NetSuite Implementation and Optimization Projects – Time and Materials vs Fixed Price, Which is the Better Model?
By Jay Oliphant
Senior Director of ERP Services
In recent years there seems to be a steady shift toward fixed price contracts for NetSuite implementation services, a shift away from time and materials contracts. However, this can lead to a “win-lose” result for the client and the service provider, as opposed to a “win-win” solution.
We respectfully suggest that clients strongly consider time and materials agreements for your NetSuite implementation and optimization needs.
When entering into a fixed price contract, the consultants perform a detailed scoping exercise, document the scope assumptions and propose a single fixed price for the project. Unless change orders for tasks deemed “out of scope” are executed, the client is charged the fixed price amount for the project. With a time and materials contract, a similar detailed scoping exercise is performed. The consultant provides an estimate for the work supported by hours and hourly rates, but no firm fixed price.
Potential Pitfalls of Fixed Price
Entering into a fixed price contract has the potential to put client and consultant in an adversarial versus collaborative position. If the project requires fewer hours than originally estimated, the consultant “wins” (better profitability) and the client may perceive losing. If more hours are required, the consultant “loses” (less profitability or even loss) and the client may or may not perceive it as a “win”.
For NetSuite implementation projects, the client frequently has many questions about how to migrate or adapt their business processes to the “leading practices” offered by NetSuite’s solutions. In a fixed price deal, consultant responses to those questions may include “I’m sorry that’s out of scope”, “you don’t get that functionality out of the box” or “that’s not what we had planned for that function”. The consultant is trying to talk the client out of what they want to do as opposed to working collaboratively with them to explain how they can accomplish their objectives.
Better Model – Time and Materials with Effective Communication
We believe that clients can avoid the scope game described above by executing a time and materials contract with consultants who are responsive to client requests and provide effective communication about the level of effort required. Client objectives can be achieved without the administrative burden of negotiating change orders. The key to success with this model is frequent communication!
This model can be applied to both NetSuite implementations and optimization projects. In our experience with optimization projects, we hear feedback from clients like “the initial implementation didn’t address all our needs”, “we were told that what we wanted was out of scope”, “we never seemed to fully complete a process”. Those perceptions can reflect implementers who were more concerned about the profitability of a project than about addressing client needs.
Affirma is a Full-Service Firm
At Affirma, customer satisfaction is priority #1. You can expect excellent service and quality communication should you choose to entrust your NetSuite implementation or optimization project with us! If you’d like to learn more about Affirma or our NetSuite practice, contact us today!