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Encore Business Solutions

Benefits of a Two-Tier ERP Solution


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You may have heard of a two-tiered enterprise resource planning (ERP) software approach during your research of new ERP software solutions like Microsoft Dynamics AX.   A two-tiered ERP solution is when you have a main, global ERP software system to run most of your business but you have an additional, supporting ERP solution for specific parts, units, or regional offices where transactional and operational data rolls up into the main, global, Tier 1 ERP system. In a previous blog post, we explained when a two-tiered approach makes sense to apply.

If it looks like a two-tiered ERP solution may be the best solution for your organization, what benefits do you stand to gain?

1) Significant cost savings - While adding multiple systems sounds like a cost increase, the whole solution needs to be considered. When implementation, ongoing maintenance fees, upgrades, and modifications are taken into account, a two-tiered system can offer quantifiable financial savings. Often a Tier 2 system will be purchased for a specific purpose so minimal modifications will be needed. Modifying a legacy system can be very time and cost intensive. Often a Tier 2 system has a lower total cost of ownership (TCO) because there is a reduced time to implement. Gartner Research has found that companies are seeing a 33% reduction in implementation costs and a 50% decrease in total time to full implementation1 when a two-tiered system is executed.

2) Increased flexibility=increased effectiveness - With the right tools to do the job, the business unit with the Tier 2 system has more flexibility to make changes to run the business better. Employees will have the information they need to make better decisions and make changes when necessary.

3) Compliance made easy– Compliance for a specific product or for a different country can be better addressed with a system that is put into place to meet that need.

Finally, some cautionary notes.  Whether this is new to you are or you are actively considering a two-tiered ERP approach, there are some pitfalls you will want to avoid.

• Less is still more. You don’t want several Tier 2 vendors because you’ll lose many of the efficiencies you were hoping to gain. Efficiencies are lost through continual upgrade, integration, and training challenges as well as complexities related to ongoing vendor management requirements.

• Integration still has to happen. You also need to keep in mind that it is very important that the data from the Tier 2 system can seamlessly and continuously roll up into your legacy or main Tier 1 system. Be sure you are working with a vendor that can do this type of work and ask to speak with reference clients.

1. ERP Strategies: Choosing Between Single Instance or a Two-Tier Approach. Retrieved December 28, 2011 from CompareERPsoftware.com: http://www.compareerpsoftware.com/offer/erp-strategies-choosing-between-single-instance-or-a-two-tier-approach/

By Encore Business Solutions, a Microsoft Dynamics GP and AX reseller servicing Western Canada.

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