When your organization decides to implement a new ERP system, it can be an exciting time for employees. There is hope on the horizon that the tedious workarounds or functional gaps within the current system will be replaced with a better and more advanced system.
It’s likely that your employees started making wish lists as soon as you announced the ERP project. These wish lists will continue to grow until someone (likely project management) reminds the team of the project constraints.
Anyone experienced in organizational change management will tell you that excitement around a new ERP implementation is a key success factor in user adoption. While turning away employees’ wish lists due to budget or time limitations may dampen the excitement, you also must control project scope.
The 2021 ERP Report
This annual report summarizes our independent research into organizations' selection and implementation decisions and their project results.
So, how do you implement a new ERP solution while ensuring both project feasibility and employee engagement? The answer is prioritization of ERP requirements before ERP selection.
Prioritizing ERP software requirements may sound like a simple task, but when all parts of the business believe their functional requirements are the most important, you may find yourself in a stalemate. Luckily, there are several strategies you can use to help your team reach a consensus and ensure a successful ERP project:
1. Clarify the Project Goals and Scope
You may be familiar with the “project management triangle” or “triple constraint” where scope, time and cost are depicted on each corner of a triangle with quality in the center. Usually, before an ERP project has begun, all three of these constraints are already decided. While time and cost are easy to quantify as the project progresses, scope can run amok – especially when it comes to meeting business requirements.
It’s because of this scope ambiguity that project kick-offs are important. With all team members (business users, analysts, ERP consultants, stakeholders, etc.) present, you should clearly define the business objective of the project and identify items that are definitely out of scope.
The goal of your project could be as simple as moving off your legacy system due to end of support or as complex as overhauling your e-commerce experience to modernize your customer service. Whatever your goal, make certain that all team members understand it, as this will minimize the amount of non-critical business requirements that arise during ERP requirements gathering.
2. Define Baseline Business Processes
Identifying the business processes that will be impacted by the ERP project helps you define project scope. In addition to identifying these processes, your team should document them as they exist in the current system. This will help establish a list of minimum requirements needed to keep the business operating.
When documenting business processes, the ERP project team should focus on business needs and not confuse current system limitations with what is truly needed. This is not the time to define future state processes but just to listen to employees’ needs.
3. Improve Your Processes
If you need to increase efficiency, break down silos or achieve another important business benefit, then business process reengineering is your new best friend. We recommend conducting business process reengineering before considering standard ERP functionality. Why before? It’s because functional areas that bring competitive advantage – such as customer service or supply chain management – should not be standardized.
Once you’ve improved the processes that differentiate your company from competitors, you can begin looking at ERP functionality. This will help you determine how to improve processes that may need to be standardized. These might be processes related to finance or human resources.
While differentiated processes should not be standardized, this is not to say that standardized processes can’t bring competitive advantage. In fact, ERP vendors spend countless dollars and hours refining system capabilities to meet the most frequently asked for features to appeal to the widest customer base. Taking advantage of a process recommended for your industry can help you to stay competitive.
4. Perform a Fit Gap Analysis
Now that you’re looking at ERP functionality, you can perform a fit gap analysis. This helps you identify where a new system fits your company’s requirements and where it doesn’t. Basically, for each requirement gathered, you should determine if each ERP system on your long list can meet the requirement natively (fit) or requires a modification (gap).
Requirements that are considered “fits” and can easily be configured are usually no-brainers when it comes to priority. Fit requirements that involve some additional effort, like a data conversion for example, can also be prioritized as these are usually easy wins for the project team.
Gap requirements, however, should be put lower on the priority list. Having a long list of gaps makes prioritization challenging, so you may want to weed through the erp requirements list to determine if the system can support these requirements in a different way than anticipated.
If there are any remaining gaps, you can justify these gaps by conducting a cost analysis. Here are some questions to keep in mind when justifying gaps:
- What is the business impact if this requirement is not met?
- Additional labor requirements?
- Dollars lost?
- Customer satisfaction impact?
- Compliance issues?
- Will this impact the project timeline?
- How many hours are required?
- Does the project have the appropriate resources to complete the work?
Based on this analysis, a cost can be associated with each gap requirement to determine if it can remain as a lower priority.
5. Classify Business Requirements
Now that all valid requirements are on the table and the gaps have been justified, the project team can classify each requirement into one of three categories: must have, value added and nice to have.
Any requirement that falls into this bucket is mission critical. Classifying a requirement as a must-have, signifies that the business cannot operate without it.
The dollar amount determined during the cost analysis of this requirement should be subtracted from the project budget since it is assumed this requirement will be met. Continue to subtract from the overall budget as requirements fall into this category as seeing the dollar amount decrease will help the team keep perspective as to which requirements are really a priority.
Value-added requirements are not mission critical. However, requirements that fall into this category could greatly enhance the business.
For example, let’s say your project mission is to simply replace the legacy system with new ERP software. As such, you are not designing new business processes that don’t already exist in the current system. If the current system does not have the ability to send customers an email when their online order has shipped, then this requirement is not technically within the project scope and is not a must-have requirement.
Considering that email confirmations are pretty standard in the e-commerce industry, meeting this requirement could add a lot of value to your company if you operate within this industry. That’s why this is an example of a value-added requirement.
Requirements that are classified as nice-to-have are often addressed in a later phase of the project. These types of requirements are those that are neither mission critical nor add a great amount of value to the business.
For example, a business user might want the ability to request a report that identifies the amount of late deliveries per vendor. While this data is readily available in the system, the user wants a report that provides a summary view. This would be considered a nice-to-have requirement.
When classifying requirements, we recommend keeping the project budget, timeline and scope top of mind. Also, it’s important to ensure collaboration among all departments and stakeholders, so you have a well-rounded perspective on what the business should prioritize.
What ERP System Fits Your Company Best?
The only way to answer this question is to prioritize your business requirements. This calls for organizational alignment around project goals, a clearly defined scope and, more often than not, process improvement.
Panorama’s ERP consultants are experts in business process reengineering and software selection. We can help your company find an ERP software solution that meets your highest priority requirements as well as several value-added and nice-to-have requirements.