Five mistakes to avoid when negotiating your ERP contract
You set out all the requirements for your ERP. You met with several vendors who are ready to help you implement and begin achieving value from that ERP. Now it is time to negotiate the contract. Here are a few mistakes to avoid.
Assuming that the ERP will do all you think it can
Work with your team to find every one of these. These can be collective assumptions or one held by one or a few, but any one of them can kill your project. You assume your chosen ERP will do something or solve some problem. Have you explicitly asked your vendor if this is true? Have they provided actual evidence that the ERP will do that something? Now is the time to sort out assumptions from facts.
Failing to vet your vendor’s financial stability
No-one wants to go into business with an unstable partner. Get their financials and make sure your financial folks give them a good grade. You want them to stay in business at least long enough to last the life of your ERP. You want enough operating capital to pay the consultants who will work on your implementation. Look up their credit rating and stock performance. Get references – as many as possible. Contact the references to learn what was successful in their dealings with the vendor. Find out what could have been done better and decide if that learning means you should add another clause to the contract.
Not asking for more
You decided on one vendor that seems best for your business. There were other vendors you considered that did not win your competition. Some of these had certain lower costs or benefits you would like. Work with your chosen vendor to build some of these features from other vendors into your contract.
Failing to bargain over base price
Ask for a lower price. You already ranked this vendor as number one but maybe they could be even better. Do not leave money on the table. Some part of the total offer can probably be reduced if you’re persistent.
Being too demanding over implementation timescales
Whether the vendor suggests 50 or 500 days to implement your ERP, remember they probably know more than you about the effort and time required. You are in a hurry to begin gaining the benefits you expect. You probably think your team is very good. Be careful: if you ask the vendor to reduce the total implementation time, there is a great risk that training or data conversion or some other important part of the process might be shortchanged. While it is important to get the job done quickly, it is more important to get it done correctly and completely.
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