When Does Two Tier ERP make sense?

Most organizations have already invested heavily in their existing on-premise ERP systems, both in terms of infrastructure as well as time. However, the emergence and success of cloud-based ERP has made apparent the benefits of the cloud in terms of costs, agility, and flexibility. So, how do organizations take advantage of the benefits that the cloud has to offer while keeping their existing systems in place?

The answer is what is known in the industry as a two-tier ERP approach. The reality about businesses, no matter what their size, is they are always changing. They are entering new markets, launching new products, entering joint ventures, and going through M&As. I think all of these changes are opportunities to adopt a cloud-based ERP strategy and marry it with core ERP systems.

There are four broad categories of scenarios that lend themselves nicely to a two-tier ERP strategy. In this two-part blog, I will touch upon a couple of these scenarios. I will discuss the other two broad categories in a subsequent blog next week.

Introduce new products and business models. Two-Tier ERP makes sense for organizations considering a new billing model, such as recurring billing and subscriptions. Additionally, companies that want to accelerate their entry into a new geography, add new product lines or track revenues for a new product or market independently are often better served rolling out a cloud-based ERP system to support these changes. Often, On-premise ERP systems are too big to “tune” for a new channel. Cloud-based ERP can address those requirements while leaving the corporate ERP implementation intact.

Speed consolidation and sharpen corporate visibility. Two-tier ERP doesn’t mean less visibility—it means more. NetSuite supports all subsidiaries’ charts-of-accounts within a single instance. Consolidated financials can be pushed or pulled into the corporate ERP’s financials for final consolidation. The NetSuite cloud provides instant on-demand access to subsidiary and divisional financials.

Next week I will delve into two other scenarios. In the meantime, feel free to chime in with your thoughts regarding the above. 

-Kishore Bhamidipati Director, Product Marketing, NetSuite Inc.

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