Benefits of conducting a needs assessment for ERP systems

Over the past decade, we have seen the widespread selection and deployment of enterprise resource planning systems (ERP) in government. Even in an era of scarce financial resources, state and local governments are moving towards the assessment of needs and selection of these systems. Why? Because managing resources and improving business functions through automation and shared information are at the core of ERP systems. Some governments will go straight into a procurement process without a formal evaluation of needs. Many will reason that they already know that they need a system so why lose time on an already lengthy process? This article will discuss the reasoning for why all governments should conduct a needs assessment and integrate the information learned into future phases of the project.

ERP provides one of the most effective methods available to state and local governments to take a comprehensive look across operations and manage resources from an enterprise-wide perspective. Considering that this is a significant investment that will stay with your organization for 10 – 15 years, it will be important to have a well thought out process. One of the areas where many businesses and governments fall short on ERP implementation is underestimating the capacity of ERP and not ensuring that business practices adjust to maximize benefits. One way to mitigate this is to conduct a needs assessment. A needs assessment should look at the following issues:

  • What are our current business practices? Are the appropriate controls in place? Is the process efficient? What makes the process inefficient – is it the lack of technology or is it the process itself (too many hand offs, processes that are tailored to a particular department)?
  • What is the long term strategy of my organization? Are my business practices in alignment?
  • What resources are available for the initiative (technology, people, funding)?
  • What is the scope of the initiative? Are we only considering core financial and human resource/payroll functions? Or, are we considering permitting, property tax, business licensing, parks and recreation, etc.?
  • What are the risks to the organization and a successful project?

A needs assessment affords the organization an opportunity to be thoughtful about what the motivations are and what the necessary changes will need to be in order to move forward with a successful procurement and implementation. There are many examples of where not having this type of examination has led to problems in both system selections and implementation. The following are some examples of this:

  • One municipality who was going through vendor demonstrations was greatly impressed by some of the functionality in the purchasing module of a proposed system. The selection team was drawn to this vendor as a result of this presentation. However, the major difficulty at the city was with their human resource process. This is where the city was looking to focus efforts. Having a needs assessment process would have allowed the city to tie their selection directly back to the strategic vision and priorities that they identified. This would have allowed them to ensure that the purchase was focused on these priorities and not as much on which part of the product demonstrated well.
  • Another municipality had been working in a very manual environment with multiple handoffs and numerous disconnected paper forms. After the village selected a system and began implementation, there was not much consideration of how the business at the village needed to change. As a result, staff focused their implementation on an automation of current processes and did not take enough advantage of the system’s capabilities. About three years post go-live, the village hired a consultant to review their implementation. One of the main findings of this assessment was that business processes did not change enough and were inefficient. The village ended up making several adjustments to the system and their processes as a result. A needs assessment would have identified the processes requiring adjustment in advance of implementation.
  • One county knew that they needed to change multiple areas of their business operations. They decided to implement HR/Payroll, Finance, Property Tax, Customer Relationship Management (CRM) and Work Orders. Given the fact that they felt that operations needed significant improvement, they wanted to make sure that all of these systems were implemented and live within 36 months. Unfortunately, once the county got into implementation, they quickly realized that they did not have enough staff in order to both implement the systems and manage the day-to-day business of government. There were many times where the implementation vendor was on site and county staff would be pulled in multiple directions. This extended the implementation timeline out by nearly a full year and increased the total cost of the contract. A needs assessment would have focused on the amount of time needed by staff to participate in the implementation and could have saved the county both time and money.

A significant step in the ERP process, the needs assessment will generally take three to four months to complete and requires the engagement of every facet of the organization. While this process requires a significant investment of time and effort, it is crucial to ensuring that your ERP investment appropriately addresses the difficulties that your organization is currently experiencing. With the level of investment that your organization is going to make on this procurement, it is critical to take all steps necessary to ensure that you spend your scarce resources wisely.