The Rise of Two-Tier ERP Systems
Not too long ago, single instance ERP implementation was the primary way to install an ERP system. Now, with new technology and deployment models, two-tier ERP systems have gained prominence. Several big names in the ERP industry are adopting the two-tier model to meet customer demand. This model has gained in popularity because a two-tier ERP system allows enterprises to keep their fully featured ERP solution deployed at headquarters, while adding a second ERP system for company subsidiaries. The reason behind deploying a multi-level ERP system is that upgrading a single instance global system is costly and time-consuming.
Businesses today are constantly growing and changing; software should also keep up with potential business volatility. For this reason, a two-tier ERP system is the perfect solution. The two-tier model alleviates the challenge of migrating one ERP instance across multiple subsidiary channels. Two-tier ERP deployment is exceptionally convenient for global companies, where implementation across different management can get convoluted, to say the least.
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Two-tier strategies have already been adopted by companies like SAP, NetSuite, and Informatica to name a few. This ERP trend is fueled by the attractive hybrid of on-premise and on-demand ERP systems, melded into two-tiers of ERP efficiency. Since 2009, 20% more companies admitted that they were considering two-layer ERP software for their business processes. Many SAP-run companies have supplemented their ERP system with a second ERP instance like JD Edwards or Microsoft at the local level. Needs are different across different business branches; therefore, one ERP instance may not make sense for a multi-tiered business.
Not only are two-tier ERP systems gaining popularity among businesses worldwide, but it’s also becoming increasingly challenging for global companies to conduct business efficiently without a second ERP instance. Multi-national companies will reap the benefits from a two-tier system, as subsidiaries in foreign countries can adopt a system that has customized features that pertain directly to the location they operate in, like special tax codes and country-specific regulations.
The increasingly popular trend of two-tier ERP strategies can be linked to three factors: expensive legacy systems that are too expensive at a local level; legacy ERP systems that lack the industry-specific ERP functionality that enterprise subsidiaries require; and a single-instance ERP system upgrade that is inefficient and expensive.
What does this trend mean for ERP vendors? We will surely see an increase in partnerships between software vendors that provide enterprise ERP and vendors that provide web-based ERP tools. NetSuite has already partnered with Informatica to create the Informatica cloud, which is designed to integrate NetSuite OneWorld with Oracle EBS and SAP’s Business Suite. Second tier ERP providers can benefit from this new two-tier ERP system by providing software with deep vertical industry functionality for enterprise subsidiaries or branches of large companies.
If you’d like to learn more about some of the specific ERP solutions? Review 20 of the top systems on the market on the Business-Software.com Top 20 ERP Software report.
[Photo courtesy of CFO An argyle. Company.]