Santiago Morales/April 21, 2022 /Dynamics 365/Digital Transformation/ 3 min read

Beware of Hidden License and Implementation Fees

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Pangea Consultants recently penned a deal with a company that was reviewing several ERPs as part of their selection process. This is quite normal, and I would expect any company worth their salt to initiate a request for a proposal. In this blog, I will address the lessons that should be considered in the implementation process and some key takeaways from the competitors’ pricing.

During the implementation process, we asked pertinent questions such as:

As well as a myriad of required questions to a potential client, so you may put together an accurate proposal that makes sense both to our organization and to the clients.

Upon completion of our due diligence/diagnostic stage, we presented our final proposal to said client. The client was none too pleased with the numbers they saw. This client has four legal entities, two of which required full Supply Chain Management, as well as integrations with multiple legacy systems. This was by no means a next, next, your live type of project. We sat down with the CFO and staff to go over our proposal. We first went through the licenses as those tend to be straightforward (or so I thought).

The client required 45 licenses, and we quoted them 45 Microsoft Dynamics 365 Finance & Operations Supply Chain Management licenses with 4 Finance Attach licenses.

The number seemed very high to them; I explained that these licenses are published online for anyone to see. In addition, I mentioned that this includes all the functionality they will require for their organization.

After some back and forth, we identified why the client was completely bowled over on our license costs. They had received a lower cost quote from one of our competitors, a cloud-based ERP that tailor fits the solution to each client. I was completely thrown aback by the pricing structure as well as the approach.

Here were some key takeaways from the competitors pricing:

  • Competitor did not quote the full 45 users. They quoted 24 as a higher number of users would have put the client in a different tenant and thus a different licensing structure increasing the license costs by an order of magnitude.
  • Competitor did not quote Supply Chain Management, Fixed assets, budgeting, nor some of the key functionalities the client would need. As a distributor of retail goods, Supply Chain Management is critical to this clients’ operations.
  • Competitor only quoted one legal entity; there are 4. By only quoting one, they did not have to put the client in a different tenant, thus reducing the licensing fees.
  • Competitor’s pricing is nowhere to be found online. Competitor offered a 30% discount, but since licenses are not published, the question was “30% off of what?”

Once that was resolved, we moved to implementation fees. Ours were admittedly higher. As mentioned, we were implementing two Legal Entities with full Supply Chain Management and two legal entities that are service-based and integrations with the client’s front-end systems. As we reviewed in-depth with the client, we learned that our competitor had quoted only one Legal entity; they did not include Supply Chain Management as part of the quote, only financials. The competitor’s response to not including Supply Chain Management was that the client did not need Supply Chain Management as a phase 1.

As previously stated, this client is a distribution company. Any consulting practice that would state that Supply Chain Management is not critical to a distribution company in phase 1 would be very hard-pressed to explain the reasoning.

Once the client completed a full analysis of both quotes, a decision to move forward with Microsoft Dynamics 365 Finance and Operations implementation was approved by the board.

Our client, as did we, learned some core lessons during this process:

  • The foot in the door method is not an effective way of building trust and a long-term relationship with a client. Under-Scoping a project to close a deal and then billing change orders is no longer an acceptable sales approach.
  • It is paramount that any organization that is looking to implement an ERP gain a complete and honest proposal from the companies you would like to work with to ensure you are aligned in both scope and cost.
  • Do your due diligence. Do not follow the “well, I worked with it in the past” approach as technological and organizational changes may make “past” systems obsolete for your organization.
  • Question your decisions and requirements. That will help both you and your partner successfully implement a solution that will benefit your organization far into the future.

Thank you.

Hidden License and Implementation fees

I hope this article helps you on your Business Applications selection journey. Feel free to reach out to me if you have any questions or comments.

Santiago Morales
Managing Partner

Read more blog entries by Santiago Morales

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