Re-Imagining Two-Tier ERP

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Jeffery Robbins
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1 Re-Imagining Two-Tier ERP Discover a Scalable, Cloud-Based Alternative May 2014 INTRODUCTION A two-tiered approach has quickly become the more common method of ERP deployment, but are the advantages greater than the alternative single-tiered approach? Over the last few years the popularity of two-tiered ERP deployments has grown, mostly among companies who cannot justify rolling out large ERP systems to their smaller subsidiaries, and wish to deploy a smaller package for their second tier. Many of these secondary models have fallen short of the mark however, finding it difficult to balance the flexibility and low TCO required by smaller subsidiaries with the robustness, control, ease of consolidation, and efficiency required by head office. With this in mind, a more agile, scalable, one-tier system, that delivers value to the entire business, may be the required solution. Let s review the various two tier options and explore the advantage of an alternative single tier model.

2 WHAT IS TWO-TIER ERP? A two-tier ERP architecture is a system in which two different ERP systems are deployed to meet the needs of two different layers of the organization. One of these systems most often serves as the global backbone, carrying out administrative processes such as financials, human resources and procurement things which can be standardized organization-wide. In addition to this, other ERP solutions are used to support specific needs for smaller operational requirements such as sales, marketing, or local manufacturing and distribution. THE CHALLENGES The main challenge for organizations deploying a two-tier ERP solution is the constant battle between the need to standardize to minimize costs and the need for flexibility to drive innovation. Shortcomings: Deployment speeds: The speed at which the centralized enterprise system can be deployed often causes long delays in getting usable solutions to smaller sites. Complex integrations and high support costs: Mixing piecemeal best-of-breed solutions increases complexity and expenditure. Different operational models: Different models for different parts of the business, geographical requirements, or cultural preferences can create barriers to change and standardization.

3 TWO-TIER ERP: THE STORY SO FAR For the last few years the advantages and disadvantages of two-tiered ERP have been well documented by analysts, influencers, experts. In 2010, Forrester Research 1 identified three different two-tier models and the benefits and challenges of each. 1 Hub only: In this model, firms impose a single instance of a single application on all business units, regardless of geography and business complexity. 2 Hub and standard spoke solution: In this model, firms impose on their spoke business units a single application, regardless of geography and business unit complexity. 3 Hub and a choice of spoke solution: In this model, firms allow a constrained choice of applications to their simpler spoke business units, providing sufficient options to suit all styles of business, but constraining choices for ease of support and vendor management. In 2011, Constellation Research analyst R Ray Wang expanded on this definition in The Case for Two Tiered ERP Deployments 2, noting that in rapidly changing markets organizations need agile business systems to respond quickly and effectively. He noted that larger enterprise ERP systems were too costly and too rigid to be beneficial in these situations and developed a list of scenarios in which two-tier ERP systems could be beneficial: 1. Organizations with different lines of business 2. Standardization for global compliance 3. Improving country deployments 4. Crafting phased modernization 1 Lawrie, G., Gilpin,M., Hamerman, P. & Rose, S., It s time to clarify your Global ERP Strategy, Forrester Research Inc., Dec Wang, R Ray, The case for two-tier ERP Deployments, Constellation Research, Inc. 2011

4 Most recently, in a paper called Understand the Deployment Options for a Two-Tier ERP Suite Strategy, 3 Gartner noted that adopting a two-tier strategy can dramatically reduce regional business unit implementation times, provide greater agility, and dramatically reduce operational costs. The paper goes on to outline eight different types of common ERP deployment: Figure 1. ERP Common Deployment Options Tier Zero Tier Single Tier Two Tiers Options Independent business units Federated One core centralized ERP system; single instance One core ERP system; multiple instances, including regional localization One core erp; second solution(s) from same vendor for subsidaries One core ERP second-tier solution from another vendor Approved solutions (two to three alternatives max) Laissez-faire open market choice; dependent oncompany Key Connected subsidiary Business unit with no subsidiaries Business unit with subsidiaries Database replication / integration Source: Gartner (May 2013) It also explores what Gartner calls The Lure of SaaS, which accelerates interest in a two-tier strategy due to the lower entry price and ease of deployment offered by SaaS, with no upfront license or hardware investment required. 3 Montgomery, Nigel, Understand the Deployment Options for a Two-Tier ERP Suite Strategy, Gartner Inc, May 2013

5 AN ALTERNATIVE TO TWO-TIER ERP The current models for two-tier ERP deployments offer no clear winner. All of the models outlined above have their advantages and disadvantages. The market reflects this. In a recent global survey of 1,275 companies by Longitude Research, almost 50 percent of respondents are running 6 or more ERP systems. Bringing another vendor on board is clearly not the answer, as it does not overcome the real issues caused by having more than one solution within your organization: challenges such as integration, multiple vendor relationships and support contracts, different technology platforms, and different skill sets. What organizations need is a single solution that meets the requirements of both head office and regional sub-divisions, as well as those of even your smallest subsidiaries. The ultimate answer is a solution that does not force organizations to compromise between standardization, efficiency, and control on the one hand; and speed, flexibility, and innovation on the other. WHAT YOU REALLY NEED + + A single solution that is robust, agile, and scalable, and meets all your organization s business requirements. + + Enables IT executives to simplify infrastructures, with single vendor sourcing and lower total cost of ownership, while LOB executives get a solution that supports them to achieve their business objectives even those shaped by local concerns. + + It gives the business the standardization required for efficiency and productivity, along with the flexibility to constantly innovate to match local conditions or different business models. + + The finance function benefits from a single vendor support agreement and a single, consistent view of the enterprise worldwide; reducing time spent consolidating data, freeing more time for analysis, and helping deliver valuable business insight.

6 ORACLE ERP CLOUD: AN ALL-TIER SOLUTION Oracle has the most complete suite of integrated, enterprise-grade applications services. By choosing Oracle ERP Cloud, organizations can avoid the fragmented data and business processes that can result from using multiple, siloed clouds from different vendors. Flexible: Oracle s uniquely comprehensive, modern approach to cloud applications means organizations can quickly deploy integrated business processes and easily access market-leading capabilities to solve end-to-end business problems. While taking advantage of the typical savings attributed to Cloud solutions of reduced operational and upgrade costs you can also flex your uptake model to expand or contract to meet your organizational growth. Proven Best Practices: Oracle ERP Cloud s applications draw on many years experience across thousands of customers running Oracle E-Business Suite, PeopleSoft and JD Edwards EnterpriseOne applications. Oracle combines best practices from each of these product lines to provide a next-generation cloud service that can be up and running in as little as weeks. Secure: Oracle s infrastructure is used by 90 percent of the world s leading SaaS providers. Oracle ERP Cloud has security in built into all aspects of the solution; in the infrastructure, database and application levels. Additionally, your data is not mingled with that of other companies within the same database, giving you the most secure ERP cloud available. High Performing: Oracle ERP Cloud is capable of meeting the processing requirements of even the largest enterprises. Internal testing has shown the Oracle ERP Cloud can process 231 million transactions an hour, or 3.85 million transactions a minute. It can be deployed in public or private cloud to match business model requirements. With Oracle ERP Cloud you no longer need to compromise between control and agility; cost efficiencies and innovation. The Oracle ERP Cloud marries the simplicity of SaaS with the power of Oracle so you can enjoy the cost efficiencies of a flexible solution with the robustness of a single, enterprisewide standard.

Why Implement a Two-Tier ERP Strategy

Why Implement a Two-Tier ERP Strategy Table of Contents Executive Summary... 3 The Growing Popularity of the Two-Tier ERP Strategy... 3 What Is a Two-Tier Approach?... 3 Drivers for Two-Tier Adoption... 4 Who s Adopting the Two-Tier ERP Strategy?...