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Mutual Respect During Contract Negotiation

Before the Break: Thursday Thinkers

Two boxers congratulating each other after a fight

Negotiating a partnership with your ERP implementation partner is not like buying a souvenir at the flea market ...


While it's not inappropriate to negotiate the terms of a contract, it's important to understand the potential repercussions of pushing too hard in the negotiation phase, especially when it comes to "Enterprise Platform" type system implementation (ERP, CRM, WMS, etc.). Mutual respect towards your "opponent" will go a long way and start your partnership on the right foot.


Data-backed reasons and arguments you might consider


Long-Term ROI vs Short-Term Savings: According to a 2020 study by Panorama Consulting Group, ERP projects have a 67% chance of exceeding their initial budget. This is often due to unforeseen issues that arise during the implementation phase. Selecting a partner based solely on their initial quoted price could lead to higher overall costs if they are unable to effectively manage these risks. In this context, it's often wiser to pay a premium for a partner with a proven track record of successful implementations and the ability to mitigate potential issues.


Importance of Expertise and Experience: A 2019 report by Gartner suggests that the complexity of an ERP implementation often requires expertise that goes beyond basic technical knowledge. A cheaper implementation partner might not have the breadth of knowledge or experience necessary to fully optimize the system for the client's unique business processes.


Ongoing Support and Relationship: In a survey by Third Stage Consulting Group, nearly 50% of respondents reported significant operational disruption after going live with their new ERP system. This disruption can last several months and requires ongoing support from the implementation partner to resolve. An implementation partner that has been pushed too hard on price might not be as willing or able to provide this level of support.


Risk of Failure: According to a report from the Project Management Institute, 14% of IT projects fail outright. Among the projects that didn't meet their initial goals, the average cost overrun was 27%. This suggests that underfunded or poorly planned projects are at a higher risk of failure, which could potentially result in the loss of the entire investment in the ERP system.


User Adoption: According to a study by Deloitte, one of the top reasons for ERP implementation failure is poor user adoption. Cheaper implementation partners might not have the resources to provide adequate training and change management services, leading to lower user adoption rates and a lower return on the ERP investment.


Shared Success Model: Partners who feel they have a fair deal will be more invested in your success. If they feel squeezed or short-changed, they might not feel as motivated to go the extra mile to ensure your project's success.


A-team vs. C-team: Partners who have been squeezed down to the last penny will not put their A-team on your project. They simply cannot afford it!


Remember that this is not just a transaction. Successful relationships are built on fairness and mutual respect.

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