When implementing software, the cost of consulting services can sometimes be a hidden, but costly, ingredient.
Geac New Zealand’s Tim Fisk says he has heard the overseas horror stories about implementation cost blow-outs of as much as 200% to 300%.
He believes it’s not such a problem in New Zealand, because there aren’t the huge companies that are found overseas. However, he says implementation cost is a factor people are increasingly taking into account when purchasing.
Fisk says Geac, which has just launched a new line of supply-chain management software called StreamLine, puts the software’s typical implementation cost in New Zealand within a budget of 50 cents for every $1 of software, for a “straightforward” implementation.
Fisk defines implementation costs as consulting, project management, re-engineering and database conversion. He says one of the reasons for Stream-Line’s 0.5:1 ratio is because of the “functional fit” of StreamLine. Other products have a lot more functionality but he says StreamLine’s been designed for a specific range of industries, meaning people don’t have to “detune” it for all those functions they don’t want.
Another reason he says, is that StreamLine is designed specifically for medium-sized organisations, which make up the bulk of New Zealand companies. And although StreamLine has been developed for a global market, it has been designed in New Zealand.
“There’s not a lot of functionality you have to detune for the California Environmental Protection Act.”
Fisk also says StreamLine has been built from the ground up and it has rapid and flexible implementation. It is based on Microsoft standards.
Geac’s competitors also claim low cost ratios. In Australia earlier this year for example, George Weston Foods announced it would implement Baan IV software and expected for every software dollar spent, only one additional dollar would go towards implementation. Baan says the 1:1 ratio was achievable by using its Dynamic Enterprise Modelling tool for mapping out business processes prior to and during software implementation.
Baan New Zealand GM Michael Murphy says that project is still on target for the 1:1 ratio. He also expects no more than a 1:1 ratio in its latest New Zealand implementation (Mercury-Transfield) involving 32 users, which is expected to take just eight or nine weeks.
“One of the reasons we won that deal was because of the speed of implementation.”
However, SAP general manager Geraldine McBride says the ratio argument can be a meaningless one and a “red herring”.
“At the end of the day it comes down to things like value and business benefit. What value is the customer getting out of the software? What business benefit is it getting?
“If it costs half a million dollars and the business benefit is two million dollars, who cares about the half a million dollars?”
She says the ratio depends on the type of implementation an organisation is doing — whether it’s a straight software replacement or whether business re-engineering is involved.
She says she knows of SAP’s R/3 being implemented on a 0.5:1 ratio, but also on a ratio of 1:1, 2:1 and 3 or 4:1.
SSA Pacific managing director Graeme Cooksley says SSA has also implemented sites with a 1:1 ratio, and in some cases below that. Others have been 2:1 or 3:1. Like McBride, he says it really depends on the type of implementation.
Factors such as re-engineering, the experience of the client, and how much of the implementation the client does itself influence the ratio.
Cooksley says the type of product is also a factor. Financials, for example, are usually easier to implement than some supply chain or manufacturing products, because people working with them have experience in sophisticated accounting software.