ERP Service Contracts – Do’s and Dont’s

The Situation

Over the last couple of years, companies hit with down revenues and have a ERP or CRM system version that is old enough that it’s not longer supported, have made the decision to cancel maintenance and support until they are ready to upgrade.

I mean if your software is no longer being supported and your not going to upgrade anytime soon WHY IN THE WORLD  would you be paying thousands of dollars a year. If that’s your situation – CANCEL IT now…

The ONLY caveat I will make is that some ERP and CRM companies will threaten you.. “OK Mr or Mrs Customer, if you cancel, WHEN you renew your maintenance and support, we are going to not only hit you with a penalty, but will charge you ALL support fees that were unpaid!!!

I only have one thing to say about this… Bull S__t!.

Don’t take it…

I didn’t.  I negotiated a deal where I would cancel for one year and then renew without any penalties or back charges.

Then, dig this… I am just re upping tomorrow and it’s been 20 months (it took me a while to get the OK) AND they are more than happy to give me the SAME DEAL.

You know why?

I think you do… A lot of people have canceled and M and S revenues are WAY down!

Any here’s a little tip on when you do re up. They might tell you that they are going to give you a GREAT deal and not charge you in arrears BUT you are going to have to agree to stay on contract for 3 years and pay the first year UP FRONT.

DON’T AGREE to this. I didn’t. I negotiated and am paying quarterly. There’s a 2% surcharge, but that’s well worth it.

So in summary, don’t pay when there is not value, start paying when there is and negotiate from the beginning to the end…

Until next time ….

Rick
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WSJ – Companies Are Spending On Software (ERP)

Hi there

This article in the WSJ today highlights that companies are starting to spend on equipment and software – Firms Spend More –  Carefully…
Sorry it’s just a summary (Subscription to read the whole thing)

This is good news for those of us that need to upgrade our aging systems. It appears that organizations are realizing that their equipment and systems are aging and now is the time to make some changes.

This is BAD news for those that get the go ahead due to the fact that vendors are not as motivated to give you the deal of the decade… that was two years ago… It told you so…

At any rate, if you can get the “green light”, do it while you can and ASK FOR THE MOON… If you don’t ask for more for less – you definitely WILL NOT get it. My #### 1 rule in negotiation…

Until next time…

Rick

The Seven Steps to Implementing ERP – Step 3 – Purchasing

OK, so far we have covered…

Step 1 – You have Justified and Specified your ERP system – people are going to "have your back" if something goes wrong (and it will!).

Step 2 – You have Sourced, Qualified and Selected an ERP software package that is going to work for your business.

Now for Step 3 – Negotiating and Purchasing your ERP system…

I can say without reservation that negotiating and purchasing an ERP system is just about as complicated as a purchasing transaction can get. While you might have extensive experience buying capital equipment, few other purchases will have as many angles as an ERP system.

First, you have the software, OK, not a big surprise, then the hardware to run it … again not a shocker, then the network backbone upgrades, then come the consultants from perhaps 1, but more likely 2 or 3 different firms, then the maintenance and support, the internal personnel that you have to keep working on the project….

So there is a list of the major aspects to the purchase. Now negotiate the best price and terms for each one of them! This is not a cookie cutter deal. The sales people that you are working with, while they are probably ethical, are going to answer your questions, and you should be asking lots of them, are not going to volunteer everything that they know about the deal…

What do I mean by that, well let me give you an example… Let’s say that you are buying the Quality module that is offered by the ERP supplier, and you know that the Quality module" consists of 15 key applications. However, the quoted package only includes "Quality module essentials", which means that you are only getting 5 out of the 15 apps. Don’t laugh, this has happened to me and yes I did catch it before I bought a package… but this kind of stuff can happen all over the place.

So bottom line – Caveat Emptor (Buyer Beware). I think you get the idea. Next … Step 4, Installation and Configuration…

Until next time… Rick

It’s Official – Oracle to Buy BEA

Boy did second round negotiations happen under the radar screen on this one!

Back in October of 07′  – IT WAS ALL OVER THE PRESS – Oracle made a bid for BEA that expired with a Sunday night deadline. At the time Oracle offered $17 and BEA said $21. No deal.

As I said back in October, Larry Ellison was NOT going to let this one go!

This morning according to the Wall Street Journal BEA accepted a bid from Oracle for $19.375. The area of middleware is HOT.

Oracle needs this acquisition to maintain an edge in middleware space.

 The promise of SaaS and SOA in ERP architecture could revolutionize ERP as we know it.

Major ERP Negotiation Tip – Don’t Divulge Your Budgeted System Cost

Providing the other side with your budgeted system cost provides them with a target price. While there are many aspects to a system purchase that you must be open and up front with the supplier, what you are willing to spend is not one of them. Oh, and by the way, if you do divulge your budgeted cost, you can be rest assured that YOU WILL spend at lest that amount.

Oracle vs. BEA – Not a One Round Fight

Larry Ellison is no dummy and while I am not an expert on Mr. Ellison let alone his negotiating skills, I have been a negotiator for many years. I cannot think of a time when I opened with my high bid.

Well according to the Wall Street Journal today, BEA has now issued a counter proposal at $21 per share.

And later in the day Oracle quickly responded, stating the no one else is offering $17 per share so the offer remains at $17. Whoa, playin hardball …

Things are heating up. If you are a student of negotiation this one could get interesting. Both of these companies are hungry, but at this point, there appears to be a lot of ground to cover before an agreement will be reached.

Oracle has drawn a line in the sand of 8 p.m. PST this Sunday…

It appears as though it’s BEA’s move …. Any predictions?

Keeping ERP Project Management Simple

How do you keep track of what’s going on with your ERP software project on both a day to day and long term basis?

Traditional project management tools and techniques can allow you to keep track of complicated timelines, involving multiple departments at various stages of completion.

If however, you use project management software daily, a situation can exist where key people are spending more time updating the project software and feeding the system, than they are actively working on the project itself.

Further, in most companies the majority of the personnel working on an implementation project have “day jobs”; what they actually get paid to do.

At the same time, for long range planning purposes, project phase management and interdependent project activities, a well thought out project timeline is mandatory. A project plan is the only way for management to project the needed resources in people, time and money in the intermediate and long term.

So, use the fancy software up front and monthly or quarterly to update the big picture plan; to determine if your project is still on track to Go Live. The project plan is not then just a “chart on the wall”, not some stale dated piece of paper. It is a periodic review and reference of project status.

OK, so you have the big picture of the project created and routinely updated, but how do you handle day to day, week to week task management activities?

Talk to people!

Have a Weekly Team Status Meeting

Like most everyone else, I hate meetings. However, the best way that I have found to manage “next actions” or current tasks is a well run ERP status meeting.

I recommend that the meeting:
• Happens every week without fail.
• Be started on time.
• Occurs early in the week – preferably on Monday morning.
• Be documented in Word or Excel and made easily available to everyone concerned.
• Take no more than one hour – shoot for 30 minutes.

You must demand that everyone come to the meeting prepared to discuss the following:

• Last weeks completed tasks.
• Tasks being worked on this week.
• Challenges AND proposed solutions – don’t let this one get away from you – i.e. NO rabbit trails.

Minutes can be organized in any of the following ways but BE CONSISTENT.
• Person
• Process
• Or any other way that makes sense to you.

Optional
• New Business / Old Business – this can DRAG the meeting down so be careful!

This meeting can hold the team together, allow for efficient communication and keep things moving forward.

Coupled with a periodic project plan update, you can invest a minimal amount of time in project and task management and be confident that you know what’s going on with the project.

ERP Software Negotiation Tips that can Save You a Lot of Money

When negotiating the price of your ERP system, there is an area that you can easily miss.

Most buyers focus on negotiating the cost of the software and consultant time for implementation.

Obviously these ARE two key areas of focus, but in the long run, and really not that long a run, you are going to surpass the money spent on software, hardware and implementation with maintenance and support.

Maintenance and support is usually based on software cost and guess what? … Many ERP suppliers don’t base it on the NEGOTIATED PRICE. They base it on the RETAIL price!

Let’s do the math…

  • Negotiated price of your software = $150,000
  • Retail price of your software = $200,000
  • Maintenance and support agreement is calculated at 15% of $200,000 so…
  • Your annual maintenance and support cost = $30,000 per year.
  • If it was based on your negotiated cost is would be = $22,500 per year.
  • A net difference of $7,500 per year. A lot of money to leave on the table.
  • Over a period of seven years your supplier can get your $50,000 negotiated discount back!

Negotiation Tip # 1
Negotiate your maintenance and support cost not on the RETAIL price of the software, but on your NEGOTIATED PRICE.

Negotiation Tip # 2

Another area where you can negotiate the maintenance and support, is in relationship to “When the clock starts ticking”, i.e. when will maintenance and support become billable?

In most implementations Go Live is a moving target. Many times this is due to delays caused by your supplier – Use this to your advantage. Base your agreed upon maintenance and support cost on your Go Live date, not your software installation date.

So this is another area that you might get some negotiating traction.

Remember, timing is everything; if you just lost a round in the negotiation, hit them with one of these tactics. But don’t hit them with both of them at once.

Save these negotiation tactics for when you feel the time is right.  If your supplier just “won a round”, their confidence will be high and they might feel obligated to “give” in the art of “give and take” negotiation.

Stay tunred for more sweet negotiating tips…