A one-tier ERP strategy means deploying a single solution to all locations, both large and small. Most solutions have a “sweet spot” where they can deliver the maximum benefit at their lowest TCO, but almost no solution is a perfect fit for all environments. A two tier ERP strategy overcomes this issue by combining a tier 1 solution for larger sites with a tier 2 solution for smaller or more rapidly changing locations within a single integrated environment.
Properly implemented, users benefit as they retain access to the capabilities they need, the solution is fully integrated so data is never lost or manually re-entered, overall costs are driven down and in many cases responsiveness and agility is increased.
But what do businesses that are considering a two-tier strategy need to ask their vendors in order for this to be implemented properly?
- Scalability – how scalable is your ERP solution in terms of numbers of users and supporting hardware?
2. Total cost of ownership – what is your typical TCO for small and medium sized subsidiaries?
3. Global functionality – does your software support compliance and account requirements like IFRS, and local manufacturing regulations in the countries we intend to operate in?
4. Data consolidation – can we consolidate data from across the business into the tier 1 system we are already using?
5. Standardization – can we standardize on one version of your product across borders?
6. Support – what are the support costs and terms for your software in the countries we operate in?
7. Infrastructure – how can we get your software to work on the technical infrastructure we have in less developed countries?
8. Reporting – can we run local and global reports to see how our business in performing?
9. Implementation – how do you ensure that the software is set up in the same way in the various countries we operate in?
10. Upgrades – what happens when we want to upgrade our software?
By consolidating the number of ERP systems a company use, rationalizing the way they manage those systems, and standardizing on as few systems as possible a two-tier strategy helps organizations become more nimble, and in turn more profitable.
But the most compelling argument is that a business can save a third on each tier 2 installation compared with a tier 1 installation when calculating total cost of ownership (Source: “The Total Cost of ERP Ownership in Mid-size Companies,” Aberdeen Group, July 2008; Based on 132 users for Tier-2, 214 for All Mid-Size Companies, 331 for Tier-1).