ARC has recently completed a study on the transportation management system integration market. We have previously done a study of transportation management system (TMS) market and transportation execution and visibility system markets, and interviewed TMS vendors. Finally, we have surveyed and interviewed TMS customers. Interviewing the system integrators (SIs), that implement the different types of transportation software solutions, allowed us to complete our 360-degree review of freight transportation software technologies.
The system integrators that serve this market were more knowledgeable, or perhaps more upfront, about the costs of implementing a transportation solution and the time it would take, than vendors or users.
The costs of an implementation depend on the integrator’s fees, how long the implementation takes, and the number of consultants involved.
System Integration Fees
The fee structure is different depending on whether the software vendor or a system integrator implements the solution. It also depends on whether the system integrator is a global SI with billions in revenues and a wide ranging and extensive consulting practice, or a boutique consultant that is much smaller and more narrowly focused on transportation and related supply chain execution software.
Software vendors and the global consulting firms have the highest fees. Hal Feuchtwanger, the Director of Transportation at 4Sight Supply Chain Group, reports that the big TMS vendors charge $250 an hour.
The cost for a boutique consultant, according to Davison Shopmeyer, an executive managing partner at enVista can go as $200 or even higher. More commonly a boutique’s fees would be in the mid-100s. The cost a boutique charges depends a lot on their consultants. Some boutiques have consultants that used to work doing implementations or in product development for leading TMS vendors. These boutiques can charge a higher rate and often avoid the need to discount to win a deal.
Global system integrators can charge even higher. According to Joel Garcia, the senior vice president of supply chain at Spinnaker SCA, global SIs can charge as much as $300 an hour despite having several consultants on the project offshore, usually in India, and being paid a much lower salary than in the US or Europe.
In some cases, a global SI or a TMS vendor does not have enough resources, and they turn around and subcontract part of the work to an SI. When an SI is hired as a subcontractor, they are typically paid half, or less, than the rate the vendor is getting, according to Mr. Feuchtwanger of 4Sight.
But companies with an offshore presence may find the subcontractor fee perfectly acceptable. Business Transformation Consulting (BTC) is a company headquartered in Mexico City with a Blue Yonder TMS implementation practice. They have several consultants that have received certifications from Blue Yonder for successfully completing their Blue Yonder TMS implementation training. Mexico, of course, has lower salaries than the US or Western Europe. But, Blas Trevino, a partner at Business Transformation Consulting is quick to point out that they take the lead on their own TMS implementations. Further, you should be careful about assuming offshore means less talented. BTC has a transportation network design practice that is based on the Blue Yonder solution. Network design requires a talented team.
How Long Does an Implementation Take?
A fully integrated TMS, with moderate complexity, will take about 4-5 months according to Mr. Shopmeyer. According to Amit Nagar, the practice leader for transportation & logistics at HCL, cloud solutions can go in faster, as quickly as 3 to 6 months. But on-premise implementations, or implementations involving a complex migration from a legacy application, can take upwards of 9-12 months.
Other consultants do not believe cloud implementations are any faster. Frank Camean, the chief executive officer at FOURSIGHT Supply Chain Group, says that “Our belief, generally is that public cloud versus private cloud versus on premise has less overall bearing on total TMS implementation time than does the size and complexity of the client network being enabled, and of the simplicity versus the sophistication of the planned deployment.”
How Many Consultants are Involved?
According to enVista, there are typically 3 full time equivalent (FTE) resources from the SI. There is a director who is leading the design and management of the project. This leader is full or part time depending on the phase of the project. Then, there is also one developer and one architect that works full time throughout the project. If there is a heavy integration or modeling lift, another part time specialist will come on to support that area, which typically consists of about 40 hours of work spread across 2-3 weeks.
Brad Forrester, the CEO at JBF Consulting, agrees there are typically 3 FTEs that will put in a total of about 5 to 6 thousand hours. These consultants will be supported by FTEs from the client. “In a typical implementation there will be 3 client FTE that will spend devote about 6,000 hours to a complex implementation. They will be supported by approximately 10 part-time SMEs who will invest another 4000 or so hours in the project.
That seems like a lot of consulting hours between SI and the client. But compared to a WMS implementation, it is a piece of cake. Many of the SIs in this market also have WMS practices. And the WMS practices are typically at least twice as large as the TMS practice.
Chris Riemann, the managing director supply chain & network optimization at Deloitte, reports that they did both warehouse management and transportation management implementations for one of the biggest retailers in the world. There were twice as many consulting hours surrounding warehouse management system (WMS). “The WMS required 15-20 integrations. The TMS a lot fewer.”
Do Agile Implementations Accelerate the Implementations?
Agile is characterized by rapid learning and decision-making cycles. Agile’s genesis was in software product development where code was developed in quicker cycles and shared more frequently with users to make sure development was proceeding on the right track, in a way that would drive value for the users. Today, virtually all SIs report that they employ an agile implementation methodology and that this project methodology can speed the implementation of enterprise software while helping to ensure the customers get the solution they want.
The traditional implementation methodology is a more sequential process known as waterfall. Mr. Garcia of Spinnaker argues that while every SI touts agile, an implementation can have many dependencies that will drive large pieces of the implementation to rely on the traditional waterfall methodology. In practice, almost all implementations are hybrid involving some agile and some waterfall. In a request for proposal to a consulting firm, the shipper should ask what portions of the implementation will be agile and which will be waterfall. And when a detailed project methodology is displayed, shippers need to realize that the implementation methodology probably can’t be followed exactly as laid out.