms of costs, it isn’t easy to provide an estimate for a typical implementation scenario. Brian shares that businesses who are first-time ERP adopters typically ask what the costs look like for a standard implementation and that the answer is always, “it depends.” There are a lot of factors that go into defining the costs. “Company size also matters,” Brian says. “Typically, the larger a company is, there are more people involved and more complicated or specialized businesses processes.”
Understanding fixed-fee implementations
In a fixed-fee implementation, the discovery process will look similar.
You go through the high-level and deep-dive discovery and interview stage, like the time-and-materials implementation.
After identifying ways to improve those processes, you’ll usually receive a functionality requirements documents, which lists all the functions that the ERP solution will present at the end of the implementation.
You’ll also get a project plan that outlines how the implementation will happen, and you’ll receive a fixed price.
“The fixed price implementation has a definite scope,” says Brian. “You have a precise list of items that will get included in the implementation to get that fixed price.”
Despite the fixed fee, costs can go up in fixed-fee implementations if the project's scope changes.
This can happen for two reasons. The most common reason is gaps in the discovery process – perhaps a specific business function was not mentioned during the interviews, or the client realizes they need customization halfway through the project. This usually means a change request that is added to the project.
The other reason is one potential ERP customers should be aware of since this is how many of those ERP horror stories begin.
“One scenario that gives fixed-fee ERP implementations a bad reputation is when ERP partners or salespeople purposely give a low-ball fee to the customer initially because they want to make the sale,” explains Brian. Once the project begins, the customer realizes that numerous items they believed were included are not in the scope, after all. In order to include them in the implementation, the customer finds that the price and timeline will increase significantly.
Brian says, “That is why it is so important to have an ERP partner who is transparent and ensures the customer has a clear understanding of the end-result and what the functionality would look like for them in a fixed-fee implementation.”
How lean implementations work
Like the other two types, a lean implementation will also follow a similar discovery and requirements gathering process. As the name implies, think of it as a scaled-down version.
“When people refer to a lean implementation, they generally mean that they will be focusing on the basic components. In order to keep costs low, it tries to minimize the consultants' time, not involve as many components or departments, and keep it as lean as possible,” explains Brian.
A lean implementation may not take into account any of the specific or unique requirements of a customer’s business processes. If there are any additional compliance or customization requests in the middle of the implementation, the customer may have to sign a change request to add time and cost to the project in order to allow for that specialized work to happen.
“As every business has its secret sauce which leads to its success and their specific compliance and process requirements, it’s likely that you may not get the full value of your ERP solution from executing a lean implementation,” advises David.
“There are only a few circumstances where a lean implementation is absolutely the way to go, and that is for a smaller organization, who’s moving off of QuickBooks or a simple accounting solution. Or perhaps they are using a bunch of Excel documents to manage a bunch of information and processes outside of the finance system.”
Selecting the right ERP implementation method for your business
There are advantages and disadvantages to each implementation type. The best way to mitigate risk is to ensure you are picking the right method for your specific business. While every company is different, here are two factors to help you make the decision
The size and complexity of your organization
Size matters when you’re thinking about which kind of ERP implementation to choose. If you are a larger business, have specific compliance or complex process requirements, or require many customizations, you should steer clear of lean implementations.
David explains why: “Modern ERP solutions like Dynamics 365 Business Central, for example, are incredibly powerful. A lean implementation will probably not allow for the exploration or implementation of all the value-added functionality that could be applied to your company’s processes.”
First-time ERP buyers
For companies considering the purchase of their first ERP solution, a lean implementation or fixed-fee implementation can help them constrain the costs and timeline of implementation. These would typically be smaller organizations, up to $1 to $5 million in top-line revenue a year.
“Typically, smaller businesses who have less tolerance for changes in timeline and cost would benefit from a fixed-fee or lean implementation,” says Brian. “That way, they know exactly what they are getting from a timeline and budget perspective and can plan accordingly.
Similarly, small businesses that want to upgrade from their basic accounting software would benefit from this implementation type. They would be able to get a more robust solution fully integrated across all their different business departments for a cost and timeline they know they can afford.
Tip: If you are a small business in the market for its first ERP solution, take a look at our KwixStart Implementation plans for D365 Business Central. They are lean implementations on a fixed fee, so you don't have to worry about going over-budget or over-schedule.
Final Steps: Pick the right ERP implementation partner
At the end of the day, the main component of a successful implementation is ensuring you have the right ERP partner. When embarking on an ERP implementation, you want to make sure that your ERP partner not only fully understands your business but also shares the same values you do.
According to David, “It’s always the people – the people on the implementation team, the people who manage the VAR partner. It’s always the people that make the difference in an ERP implementation, on whether it is successful and provides high value or not. It’s never about the software.”
Brian Paquette, CEO of Kwixand Solutions, and David Doyle, Director of Sales and Marketing, have decades of experience in ERP implementations across various industries. Check out our About page to learn more about their experience and values.