Why do some big companies go to all the cost and expenseOpens a new window of maintaining two software platforms to manage their business and automate back-office functions?
Surely a two-tier enterprise resource planning software system – one used by a parent company, say, for financial and HR needs and the other for remote subsidiaries with specific operational and foreign language needs – is complex and creates difficulties.
But large corporations nevertheless adopt a two-tier system because the parent company needs a platform for global financial while personnel management and subsidiaries need one both to support regional objectives and integrate with the corporate system.
This is referred to as a Tier 1 and Tier 2 solution. It can involve software from different companies.
The differences
Tier 1 ERP systems are usually found operating within companies that have sophisticated environmentsOpens a new window  requiring complex task management by senior staff. Consequently, they are expensive and will often take some time to implement.
Tier 2 ERP platforms are more specialized and address specific operational needs including the daily running of the business in areas such as oil refining, education or asset management.
There are market leaders in both areas. At the Tier 1 level, the corporations are large and well-recognized providers — Oracle and Microsoft, for example — while specialist ERP providers can be quite smaller. Leading names in this sector include NetSuite and Syspro.
But why go to all the cost and expense of maintaining a multiplatform, highly complex arrangement like this? Surely it creates additional operational difficulties when it comes to integrating these systems?
Integration will always be a priority for ERP developers. Many are aware that companies require their software to run well with others. This means that there is an emphasis on fast integration and a recognition that one ERP platform cannot cover all the bases for big companies.
When considering platforms for a multitier brief, it’s important to use those that are most customizable and have been employed in similar rolesOpens a new window . They can mean cost savings as well. For example, the head office can share ERP templates with subsidiaries to save money designing their own.
A common mistake
Many companies make the mistake of trying to expand a single ERP platform into multiple roles, frequently those for which it wasn’t designed.
Management will try to save time and money by forcing the ERP software to stretch further. But such a move can create confusion, errors and far too much money spent on additional time for purchasing and implementing more tools.
It’s always worth looking at a second ERP system to meet specific requirements. Software engineers are conscious that their software could be employed within a multi-tier role, and they’re more accommodating for pricing.
Key takeaways:
- Multitier ERP setups are becoming more common among larger corporations, frequently when one system is managing a corporation’s core functions while a secondary system controls specialist applications.
- The need for, and availability of, specialist ERPs is creating more of a demand for two-tier systems as this helps companies cover more ground in a more cost effective fashion.
- Integration between systems is not as complex as some management teams believe; modern ERP is very flexible and can often be priced to accommodate a multi-tier strategy.