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What is a Two Tier ERP?

ERP NetSuite Strategy

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cloud computing We’ve discussed “What is  ERP?”, but now its time to take a look at two tier ERPs, and some of the benefits that NetSuite offers for those looking for a two tier approach.

A two tier ERP is a concept or approach that is generally used in larger organizations. Oftentimes, larger organizations have multiple lines of business and / or multiple companies running independent from each other.  These companies, most likely, have different target customer segments, different inventory product requirements, and may be serving unique geographical markets.   Each line of business, when looked at from their perspective, must be able to take care of their own business requirements.  However, this may not serve the interest of a corporate parent who wants to be able to consolidate results of its subsidiaries as well as have some level of governance.

Two tier systems often make sense to the management because they want to be able to act quickly while producing some level of autonomy for each subsidiary.  I am a strong believer of a single instance architecture.  But I am realistic.  It may be next to impossible to achieve this depending on the situation.  Here are some criteria where Two Tier may make sense:

  1. The parent ERP is too complex to adopt for a small business unit.
  2. The cost is prohibitive for the smaller business unit to own the parent ERP.
  3. Certain local or regional regulatory requirements can not be met.
  4. Key functionality is missing from the parent ERP.

NetSuite works to have an offer for organizations that face these challenges.  In some respects, the NetSuite OneWorld product is seeking to be the Parent ERP.  Of course, it is all one system and it works very well if the criteria noted above is met.  At the same time, NetSuite is pitching to larger companies to be part of a two tier structure; not as the main ERP but as a sub ERP.

NetSuite has recently won some major clients that are two tiered.  For example, see these articles:

At the same time, they have a great success story with OneWorld acting as a single instance for GroupOn.

The reality is that as companies grow, so do their demanding requirements.  Today, there are very few business management systems that can truly make a Single Instance offer.  The choices really open up if you go Two Tier.  But make no mistake, you will require a major investment to integrate, train people, and maintain these systems on an ongoing basis.  NetSuite’s technical architecture makes it pretty easy to integrate with; but it will require work.  Two-tier has become much easier due to integration platforms, such as Boomi or Mulesoft.

Finally, two tier ERP is different from Best of Breed often adopted by smaller organizations who aren’t holding the entire consequence of a fragmented technical architecture.  Please see my article, “Best-of-Breed Business Systems: Traps & Lies”.  The same considerations apply for two-tier ERP.  Ideally, get the entire business, on a single instance.  If the boundary is a subsidiary, then so be it.

Copyright © Marty Zigman 2011

Marty Zigman

Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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About Marty Zigman

Marty Zigman

Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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