Fixed Fee or Time & Materials - Which is the best model for your SAP project?
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Soon after selection of the implementation vendor, you will have to prepare a contract to engage with your SAP systems integrator. As such comes the tricky question ? Do you engage in a fixed fee contract or time and materials for the next phase or your entire project. The answer is not simpler either. My personal choice as always has been to go with a fixed fee engagement model but this may not always be possible depending on the type of SAP solution your company is implementing and some other factors that are discussed below. I will share my perspectives on both fixed fee and time & materials engagement model and at the end this should guide your project leadership in making a better decision. I have discussed points at a very high level and the actual decision will be based on your project specific circumstances.
SAP Fixed Fee Contract
In a fixed fee contract, you are asking your SAP implementation vendor to deliver particular phase or the entire SAP solution for a fixed price. Within the contract or SOW you should include the exact scope of the solution you need to implement. Any change or addition to this scope will have to be reviewed and processed by the change control committee of the project.
This model may not suit every SAP customer and the following aspects need to be considered before making a proper decision.
Time & Materials Contract
In this model, you (the SAP customer) agree to pay the implementation vendor based upon the work that was done by the vendor resources on the project. This engagement is preferred when your project scope is not clear such that it can be included in the contract. Also, if you are doing sizeable custom development in SAP to meet your business needs there may be uncertainties to build a custom solution. It may be wise for the vendor and SAP customer to engage with a T&M contract. Word of caution: You should closely monitor the cost per resource and total effort spent of deliverables to keep to project costs from blowing thru the roof.
Points to consider for going forward with a time and materials contract.