This article is about Business vs Functional Requirements: The Key Differences and Practical Examples. As business analysts, one of our main responsibilities is understanding and defining requirements, but the distinctions between different types of requirements can sometimes be a bit confusing. For instance, what exactly is the difference between business requirements and functional requirements? I’ll explain the various types of requirements using clear definitions and examples, following the BABOK framework. By the end, you’ll have a solid understanding of how business, user, and solution requirements fit together to ensure project success.
Key Takeaways
- Business Requirements: High-level statements representing the organisation’s vision, scope, and purpose. These are not directly implementable.
- User Requirements: Describe how users interact with the solution and serve as a bridge between business and solution requirements.
- Solution Requirements: Define system capabilities and are directly implementable, split into:
- Functional Requirements (system behaviour)
- Non-Functional Requirements (system conditions).
Overview of Requirements
To start, I will follow the BABOK (Business Analysis Body of Knowledge) definition of requirements in this article. According to IIBA, there are four types of requirements:
- Business Requirements
- User Requirements
- Solution Requirements
- Transition Requirements (though I won’t go into detail on this type here).
1. Business Requirements
Business requirements describe the needs of the organisation as a whole. These are high-level statements that define the Vision, Scope and Duration of the project.
They express why the project is being undertaken but cannot be directly implemented in a system.
Example:
- To meet obligations to key international conventions, the business must deliver annual reports on the collection, management, and disposal of hazardous waste in Australia.
2. User Requirements
User requirements support business requirements and are often called stakeholder requirements. They describe how users need to interact with the solution and act as a bridge between business and solution requirements.
Examples:
- The user must have the ability to view a waste report by date range, jurisdiction, and waste category.
- The user must have the ability to submit a report for delegate approval before it is published.
3. Solution Requirements
Solution requirements support user requirements and define the capabilities of the system. Unlike business requirements, these can be directly implemented in the system.
Types of Solution Requirements:
- Functional Requirements: Describe the system’s behaviour or what the system should do.
- Non-Functional Requirements: Describe the system’s conditions or how the system should perform.
Functional Requirements Examples:
- The system must display report data by:
- Date parameters
- Jurisdiction
- Waste category
- The system must save the report as a draft.
- The system must notify a delegate of a pending review.
- The system must publish a report to PDF.
Non-Functional Requirements Examples:
- The system must operate within the organisation’s desktop standard operating environment.
- The system must integrate with Active Directory to enable single sign-on.
- The system must be available during standard production or business hours.
- The system must respond within two seconds to direct user interactions with the interface.
Summary: Business vs Functional Requirements
Business requirements describe the high-level goals and objectives of a system or product, while functional requirements detail the specific functions and behaviors needed to meet those goals.
Business requirements originate from business stakeholders and decision makers. They define the rationale for a project and the metrics that will determine its success or failure. Examples of business requirements include increasing customer engagement by 20%, reducing operational costs by 10%, or improving employee productivity.
In contrast, functional requirements come from business analysts and systems engineers who need to define the capabilities and components necessary to deliver the business goals. Functional requirements are more detailed and technical. They specify exactly what the system should do – for example, allow users to update their account information, process transactions in real-time, or generate monthly reports.
The key difference is that business requirements focus on the “why” and “what” at a broad level, while functional requirements dive into the details of “how” the system will be designed and built. Business requirements drive the high-level vision, and functional requirements enable that vision through concrete system behaviors and functions. Converting business needs into functional specifications is a key step in the design process. The two work together to align the business goals with the technical implementation.
Requirements Traceability Matrix
Finally, all these requirements should connect through a traceability matrix. This matrix ensures full scope coverage by linking requirements across categories. Any requirements that don’t trace back to others may need to be examined and removed from scope. By doing so, you achieve a fully traceable and cohesive set of requirements.