Every executive who requests a proposal for an ERP project runs into the same question: "How many man-days is this project?" Yet failure rates that have not changed for decades show that the real problem lies not in the duration but in the question itself. This article examines why the man-day pricing model is breaking down economically and which questions should be asked at the proposal table.
The Unchanging Failure Rates of ERP Projects
Gartner research predicts that through 2027 more than 70% of newly implemented ERP initiatives will not fully meet their original business goals, and as many as 25% will fail severely. McKinsey’s transformation research paints the same picture: roughly 70% of large-scale transformation efforts fall short of their goals; in the "Unlocking success in digital transformations" study, the share of organisations that say they have been able to sustain their performance improvements is only 16%.
What is striking is this: these rates have barely changed across generations of technology. Software moved to the cloud, interfaces were modernised, AI arrived — the failure rate has stayed put. If the problem were in the technology, it would have improved along with the technology. If it is not improving, the problem is in the model.
The Structural Contradiction of the Man-Day Pricing Model
The contradiction of the man-day model can be summed up in a single sentence: the vendor’s revenue grows as the duration lengthens; the customer’s interest lies in shortening it. The two parties to the same contract are structurally incentivised in opposite directions.
This contradiction grows through three mechanisms:
- The economics of scope ambiguity: Every requirement that is not clarified at the start of the project turns, in the months that follow, into an additional man-day invoice in the form of a "change request". For the vendor, ambiguity is not a cost but a revenue line.
- Information asymmetry: The customer has no tool to check whether the estimate "this job is 40 man-days" is realistic. There is no point of comparison; the negotiation rests on trust, not on data.
- The input-output disconnect: A man-day is a measure of input. The invoice shows hours, but inventory accuracy, delivery time, error rate — in other words the outputs the customer actually wants to buy — are often absent from the contract.
Field observation (anonymised): A manufacturing company whose ERP project started with a 120 man-day proposal had exceeded 200 man-days by month 14. The reason for the overrun was not laziness — at the outset, nobody had measured the existing processes. Every duration commitment made without a diagnosis is an estimate; and the invoice for the estimate is always issued to the customer. We would not trust a surgeon who commits to the length of an operation without taking an X-ray; in ERP, the same commitment is made every day.
The Economic Break in ERP Consulting: What Do Bain and McKinsey Say?
The break began first at the top of the consulting world. According to industry reports, AI is forcing McKinsey, BCG and Bain to rethink their fee models; McKinsey has stated that roughly a quarter of its fees are now outcome-based. The model is simple: the parties agree on a measurable target — revenue growth, a cost reduction, an operational metric — and the fee is tied to the target being met.
The chain of logic carries over directly to ERP: AI is making the repetitive part of consulting work (documentation, the configuration plan, test scenarios) cheaper. As repetitive work becomes cheaper, every hour priced on a man-day basis comes into question. What remains is the consultant’s real value: the right diagnosis, the right prioritisation and ownership of the outcome. Our assessment (a labelled estimate): this pricing shift, which began in large consulting firms, will reach the SME ERP market within the next few years — and proposals that arrive with a man-day table will be left defenceless against proposals that arrive with an outcome commitment.
5 Questions to Ask When Evaluating an ERP Proposal
At the proposal table, the following five questions make the weak points of the man-day model visible. If the answers are not satisfactory, the risk is high whatever the price.
1. What measurement is this proposal based on?
A man-day figure given without measuring existing processes, data quality and organisational maturity is an estimate. "We know from similar projects" is not a measurement — ask for a written assessment of the current state that is specific to your company.
2. If the scope changes, how does the price change?
Are the unit cost of a change request, the approval mechanism and the cap written into the contract? If the cost of scope ambiguity has not been defined in advance, your bargaining power decreases as the project drags on.
3. How is success defined, and who measures it?
"Go-live" is not a definition of success; the system goes live and nobody uses it. Business metrics such as inventory accuracy, closing time and delivery performance should be agreed at the outset, and their measurement should be verifiable independently of the vendor.
4. Which part of the work is standard, and which part is genuine expertise?
Documentation, standard configuration and the production of test scenarios can today be automated to a large extent. If these items are still priced at the full man-day rate, the savings from automation are staying with the vendor, not with you.
5. How much of the payment is tied to the outcome?
Is the vendor willing to tie part of its fee to the outcome it commits to? A proposal that leaves all the risk with the customer is saying that the vendor does not trust its own estimate either. Even a small share linked to the outcome aligns the incentives.
Conclusion: The Shift to a Value-Based Model
The man-day model was the product of an era in which measurement was expensive and slow. As measurement becomes cheaper — as processes are digitised and diagnosis is automated — models that price the output rather than the input are becoming inevitable. The most powerful tool in an executive’s hands is to come to the proposal table with a demand for measurement: X-ray first, then diagnosis, treatment last.
This article is the first in the growing «From Man-Days to Value» series.
1. Is Consulting That Sells Man-Days Coming to an End? (this article)
2. Let’s X-Ray the Promises of AI
3. What Has AI Made Cheaper in ERP, and What Has It Made Valuable?
4. Diagnosis First: What Does the New Path in ERP Look Like in Practice?
5. The Unmeasured Layer of Digital Transformation: Leadership
6. Why Do Reports
Stay on the Shelf in Digital Transformation?
7. (coming soon)
As a starting point for seeing your project’s risk profile, you can use the 2-minute ERP Risk Score assessment. To make sure you do not miss the rest of the series, follow our LinkedIn newsletter.