Fixing ERP contracts the way to go

Fixing ERP contracts the way to go

Competition for the business of installing and integrating enterprise resource planning (ERP) applications is increasingly resulting in fixed-price and fixed-schedule contracts. But not all fixed-cost, fixed-time schemes are what they appear, according to analysts.

In the interest of holding down implementation costs and improving the logistical and strategic planning required for such critical projects, organisations often demand - and get - contracts stipulating financial figures and dates.

The hydra-headed spectre of the year 2000 issue also looms over this aspect of ERP applications, because IT shops are spread thin as the deadline nears, making fixed-time and fixed-cost contracts even more attractive.

Businesses will spend roughly $US18 billion on the consulting and integration services needed to implement ERP systems in 1998, and more than $US34 billion in 2002, according to forecasts by International Data Corporation (IDC).

Despite those huge outlays, ERP implementation costs and project schedules have been shrinking in general, noted IDC analyst Susan Siew-Joo Tan.

Fixed-price contracts are catching on with larger consulting houses, but the inherent complexity of ERP installations sometimes makes hard and fast numbers tough to come by.

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