Our client, a major enterprise software provider of human capital management solutions was in the process of a major transition from on-premise to cloud as it built new ERP channels with partners such as SAP, Oracle, Workday etc. Read the full case study here.

The push to align with ERP partners’ per employee per month (PEPM) pricing model uncovered additional opportunities to also overhaul their deployment and implementation pricing structure.

Our client operated across four business units that historically struggled to recover the deployment costs where the business units recovered only 5-35% of the costs associated with the implementation services.

High levels of customization to address the needs of specific jurisdictions, integrations, and business workflows increased the costs of deployment. As their growth strategy shifted to mid-to-low market, the unrecovered costs were estimated to increase 15-25% YoY .

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PROBLEM

1. Limited value positioning: No value proposition of the high levels of customization, time to value, and various SLAs
2. 85% sales automatically discounted implementation: Perception that full-fee implementations would negatively impact sales
3. Financial model challenges: No system in place to track, attribute, & estimate costs
4. New pricing and packaging needed for cloud: In cloud – value comes from delivering superior ERP implementation & bundling with system integrators - SIs

INSIGHT

1. Clients valued the customization and high SLAs: 70+% of the clients interviewed indicated client’s SLAs improved time to value by three months – avg. $170K/yr
2. 37% of the clients paid at or above list price: The perception of customers’ willingness-to-pay was not supported by sales data from FY 15 and FY16
3. Deployment was reported as cost of acquisition: New cost accounting system needed to drive value realization
4. New pricing strategy and structure needed for cloud: Opportunities exist to justify deployment activities for various service levels and align pricing of the service levels with customers’ requirements and recover up to 85% of the costs.

Strategy, sales, and finance teams received the proposed strategy with enthusiasm and committed implementation services resources to start tracking the cost attributes and service levels to implement the model in FY18.

Our client has the opportunity to recover its implementation costs up to 48% in the first year and continue to increase its cost recovery as it shifts to mid-to-down market.