Two-tier ERP: The path to unlocking business potential in the cloud
The benefits of two-tier ERP systems aren't just theoretical. Real world scenarios show how the strategy shines.
Part two of a three-part series
According to a recent IDC report, more than 50% of all small and midsize businesses worldwide are expected to run on cloud-based, mobile-first ERP systems by 2026.* This demands agility, innovation, and seamless coordination across all levels of an organization. The pressure to deliver these advantages is driving companies to replace rigid, outdated systems with cloud technology.
However, in the race to the cloud, many businesses struggle with the one-size-fits-all approach of traditional ERP systems. These systems cannot accommodate the unique needs of each subsidiary and often don’t need to be implemented across all regions. As a result, organizations encounter delayed deployments, operational inefficiencies, and compliance issues, leading to higher costs, data silos, and inconsistent workflows.
Enter the pairing of the two-tier ERP strategy with cloud ERP. This duo combines a comprehensive ERP system at the corporate level with more flexible, tailored solutions for each subsidiary or division. And it’s this balance of centralization, flexibility, and governance that unlocks new levels of efficiency and operational success.
The benefits of a two-tier ERP strategy for cloud ERP
By enabling subsidiaries or divisions to operate with their unique processes while maintaining alignment with corporate-level systems, a two-tier ERP strategy offers the perfect complement to cloud ERP.
Together, they create a unified yet adaptable framework that delivers significant overall business benefits, including:
- Instant value: Designed for rapid deployment, cloud ERP paves the way to fast realization of a two-tier ERP strategy’s advantages. This outcome is particularly valuable in time-sensitive scenarios in which swift integration is essential—for example, mergers and acquisitions.
- Continuous innovation: Regular updates with the latest features and functionalities enable organizations to leverage new technology advancements continuously and quickly.
- Predictable total cost of ownership (TCO): A cloud ERP subscription model enables more precise expense planning to avoid unexpected costs associated with on-premise ERP systems.
- Autonomy: Businesses can select the best ERP capabilities that meet their needs, which is a customized option for avoiding the limitations of a one-size-fits-all solution.
- Simplicity: More intuitive than on-premise counterparts, cloud ERP shortens learning curves, decreases training costs, and improves employee productivity.
- Reliability and security: When hosted in provider-managed data centers, cloud ERP subscriptions include governed measures for protecting data from unauthorized access, preventing security breaches, and ensuring reliable data availability.
Top use cases putting theory into action
Two-tier ERP systems are not just beneficial in theory. They excel in the real world across a diverse range of scenarios.
Let’s explore scenarios where this strategy truly shines.
1. Navigating mergers and acquisitions
Mergers and acquisitions often result in a patchwork of disparate ERP systems, making integration a significant challenge. To ensure continuity and minimize operational disruptions, a stable core ERP can be established at the enterprise level and complemented with a second layer of independent ERP systems for newly acquired entities or divisions.
2. Empowering subsidiaries with tailored solutions
A two-tier ERP strategy balances autonomy and oversight—especially for organizations with multiple subsidiaries. Each subsidiary can deploy a tailored ERP system that aligns with its specific operational needs and regulatory requirements. Meanwhile, the parent organization maintains centralized control and visibility to facilitate effective oversight and strategic decision-making. This decentralized structure enhances subsidiary-level flexibility while preserving the business’s cohesion and strategic direction.
3. Fostering innovation and experimentation
Deploying separate ERP systems for experimental projects or joint initiatives fosters an environment where creativity and risk-taking can flourish without disrupting operational stability.
4. Supporting divisions with significant autonomy
Divisions can operate independently with their ERP systems in ways that enhance organizational agility and adaptiveness. This decentralized structure allows divisions to make agile decisions, manage operations efficiently, and rapidly respond to market demands, all while staying aligned with corporate standards.
5. Streamlining divestitures
Divestitures can be complex and disruptive, but a two-tier ERP system simplifies the process with smooth separation of ERP systems when noncore operations are spun off. This streamlined approach supports a smooth transition and operational continuity.
6. Managing seasonal fluctuations
Organizations can scale their IT infrastructure to match demand variations by implementing a dedicated ERP system for seasonal activities. Doing so not only optimizes costs but also increases operational efficiency during both peak and off-peak periods.
7. Facilitating cloud migrations
A two-tier ERP strategy facilitates a controlled and gradual migration of business units or functions to the cloud. In return, businesses are empowered to benefit from the cloud’s scalability, flexibility, and innovation at their own pace while minimizing risks and integrating existing systems.
See how global manufacturer Hitachi High-Tech is accelerating business innovation with a two-tier ERP strategy.
A strategic path to business agility
Incorporating a two-tier ERP strategy with cloud ERP offers businesses a powerful tool set to navigate complex challenges and seize new opportunities. Organizations can not only achieve greater flexibility, efficiency, and control but also position themselves for ongoing growth and success.