Typically, growing companies attempt to integrate all of their new subsidiaries, business areas, and regions into one all-encompassing ERP system. Thomas Kramer, Head of SAP Cloud ERP Implementation at All for One Steeb, points out that “smaller subsidiaries, () often don’t need the complexity and functional depth from headquarters systems and might be overwhelmed by the so-called Tier-1 systems in terms of complexity and costs.” However, more often than not a tier-1 ERP system is the bottom-line, essential for reporting to headquarters, thus making it appear to be the only viable solution for smaller subsidiaries as well.

In these circumstances, an excellent alternative would be to consider a two-tier strategy using the strong capabilities of SAP Cloud ERP. What do we mean by a two-tier approach? This is when two ERP systems are operated simultaneously and integrated with each other. The result is that you can use the robust, comprehensive ERP system at the corporate level (tier one) while keeping the more flexible, agile, and cost-effective solution at the subsidiary level (tier two).

4 Astonishing Advantages of Running a Two-Tier System

Fast Integration

According to Tomas Fertig, CEO of Seidor (USA), a SAP Cloud ERP, such as Business ByDesign, can be implemented and customised by subsidiaries as part of a two-tier system in half the amount of time when compared to a one-tier solution of the same scope.

Increased Customization and Simplicity

As a solution in tier two, SAP Cloud ERP offers the subsidiaries more customization options. This allows for tier two subsidiaries to benefit from the solution being reduced to the data, functions, and processes that are needed by the end users. Thus, the simplified ERP gives them more flexibility with the same budget compared to a customized version of the corporate ERP system.

Value for Money

Flexibility is not the only thing that is enhanced by having a two-tier strategy. You also get more bang for your buck according to Bob Atkinson, Managing Director of In Cloud Solutions (UK): “You can do two to three times as much within the same time budget in SAP Cloud ERP compared to what you can do by developing your existing ECC solution, due to the pre-determined processes within the Cloud Solutions. The financial budget is of course inversely proportional to this!”

Simple and Cost-Efficient Implementation

The two-tier strategy often saves time and cuts costs compared to the one-tier approach. Tankler Wang, VP Service from Acloudear in China said this is often the case because subsidiaries can re-use the solution templates defined by headquarters when rolling out the solution and just focus on specific country localisations where necessary to simplify the data and business transactions synchronizing within the group tier one solution.

What’s Behind the Two-Tier System’s Success?

The two-tier strategy is a hybrid construct. It is built upon the robust foundations of the parent system - with agile cloud solutions for daily transactions at the subsidiaries level, layered on top. The tier-one system runs at the corporate level at the headquarters and bigger subsidiaries. The tier two system is used at the operating level at the smaller subsidiaries and in agile business areas. This system is highly customised to leverage flexibility and agility while reducing complexity and eliminating unnecessary functions that specific units need.

Many subsidiaries that are overwhelmed by the complexity of the corporate solution start to implement their own ERP systems – systems that are less complex, cheaper, more flexible due to less conformity, and locally more suitable for their exact needs. However, the up-shot is more administration, updates, and requests for support, along with the need to purchase and integrate yet more tools, none of which were initially costed into the project! Using sleeker and simpler solutions at the tier two level (such as SAP Cloud ERP or S/4HANA Cloud ERP) makes S4 HANA driven Group subsidiaries more efficient, and transparent.

By using SAP Cloud ERP or S/4HANA Public Cloud in tier two and ECC or S4HANA on premise in tier one, the systems within the group can be connected and still save money and time while reintegrating the data from the subsidiaries to the corporate level.

For the subsidiaries, a Cloud ERP system as a tier two system remains flexible and highly customizable (forms, tax conformity, etc.) while running on the corporate database of the tier one solution (sourcing and distribution of Global Stock for example) a point confirmed by Bob Atkinson, Managing Director of InCloud Solutions.

The Perfect Match

When implementing ERP, value for money is a vital issue for our customers. That is why it is great news that the two tier solution provides two to three times more value for the same budget - giving our customers exactly what they need while cutting costs.

The United VARs alliance specialises in delivering global projects and two-tier strategies all over the world via its 50 member companies. We work together to deliver first-class global implementations making us the ideal choice for your project. United VARs offers international coverage and local support at a lower cost than the big consulting companies. So as Tomas Fertig, CEO of Seidor affirms, United VARs is the “go-to option” for tier two implementations.

Read more about United VARs here.


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