What happens to a company’s business technology when it starts to acquire new businesses and expand? Typically, growing companies try to integrate all of their new subsidiaries, business areas, and regions into one all-encompassing ERP. But is that the smartest way to integrate new operations and get them adding value quickly?
“Smaller subsidiaries often don’t need the functional depth of the headquarters systems,” said Thomas Kramer of B4B Solutions in Germany, where he is head of SAP Business ByDesign Implementation. He believes small subsidiaries might actually be overwhelmed by the so-called tier-one systems in terms of functionality and costs. However, more often than not, a tier-one ERP system is considered essential for reporting to headquarters, making it look like the only viable solution across the board.
But there is another option: a quick-to-value cloud-based alternative that could be the answer to many a prayer – a two-tier strategy that leverages the strong capabilities of a lighter cloud-based ERP solution.
What do we mean by a two-tier approach? This is when two ERP solutions are operated simultaneously and integrated with each other. The result is that you can use the robust, comprehensive ERP solution at the corporate level (tier one) while keeping the more flexible, agile, and cost-effective solution at the subsidiary level (tier two).
- Fast integration: According to Tomas Fertig, CEO of Seidor (USA), cloud ERP can be implemented and customized in half the time compared with a tier-one solution of the same scope.
- Increased customization and simplicity: A tier-two solution can be simplified and reduced to run just the processes required by the end users – the core data, functions, and processes they need to do their jobs. This simplified ERP gives them more flexibility for the same budget compared to a customized version of the existing corporate ERP.
- Value for money: Flexibility is not the only thing enhanced by a two-tier strategy. You also get more bang for your buck, according to Bob Atkinson, managing director of In Cloud Solutions (UK): “You can do two to three times as much in the same time compared with your existing ERP solution, due to the preconfigured processes in the lightweight cloud-based solution.”
- Streamlined and cost-efficient implementation: The two-tier strategy often saves time and cuts costs compared to the tier-one approach. Tankler Wang, VP Service from Acloudear in China, said this is often the case because subsidiaries can reuse the solution templates defined by headquarters when rolling out the new solution. Then the focus can fall onto other work like specific country localizations.
- Simplicity and affordability: Many subsidiaries forced to work within a tier-one corporate solution get overwhelmed and start to implement their own ERP systems. They crave something more affordable and more suitable for their needs. However, the upshot is usually more administration, updates, and requests for support, along with the need to purchase and integrate yet more tools. You can bet none of this was initially budgeted for the project!
Using sleeker and simpler solutions at the tier-two level boosts the efficiency and transparency of group subsidiaries. Meanwhile, the cloud ERP is flexible and highly customizable (for forms and tax conformity, for example) while running on the corporate database of the tier-one solution (sourcing and distribution of global inventory, for example).
When implementing ERP, value for money is a vital issue. That is why it is great news that the two-tier solution provides two to three times more value for the same budget – giving customers exactly what they need while cutting costs.
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This blog post was written with input and expert knowledge from the following four members of United VARs: Bob Atkinson, Managing Director, InCloud Solutions, United VARs Member in the UK; Tankler Wang, VP Service, Acloudear, United VARs Member in China; Tomas Fertig, CEO Seidor, United VARs Member in the USA; and Thomas Kramer, Head of SAP Business ByDesign Implementation, B4B Solutions, United VARs Member in Austria and Germany. The United VARs alliance specializes in delivering global projects and two-tier strategies all over the world via its 50 member companies.
This article originally appeared in ERP Solutions Review and is republished by permission. United VARs is an SAP platinum partner.