Tuesday, December 08, 2009

Revisting Epicor's Shared Benefits program

I wrote about Epicor's Shared Benefits program about a month ago, when it was first announced. The program, in brief, offers customers to get back half of the savings if Epicor delivers its implementation services at less than estimated, and only pay half of Epicor's hourly rates if Epicor exceeds its estimate. In essence, it's sort of a compromise between a time-and-materials project and a fixed-price engagement.

After my initial post, Epicor wanted to brief me more fully on the program, so I agreed to take a phone call this morning from Craig Stephens, Epicor's VP of Consulting Services, who is based in the UK.

Time and Materials vs. Fixed Price
The problems of time-and-material contracts are well-understood, as many ERP prospects have heard the horror stories of projects that run well over budget. Many therefore jump at the chance to have the vendor take on the implementation as a fixed-price contract. In our buyer consulting services at Strativa, we point out, however, that this can often be a mistake, for two reasons.
  • Customers often don't realize that with a fixed price contract, every change in scope becomes a change order. Every assumption must be spelled out in the contract. Furthermore, as the inevitable misunderstandings become apparent during the implementation, the project manager often winds up spending more time negotiating change orders than managing the work itself.

  • Secondly, customers don't realize that a fixed-price contract can often cost more than a time-and-materials engagement, as the vendor immediately jacks up the price by 20% or more as a risk premium for doing the project as a fixed price.
Stephens believes that the Shared Benefits program represents a better approach, reducing the risk of a time-and-materials engagement for the customer while avoiding the risk premium required for a fixed price contract. He claims that Epicor does not include a risk premium when quoting these projects, thereby saving the customer money.

The other point that I find attractive with the Shared Benefits program is the alignment of incentives between customer and vendor. With fixed price contracts, Stephens points out, customers are under little restraint in trying to include additional scope within the fixed price. Under Shared Benefits, customers can still try to interpret the implementation plan to include more work, but they will share in the cost if the project exceeds budget.

Resources for Epicor 9 rollouts
While I had him on the phone, I asked Stephens about Epicor's ability to support its push to roll out its new version, Epicor 9, to new and existing customers, especially in light of workforce reductions that Epicor has taken in the past year in its professional services group.

Stephens indicated that headcount is flat from the previous year and that there are adequate consulting resources on board to support Epicor 9 implementations. He also indicated that much of the functionality in Epicor 9 is an upgrade from Epicor's previous Vantage 8 product, though the financial modules are new and different. Hence the major training effort for Epicor's consultants is in the E9 financials.

In response to my question about documentation, Stephens also assured me that the system documentation was all up to date for the new version and in fact sometimes was developed more quickly than the product itself. As this is so different from what I've heard from my own sources, I'd be interested in any feedback readers have on this issue, or any other matter involving Epicor. Leave a comment on this post, or email me privately (my email address is in the right-hand column).

Innovation in services delivery
As I wrote in my earlier post, Epicor should be commended for at least trying to do something about the problems facing organizations generally in contracting for and implementing ERP. Whether Epicor's Shared Benefits program is an answer remains to be seen as the program is just now being rolled out. Stephens says he expects about 40% of Epicor's new contracts to include the Shared Benefits option and it is the "default" option in writing new business. Over the next few months Epicor should get some early results from this program, which hopefully will demonstrate the success of the concept.

Related posts
Epicor's Shared Benefits program: watch for unintended consequences

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