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These 7 Factors are Driving Demand for a Two-Tier ERP Strategy

Learn why a two-tier ERP system can enable enterprise manufacturers to mitigate complexity, increase flexibility, and reduce costs.

December 05, 2023

Modern organizations looking for industry success know that an ERP is key to operational excellence, as it creates a centralized hub for every part of the business. Yet the single-tiered ERP approach of yesterday won’t support the growing businesses of tomorrow.

Now is the time to rethink your ERP strategy. Organizations looking for more flexibility, lower costs, less complexity, and better positioning to scale are turning to a two-tiered ERP approach to make this happen. Instead of trying to bring an entire organization—made up of  different business units with differing needs—under a one-size-fits-all ERP, a two-tiered approach uses one ERP system at the corporate or higher level, and another at the business unit level.

This approach allows business units to continue at their pace of innovation, while building a system that addresses their unique processes, compliance, and local requirements. They don’t have to worry about slowing their pace or trying to align their processes to other business units or the organization as a whole, as they would under a one-size-fits-all system. A two-tiered ERP thereby mitigates complexity, promotes flexibility, and reduces costs associated with a single-tier model.

Many organizations are now embracing this two-tiered ERP approach—but what’s driving them there? Here are just a few key reasons why they’re looking to evolve their ERP strategy:

 

1. Mergers and Acquisitions

Being able to merge the systems of a newly acquired company is a necessity for a successful M&A. Yet trying to do so under a one-tier ERP system will be incredibly challenging, especially if your target company is using a completely different ERP system. Which one do you stay with? How do you merge them? Should you leave them as two siloed systems? A two-tiered ERP approach can solve this by merging a company more efficiently with lower costs.

 

2. Companies Want Best-in-Breed Tech For Operational Units

Each business unit has its own capabilities, needs, and speed at which it runs. Yet trying to bring diverse business units under the umbrella of a single-tier ERP system can impede or curtail  operations. Instead, implementing a two-tier ERP approach allows business units to adopt ERP systems that are tailored to their individual business needs, while still allowing them to connect to a second, comprehensive ERP system when appropriate.

 

3. The Cloud Makes Integration More Accessible

Businesses are turning to a two-tiered ERP approach because the cloud has made it easier than ever before to implement ERP systems. Instead of a costly on-prem implementation that requires physical servers and a lot of coordination, organizations can tier their ERP systems quickly and easily using the cloud, reducing a number of barriers to entry.

 

4. The Availability of Bi-Directional Writing

Tech advances in ERP allow for bi-directional writing across two-tiered systems, meaning you don’t have to worry about the top tier of your ERP writing to the business unit tier, yet the business unit tier not writing back. Instead, there’s great synchronization and real-time data flow that allow teams to stay updated across applications.

 

5. Solutions for a Distributed Workforce

Many legacy systems that are being phased out today were made to manage full-time, on-premises staff. Today, an organization’s workforce can be located anywhere in the world, increasing the need for technology that makes managing distributed teams easy. Two-tiered ERP systems leverage cloud capabilities for easy access from anywhere, making it easy to respond  to individual business unit needs around the world.

 

6. Globalization and Local Requirements

Wherever they are around the globe, distributed teams have their own local business unit needs—things like local regulations, currency, and compliance requirements should be reflected in their ERP system. While it may be near impossible to manage localization customization with a one-tier ERP approach, it can easily be done through a two-tiered ERP approach.

 

7. Usage-Based Pricing Models

Taking a two-tiered ERP approach doesn’t mean implementing the same robust ERP system at the business unit level that you have at the corporate or top level. Instead, you can implement an ERP system that will be best for that business unit, which can be a less expensive or more manageable system. Today’s ERP usage-based pricing models are making it more cost effective for organizations to adopt a two-tiered system, and can ramp up or down with seasonal needs.

 

Implementing a Two-Tiered ERP Approach Today

Modern organizations looking for success in their industry know that an ERP is key to operational excellence—but they’re ready to go further. Today, they’re taking a two-tiered approach to their ERP strategy that will help create cost efficiency, reduce complexity, and create the flexibility they need to scale. If your organization has any or all of these factors or drivers in mind, then it’s time to begin the next, two-tiered step in your ERP journey.