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March 08, 2011

Constellation Report Makes Case for Two-Tier ERP Deployments

By David Sims, TMCnet Contributing Editor

In case you were wondering what that is in your rear-view mirror, industry observer Chris Chiappinelli has the answer: “The mirage of a single-instance enterprise resource planning (ERP) system for global corporations is fading into the digital sunset.”

Chiappinelli cites a new report from Constellation Research, which finds that the general trend in manufacturing and other industries is to consolidate disparate ERP software systems, as is “often the result of acquisitions or departmental siloing, into one mega ERP deployment to run the entire business.”

The goal of such mega ERP deployments is “to facilitate streamlined business processes and holistically manage business data at a lower cost of ownership,” Chiappinelli added. However, over the last decade, researchers say, “organizations have discovered the failure of the single-instance strategy.” What many businesses are looking at now is a two-tier ERP model, which “enables organizations to keep existing ERP systems at the corporate level, while empowering divisions or business units to innovate with a second ERP system.”

A research report titled, “The Case for Two-Tier ERP Deployments,” looks at improved integration techniques, including APIs based on open standards, Web services, and process integration libraries, “as enablers of a two-tier ERP structure in which data from the second tier must roll up to the first,” Chiappinelli commented. Also, key to a more heterogeneous ERP deployment approach is “better master data management,” as per the Constellation report.

“For now, the dual ERP implementations are mostly on-premises affairs, but cloud-based products will gain favor over the next 18 to 24 months... Whether SaaS (News - Alert), on-premises, or hybrid, a two-tier ERP strategy will reduce costs, meet new business requirements, and provide better business value.”

David Sims is a contributing editor for TMCnet. To read more of David’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Jaclyn Allard

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