Tier 1 or tier 2 – which ERP system is right for you?

Published on: December 11, 2018

Many end users wrestle with whether to replace their current ERP with a Tier 1 or Tier 2 ERP system? What should they be looking for in each to make a more informed decision?

This is one of the most perplexing and complicated system decisions to make in most businesses today. Unlike any other system an organization uses today, ERP systems are truly “prime mission” to all organizations. The financial status of any company – represented by either internal management or externally – is essential from a regulatory and scorekeeping/control perspective.

The issues are many. The cost of acquisition and on-going ownership can be significantly different from one tier to another. Both the cost of acquisition and cost of on-going ownership was 20% of what it was with their Tier 1 ERP product. This is indeed a huge cost saving for any organization. But what does this cost-saving entail? Does the end user have their all of their ERP needs to be met? And if so, to what extent or percentage?

The question we are therefore asking is simple – can the End User perceive the additional value they will derive from choosing a more expensive Tier 1 solution over a Tier 2 ERP product? This is the main reason for the existence of marketing departments for ERP vendors today. Each marketing vendor explains its product to justify that value. These can both be very confusing and contradictory depending on the authors of these documents. So where does an End User go for help to avoid the confusion?

Core Financial Modules
Much contemporary thought into ERP systems suggests that much of the core financial modules – like General Ledger, Accounts Receivable, Accounts Payable – is becoming a “commodity” in the ERP world regardless of the ERP tier they play in. In other words, if a solution has satisfactory financials when compared to another but one solution is clearly better in the vertical needs of saying the transportation industry, then a transportation company may want to swing to that verticalized ERP.

But at the end of the day, the amount of homework an End User does is always the best and safest route. See demos that are specifically tailored to your business, find out what other people in your industry are using for their ERP, determine what you can afford, which product allows you to use industry best practices, etc.. Answering these questions may lend more weight to an important decision such as this.

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