ERP System Selection – Defining Your Requirements

August 20th, 2013 by

If you have decided to replace your current business management system, there are a number of critical steps you need to take to reach a purchase decision.  Obviously one of the most important ERP system selection steps is defining exactly what you want your new system to do.

ERP System SelectionThis requirements document serves two purposes.  First, it describes how you want to run your business (regulatory reporting, operations control and strategic visioning).  Second, it establishes a means whereby you can identify best suited products.

There is any number of methodologies that various product professionals recommend when it comes to ERP system selection.  Some prefer a fast track method that assumes one of a very few pre-selected products will be included in the analysis.

Some believe that the creation of a requirements document serves no useful purpose simply because the business processes supported by today’s ERP systems cannot or should not be modified.  After all software vendors have spent millions of dollars creating best practice processes.

Depending on your point of view the logic of these assertions might make sense.  However, product professionals forget that the ERP system selection process is actually one element in a far more important initiative to transform a firm into a more efficient, effective and competitive organization where everyone has an opportunity to contribute to their personal success and therefore the success of the firm itself.

I am in this later group, believing that it is important for people in a firm to define specifically what they need to be successful.  It’s part of the process.

If you are interested I have written a number of articles regarding ERP system selection.  If I could recommend one it would be Financial Application Software: Find a Product That Best Suits Your Unique Needs.

ERP System Selection – Create a Solid Foundation

You cannot just leap into an ERP systems selection project, defining what you want and evaluating products that you have previously identified.  If you do so, you may have already created a critical weakness that might doom the project to failure (complete failure, failure to achieve your objectives or selection of the wrong product).  Instead you need to create a solid project foundation that will lead to success.

This article isn’t going to set forth every step in an ERP systems selection project.  Instead we will be concentrating on the creation of a solid requirements document and the process of reaching that critical point in the project.

Quiet Discussions

One of the dangers inherent in any ERP system selection project is failing to include those people who will actually have to use the software on a day-to-day basis.  Exclusion leads to resistance which leads to under achievement.

Regardless of who decides that the current ERP system is under performing, the decision to “do something” must be supported by everyone in the organization, not just key stakeholders.

Start the project by asking people what they think.  Nothing formal.  Just a general discussion that gives everyone an opportunity to express their opinion, have people wanting to listen to them and knowing that they matter.  This inclusiveness insures that everyone’s on board and that’s a critical project objective.

If the vast majority of employees agree that something needs to be done, then move to the next step.

Educate Yourself

The fact that most people want to move forward doesn’t necessarily mean that you should launch a formal ERP system selection project.  The only fact in evidence right now is that people are not happy with the current ERP system.  The first step forward should be the appointment of a project manager.

At this early stage the project manager is responsible for knowledge acquisition.  The most critical first step is answering the question “Do you know what you are doing?”  Ignorance is a real danger.  Learn as much as you can about ERP system selection.  You might want to use GoogleBlogSearch to find other articles and blogs that relate to ERP system selection.

If you don’t feel as though you have the required knowledge and experience, bring in an unbiased software selection consultant.  At the same time you cannot just turn the project over to a third party.  Your firm, your employees and your business processes need to be improved and that responsibility cannot be abdicated.

Discover What’s Possible

If you have been using your current EP system for a number of years, it’s likely that you would have insulated yourself.  If you are going to understand what’s possible in terms of modern system functionality and information opportunities, you need to acquire knowledge.

The most effective (and efficient) path is to identify several products that “might” be of interest.  Meet with these product professionals and let them give you a partial “dog and pony show”.  Make it very clear that you aren’t buying software.  You just want to understand what their system offers in terms of functionality and information management that might apply to your firm.

Evaluate the Potential Relationship

If you are very lucky, you might identify in these initial conversations one or more products that might be of great interest once the formal ERP system selection project is launched.  Rather than evaluating the product in detail (unless the product is clearly unsuitable), you might want to evaluate the potential of the relationship you are going to establish with the product professional.

While you are going to purchase a “product” at some point in the future, the success of the project is going to be based on the knowledge and skill of the product provider.  If they want to help you succeed, keep them in the mix.  If they just want to sell you software, find another product professional.

Create a Foundation for Success

ERP system selection isn’t just about buying a more functionally rich product.  Actually it really doesn’t matter what product you select if your firm isn’t organized for success.

One of your keys to success is creating an effective and efficient system where software functionality supports the way you choose to run your business.  Of course success cannot be achieved if your people, business processes, culture and management do not contribute to your success.

An ERP system selection project gives you an opportunity to literally and figuratively take your business apart and create a more competitive whole.  If you don’t know what you need to do to succeed, how can you possibly understand how your business management system should support your efforts?

ERP System Selection – Define Your Requirements

Now we can finally discuss the requirements definition process.  You could have just jumped right into evaluating products, but how can you evaluate products if you don’t know what you really need?

To be honest the most important aspect of the needs definition process is helping people understand what they need to do very well to compete more effectively.  Many firms really don’t understand why they are not as successful as they would like to be and they really don’t invest the time to find out.

The ERP system selection process forces (or at least it should do so) firms to look inward and understand what they do well and what needs to be improved.  If they can understand their strengths and weaknesses, they can then define what role their ERP system should play.  If they don’t understand, how can they possibly know what they want from their ERP system?

Requirements Document – Short Form

I have been publishing The Accounting Library, our software selection tool for the past 23 years and have seen a distinct shift in opinion regarding the use of requirements documents in ERP system selection projects.  Some people now advocate the virtual (or actual) elimination of any form of requirements document and requirements analysis.

Ten years ago many ERP products were strikingly different when it came to supported functionality and supported business processes.  That’s why firms had to use a detailed requirements document that could contain 4,000+ requirements.  It was the only way you could truly differentiate one product from another.

Today many/most ERP products support the exact same business processes, making it much more difficult to differentiate one product from another.  Now ERP system selection professionals (including vendors of course) suggest that you just identify your most important requirements, usually dictated by your industry.  I have actually seen instances where professionals recommend the creation of a requirements document that contains only 5 – 20 requirements.

Requirements Document – Long Form

While the short form approach certainly reduces the time everyone has to spend evaluating lengthy requirements documents, I think it has the tendency to create clones of ERP products.  Vendors have spent millions developing their products and they know better than we do about best practices.

While I can appreciate the fact that vendors have spent a lot of time creating software supported best practices, these products are not 100% clones of each other.  ERP products do in fact differ,  If you are going to find best suited products, you have to invest your time defining exactly what you need to do to become more competitive and you need to invest your time finding a product that meets those requirements.

Specifically you need to follow a four step process.

  • Critique your current ERP system and identify its strengths and weaknesses.
  • Analyze and improve your current business practices.
  • Meet with product professionals (vendors or software resellers) and determine what functionality or information management advances might help you compete more effectively.
  • Create a vision of your future and define the functionality and reporting options you need to meet these future requirements.

Many firms forget this last step.  If you are going to succeed in business you have to know where you are going and you have to utilize an ERP system that helps you get to this future.  Define where you are going to be, not where you are today.

Each of the steps outlined above will contribute to the completed requirements document.  You actually might want to adopt the long form requirements document as a first hurdle for products being evaluated.

Create a very short list of critical requirements.  Compare these against products under review.  If a product does not meet these critical requirements, it should be eliminated from further consideration.  Actually this first step can be used to whittle down the list of product candidates.

Once you have created the list of critical requirements, start to fill in the gaps.  This is the step some people suggest should be eliminated.  I disagree with this approach.  How are you going to identify best suited products if you cannot determine which ones are in fact better?

There is one last benefit from this approach.  Defining your requirements in detail forces you to consider exactly what is going to be required for you to become more competitive.  If you don’t ask these questions, how can you know where you are going?


ERP system selection can be a long and sometimes frustrating process.  With a lot of work and a little bit of luck you will find that one product with which we can form an effective, efficient and competitive partnership.

You have to start by understanding what you need to do to become more competitive and profitable.  Look inward.  Create a foundation for success.  Understand how ERP software can help you become more effective and efficient.

Define a vision of your future and create a requirements document that meets your needs today as well as in the future.

Most important of all remember that people matter.  Give each of your employees the encouragement and the software tools they need to become personally successful.  If they can become successful, your firm will become successful.

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