What is Two-Tier ERP? How can Two-Tier ERP Empower Business Development?

Regardless of whether through business expansion or mergers and acquisitions, as companies grow, the advantage of a unified financial system view does not diminish but becomes increasingly important. However, simply expanding the Enterprise Resource Planning (ERP) system to support the operations of multiple business units or subsidiaries, meeting their diverse reporting and compliance structure requirements, can undoubtedly plunge the company into a quagmire of complexity.

 

To address this issue, companies should start with their organizational structure and implement an ERP system through a tiered approach.

 

What is Two-Tier ERP?

Two-Tier ERP is an enterprise resource planning technology that meets the needs of large enterprises with multiple operating points /or subsidiaries by using two systems. Under this strategy, the headquarters can use a highly customized Tier 1 ERP system that supports the operations of a large global enterprise with comprehensive functionality. Each subsidiary or business unit can use a Tier 2 ERP system that is less resource-intensive and more targeted in functionality.

 

To implement Two-Tier ERP, companies need to integrate the two ERP systems so that information flows automatically from Tier 2 to Tier 1, efficiently managing master data or building a single, accurate source of information for the entire organization. These two ERP systems will perform different duties. The Tier 1 ERP system is generally responsible for handling core operations such as finance, human resources, and procurement, while the Tier 2 ERP system manages the specific activities of each subsidiary or operating point, such as sales, marketing, or manufacturing processes.

 

The advantages of Two-Tier ERP include:

 

1. Cost Savings

   Perhaps the most attractive aspect of Two-Tier ERP, especially when merger and acquisition activities have already incurred many other costs. Generally, the implementation, maintenance, and upgrade costs of Two-Tier ERP are lower, especially when the parent company deploys the same Tier 2 ERP system for multiple subsidiaries. In addition, the Tier 2 ERP system can share IT resources with the corporate headquarters with only a small amount of maintenance, allowing the company to optimize its IT personnel structure or allocate these personnel to projects that directly generate revenue.

 

2. Meeting Specific Business Needs

   Some business units may have special requirements for business software due to the products they sell and the industries their customers are in. In this case, a specialized ERP tailored for specific enterprises can better meet financial process needs and improve efficiency — something a Tier 1 ERP system cannot do.

 

3. More Flexible and Easier to Control

   Tier 2 ERP systems are less complex and lighter, allowing users to adjust them more easily and quickly as needed. This means that business departments of large companies can respond more timely to market changes and customer behavior changes, better controlling operations and business processes.

 

4. Meeting Local Requirements

   For subsidiaries in different countries and regions, the ERP system should not only support local currencies and languages but also comply with local legal requirements and adapt to subtle cultural or regional differences. If the Tier 1 ERP system cannot adapt to these special situations, the company can deploy a Tier 2 ERP system to meet all these special requirements.

 

5. Improving User Experience

   Tier 1 ERP systems are often difficult to use and intimidating to learn. In contrast, Tier 2 ERP systems generally have a friendly interface and a better user experience. At the same time, this good user experience also helps to reduce training costs.

 

Scenarios for Using Two-Tier ERP:

Many large companies have realized, after experiencing multiple project failures and budget overruns, that migrating newly acquired companies or new subsidiaries to the Tier 1 ERP system is not feasible.

 

Let's look at some situations suitable for deploying Two-Tier ERP:

· The business model of the subsidiary is different from that of the parent company, such as the headquarters focusing on the sale of computer hardware and software, while the subsidiary focuses on providing IT services and consulting services.

· The subsidiary is facing industries outside the scope of the parent company's business or is selling to niche markets, which may require certain special functions that the Tier 1 ERP system cannot provide.

· Business departments or offices operate in different countries or regions from the headquarters, and the Tier 2 ERP system not only supports local languages and currencies but also meets the tax and other regulatory requirements of the country or region.

· After a company is merged or acquired, "migrating" the processes and operations of the newly acquired or newly merged company to the existing ERP system may be very time-consuming and may incur huge costs. In general, it is better to deploy a dedicated platform for the newly acquired/newly merged company.

· The acquired company does not have a formal business management system or only has basic entry-level software.

· The company wants to retain the existing ERP system to run certain business functions or processes while obtaining the new features and user-friendliness of the new ERP solution. Compared with the time-consuming and labor-intensive replacement of the main ERP system, the Two-Tier ERP solution is faster and simpler.

 

Today, the Two-Tier ERP strategy is becoming increasingly popular. On the one hand, software vendors can provide ERP suites with lower costs and more pre-built features; on the other hand, traditional ERP systems have long implementation cycles, high implementation costs, and are usually deployed locally, requiring a lot of configuration work. In contrast, many companies find that compared with replacing the Tier 1 ERP system or migrating new subsidiaries or newly acquired companies to the existing system, the Two-Tier ERP solution is more economical and requires less work.

 

Choose ERP, Choose Us, Hitpoint Cloud.

The Hitpoint Cloud team has been focusing on Oracle NetSuite products since 2009 and is a star partner of Oracle NetSuite for many years, providing Cloud Computing solutions for various modules including finance, distribution, project management, and e-commerce. We have rich experience in the implementation, localization, secondary development, and training of Oracle NetSuite.