Monday, November 09, 2009

Epicor's Shared Benefits program: watch for unintended consequences

Epicor is holding its Perspectives user conference this week in Las Vegas, and one big announcement this morning was concerning Epicor's new Shared Benefits Program. According to the press release, the program is "aimed at helping companies eliminate risk and avoid excessive cost overruns that can plague conventional enterprise resource planning (ERP) system deployments."

The press release goes on to talk about return on investment, joint responsibility, visibility, and accountability. But when it comes to metrics, the incentives only seem to address the cost side of the equation:
Upon project completion, if the project is under budget, the savings are shared 50/50. Conversely, if the project runs over budget, the customer is billed 50% of the contracted professional services hourly rates for all over-budget costs.
My take
First, Epicor should be commended for addressing this issue. Implementation cost is a big concern for companies of all sizes, but especially among the midmarket firms that Epicor targets, and especially under current economic conditions. I like that Epicor is facing this problem head on with its Shared Benefits program.

However, as with any incentive program, there can be unintended consequences.
  • First, if Epicor receives half of the savings for bringing the project in under budget, might that not motivate the project manager to expend as few professional services dollars as possible during the implementation?
  • Second, if Epicor has to cut professional services rates by 50% after exceeding the budget, how will that affect the choice of which consultants to assign to the project? Might that not motivate the project manager to utilize someone other than the best consultants? I suspect that, with the rollout of Epicor 9, Epicor's best consultants might be very heavily utilized right now, so you have to question anything that might encourage engagement managers to skimp on services hours.
  • Another issue, as I mentioned, is the exclusive focus on costs. On the one hand, this is understandable: benefits from enterprise systems are often difficult to measure, while the costs are clearly recognizable. On the other hand, this could motivate the service provider to focus more on getting the system installed and getting the professional services team out the door, rather than ensuring that the customer achieves real benefits.
To be fair, I don't believe that Epicor wants any of these consequences--that's why they're called "unintended." But it's important for customers to recognize and be aware of how it's possible for such a program to have perverse results.

Again, credit goes to Epicor for trying to put some teeth in its implementation commitments. It will be interesting to see in a year or so what the real results of this program are.

Update, Nov. 11: Dennis Howlett attended the conference and had a chance to ask Craig Stephens, Epicor's VP of Consulting Services, specifically about my concerns expressed in this post. Read Dennis's write up. Stephens is right that my concerns would apply even more to a fixed-price contract, which, of course, have been quite common in ERP implementation deals for ages. Ultimately, it's all about the professionalism and qualifications of the vendor's implementation team, as well as the willingness of the client to bear its part of the responsibility for success.

1 comment:

Phil Simon said...

Nice post, Frank.

I think that you rightly point out some of the potential pitfalls of such a program. As a hopefully impartial observer, though, I would think that this would be a nice potential point of differentiation for Epicor during the sales cycle.