Why Now Is The Time To Rethink Your Two-Tier ERP Strategy

Sven Denecken

Multinational companies directly drive the majority of global business operations. Subsidiaries, dedicated lines of business, acquisitions, or divestitures are often run on the headquarters’ ERP system, but there are cases where it is advantageous for the subsidiary to run with its own, independent ERP system.

The headquarters’ ERP system is often more robust and complex than its subsidiaries’ smaller, less complex, and less powerful ERP solution. Too many times, this has led to multi-vendor ERP systems and strategies across the different tiers of the corporation

Two-tier ERP deployments, which provide the headquarters with a traditional, broad solution and the subsidiary with a lighter version that addresses its specific requirements, provides the enterprise more variability in how subsidiaries are managed. You can choose a model that is more headquarters-centric and top down, or you can use a more autonomous model for the subsidiary. Do you only need to be able to consolidate financial results, or do you want to join planning and execution on common business processes? If the headquarters and subsidiary are using ERP products from different vendors or with different data models, this type of integration will be more difficult.

Those multi-vendor, two-tier ERP deployments might appear cheaper if only the subsidiary’s ERP licenses are considered. However, they are in fact pretty expensive, as multiple APIs based on different data and process semantics have to be mapped via middleware and complex coding and sometimes connected with batch loads. On top of that, different vendors’ product release and upgrade schedules have to be matched, which further increases complexity and cost. Besides the cost impact, companies lose their agility to implement changes when they are needed most.

Now is the time when the ongoing digital transformation across all industries mandates enterprises to rethink their business processes and how they work.

It’s timely that the market has ERP products that allow businesses to move their core towards the need of the digital economy – and not only as on-premises products, but also as public cloud editions. This lightweight, public cloud ERP offering can support subsidiaries’ requirements and provide unmatched proximity to the data and process semantics of the headquarters’ systems. This is key, as this proximity removes a lot of complexity that comes when you have different ERP products that must be synchronized and integrated. Less complexity offers the agility to adopt new business processes and innovations quickly.

We are living through complex times where digital transformation further accelerates the pace. Enterprises need systems with a greatly simplified data model to accommodate the increasing transactional and analytical load needed to serve the customer segment of one. These systems provide the digital core you need with a powerful, public cloud option for your subsidiaries.

Imagine the ease of duplicating innovations explored in a subsidiary back to the headquarters (or vice versa). Think how much easier it will be to leverage the same data structures for analytical purposes and gain unmatched insights across multiple tiers of your corporation, and then generate value with a common user experience across all parts of your enterprise.

Seeing the challenges of accelerated digital transformation ahead and realizing the availability of a lightweight, powerful, and modern ERP solution with flexible deployment options gives you the perfect occasion to rethink your two-tier ERP strategy now.

For more insight, download the whitepaper SAP S/4HANA: From Two-tier ERP to the N-tier Enterprise from Josh Greenbaum.

This article originally appeared on ZDNet.

Sven Denecken

About Sven Denecken

Sven Denecken is Senior Vice President, Product Management and Co-Innovation of SAP S/4HANA, at SAP. His experience working with customers and partners for decades and networking with the SAP field organization and industry analysts allows him to bring client issues and challenges directly into the solution development process, ensuring that next-generation software solutions address customer requirements to focus on business outcome and help customers gain competitive advantage. Connect with Sven on Twitter @SDenecken or e-mail at sven.denecken@sap.com.