Why Two-Tier ERP?
With a Two-Tier ERP strategy, they can meet both the needs at the corporate level and the often very different needs of local subunits and subsidiaries. A Two-Tier ERP strategy leverages the strengths of having two different ERP systems, so companies do not have to complicate their technology environments or give up standardization. This way, they get a much more efficient solution overall and a better return on their ERP investments.
There are many good arguments for why a single ERP solution from one provider is generally the best solution. And it makes a lot of sense for companies to keep technical complexity to a minimum and only deal with one technology provider. But one system from one provider is not necessarily the right way to go for everyone.
Many larger companies operate under very complex conditions in practice. For example, growth and acquisitions can result in user groups or business units with special needs, or specialized systems with significant functionality that are not part of the ERP, even though they may be integrated with it. In these situations, a Two-Tier ERP strategy may be preferable. There is no single ERP system that can do everything. Today’s leading ERP systems cover more functionality than ever, and modern cloud-based solutions are much more efficient and quicker to implement than the often challenging and lengthy implementations that were common in the past.
Nevertheless, it does not make economic sense for software providers to try to meet every conceivable need, as it would result in overly complicated products. This means that even the best ERP solutions essentially have gaps in their functionality, where companies must integrate them with more specialized software products or develop customizations. Therefore, a two-tier ERP architecture – where the primary ERP system forms the backbone of the organization, while the secondary supports more specific needs in certain parts of the organization – is a good idea when the business processes in a company are so different that they are best supported by two different systems, such as in large corporations with multiple locations or subsidiaries.
It’s primarily about processes
Today, the Two-Tier ERP strategy is a well-tested approach. A complex, global company can use SAP to manage the group’s cross-functional activities in a very standardized, streamlined way. But if the company acquires a subsidiary or enters a new market, it often faces new requirements or new business needs. In such a situation, it is often business processes that only matter to the new division or market.
Therefore, it does not necessarily make sense to facilitate them across the entire company. In these cases, the company can advantageously implement another smaller and more flexible ERP solution, such as Business Central, to support the operations of the specific business group. It also happens that business areas or newly acquired subsidiaries use several highly specialized or customized applications, and it is easier to consolidate and streamline them within the framework of a Business Central ERP solution than in SAP.
Another relatively common scenario occurs when a company establishes a subsidiary or acquires a company in another language environment and decides to use Business Central because it simply better matches their needs.
Business Central and SAP – A good match
A Two-Tier model can, in principle, be built on many different ERP systems, but it is our experience that some are easier to combine than others. At NORRIQ, we know that SAP and Business Central are a good example of two systems that complement each other well and have proven to be a good match and starting point for a successful Two-Tier ERP strategy.
We have particularly good experiences with Two-Tier ERP strategies based on SAP and the cloud version of Business Central – often large companies with a complex structure that run SAP on-premises and then implement a cloud-based Business Central where it makes sense. For some companies, the cloud-based version of Business Central may also be their first experience with a cloud-based ERP system. This actually encourages them to also move their SAP ERP solution to the cloud.
To explain why Business Central works so well in a Two-Tier ERP strategy, many in the industry highlight several aspects of the technology: Firstly, Dynamics 365 Business Central is a leader in its category when it comes to delivering comprehensive, powerful functionality to a wide range of businesses. Additionally, flexible configurations make it possible to adapt Business Central to industry-specific requirements – a sea of IT providers offer proven solutions that meet more specialized needs. The software has been localized to more than 40 languages and country-specific conditions, and the intuitive user interface briefly takes usability standards to a high level.
The best of both worlds
Implementing a Two-Tier ERP strategy based on Business Central and SAP is today a project with a high ROI and low risk. The strategy’s two-tier structure creates a multi-layered solution – including at the database and application level, and it enables a completely different degree of flexibility. The layers work well together but also function independently of each other. You combine the advantages of a larger, central solution with a smaller agile solution and get a very smooth setup with full access to all relevant functions.
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FAQ About Two-Tier ERP:
What is Two-Tier ERP?
A Two-Tier ERP setup is a solution where a company’s headquarters uses an ERP system to manage its own operations, while its subsidiaries or other locations use a separate, independent ERP system. This allows the headquarters to centrally manage and consolidate data while subsidiaries can still have the autonomy to manage their own operations.
What is Multisite ERP?
Here, you have a network of equal companies that “share” the market among themselves. Professional companies, such as consulting firms, are often organized this way. In a multisite architecture, all locations in a company use the same ERP system (One-Tier ERP), allowing for continuous consolidation and centralization of data across all locations. This can help improve efficiency and consistency in your business processes.
What is Hub & Spoke Architecture?
Hub-and-spoke architecture combines the stability of a monolithic platform with the agility of microservices. Here, there will be companies where there is a “parent-child” relationship, so that one company, for example, handles SCM and the others are sales units. In hub-and-spoke software architecture, the “hub” is the fundamental data layer – a single data access point that can deliver about 80% of the functionality you need.
