Some time back, as I was riding a taxi from Prague airport to Holiday Inn hotel, I wondered about the fixed price I was about to pay for the ride.
– “Airport to city is 700 flat.” – said the driver when I asked how much approximately will it cost.
Common wisdom goes that flat rates mean you get it worse than if it wasn’t flat. Indeed, if it was on meter, and if the driver took the shortest route (I had a GPS device on me, I could’ve easily checked it!), the fare would’ve been lower. And yet, I decided I loved the flat rate.
Flat rate means that the risk is with the driver, if for some reason or other his costs exceed the fare (e.g. because of a traffic jam or a closed road), I end up paying the agreed price. Also, the driver will really do his best to take the shortest route possible, because he wants to earn the highest possible margin, so he’ll make extra effort to be as efficient as it gets.
On the other hand, when the fare is on meter, the risks are with me, and any detours are on my budget. The driver has no incentive to keep the costs low–he actually benefits from taking me on a sightseeing ride. I always carry a GPS, but yet.
Compare it to implementation projects. Flat rate equals fixed price, meter equals time & material. Which one do customers prefer? Of course, fixed price. Because it puts the burden of delivery on the consultancy. If consultants fail to deliver in time and on budget, it’s on them, and they will make extra effort to hit the mark. With Microsoft Dynamics implementations, customers don’t like it time & material based. The ultimate reasons is that time & material projects make it difficult to predict ROI.
The problem with implementation projects, as with majority of IT projects in general, is that they rarely hit the mark–they often exceed the allocated budget or trample over deadlines. So, it’s consultants who bear the risks, and if the customer doesn’t agree to extend the budget (why should they?) the consultants have to bite the bullet.
I have a theory about blowing budgets away and trampling deadlines: it happens not because consultants are incompetent, it happens because budgets and deadlines are unrealistic. The problem is estimating work and effort, and if you underestimate it, you are sure to blow the budget. (If you underestimate on purpose, so you can get the job, and you miss the mark, then you deserve to bite the bullet!)
If you are a consultancy specializing in implementing Microsoft Dynamics NAV (or any other Dynamics flavor), there is good news for you: Sure Step.
While Sure Step can’t make you estimate the work with accountant’s precision, it can get you very close to real figures. The tools available to you in the Diagnostic phase of Sure Step can help you calculate important numbers, such as Degree of Fit, which can give you a better picture about amount of effort you need to exert to get from here to there.
Actually, whole Diagnostic phase is packed with tools that help you build a firm picture about the project, estimate the work to be done, and make you feel more comfortable about fixed price. Specifically if you utilize Fit Gap and Solution Blueprint, Architecture Assessment, Scoping Assessment and Business Case decision accelerators (four out of five), I am fairly sure you’ll feel as happy about your next fixed price project, as I was when I paid 700 CZK to the taxi driver at the lobby of Holiday Inn, Prague.
