Building a software strategy to serve an extended global enterprise has always been a challenge. This is particularly true in today’s rapidly changing global digital business environment.
As companies embark on global digital transformations, shifting to all digital, real time operations, they are finding that their legacy two-tier enterprise resource planning (ERP) systems must evolve.
Many of the current two-tier systems were built at a time when only limited connectivity back to the head office was required. The top three goals were focused on:
1. Consolidation: Financial, inventory, and other basic operational data across the enterprise.
2. Cost Containment and Operational Efficiency: Managing costs across global operations.
3. Flexibility and Innovation: Giving subsidiaries autonomy, allowing them to make individual choices on their own systems.
Today however, as the nature of subsidiary operations has evolved to require greater levels of functionality and support for innovation – particularly as companies try to transform digitally, two-tier architectures that depend on integrating different vendor systems have become barriers to innovation, cost-containment, and operational efficiency. The result is a slow, inflexible, and complicated landscape that creates a great deal of pain for the companies stuck there.
In its recent report on the state of two-tier ERP systems, Enterprise Applications Consulting concludes that a new n-tier model is needed, allowing subsidiaries to run in real-time while closely integrated with the headquarters’ system. The report highlights how SAP S/4HANA Cloud helps companies achieve this by offering both in-the-cloud and on-premise versions, which allow organizations to leverage:
- A consistent code line and data structure extending from a fully-functional headquarters system running SAP S/4HANA on-premise
- A flexible and adaptive subsidiary solution, also based on SAP S/4HANA, running in a public cloud.
The ability to use the same product family – with its shared data structures, APIs, and extensibility platform – in n-tier deployment, makes it possible to envision a better way to support a high degree of operational integration between headquarters and subsidiary operations without sacrificing the autonomy and local requirements that are sacrosanct in many subsidiaries. The result can unleash a degree of integration and business orchestration between headquarters and subsidiary operations that goes well beyond what has traditionally been considered two-tier ERP and help companies drive toward global digital transformation.
For a deeper view of the new n-tier architecture, read the Enterprise Applications Consulting report.
Toby Davidson is vice president of Solution Management for SAP S/4HANA Cloud
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