Tier I ERP Software: Are You Really That Complex?

Written By: Eric Kimberling
Date: September 7, 2018

In talking with business leaders, we hear quite often how “complex” their businesses are, thinking they absolutely need a Tier I ERP software solution (such as SAP or Oracle) to handle their unique qualifications.

So how complex do you really need to be to require a system such as SAP S/4HANA vs. Oracle Cloud ERP? The answer is, probably far more complex than you think.

Let’s look at a few scenarios that determine business “complexity” from a software perspective:

Annual Revenue: A high annual revenue is usually the result of additional complexities. However, by itself revenue is not a good measure. Most systems can handle numbers as big as you want to make them. A distribution firm, for example, while not producing any product, will cycle the combined volumes from all the suppliers and manufacturers it represents.

Locations: This is perhaps the most common “complexity” we hear, having multiple locations. It really depends on what is done at each location, rather than how many there are. If you are a global firm with 60 domestic and international distribution centers, you are not necessarily complex if all centers are run in the same fashion and distribute the same products. Where complexity comes in is when there is variation in the operations across facilities.

Processes: Complexity of processes is terribly misunderstood. What makes a process complex is how unique it is from a software perspective, not how complex your company has made it. If you currently have a multi-step process for creating an invoice or work order, it might seem complex because of the current inefficiencies. However, from a software perspective, it is probably not complex. What you need is a proper process improvement initiative. Where processes do become complex is when there are many of them, they are truly unique and highly variable. This is also where many ERP disasters such as the SAP failure at Lidl or the SAP failure at National Grid struggle.

Uniqueness: Every business is unique in one way or another, but being unique rarely determines the need for a certain Tier of software. While Tier 1 ERP software solutions can handle a greater variety of operations, there is a significant cost associated with making those systems fit your operations. Additionally, with a large mix of lower tiered solutions tailored for specific industries, there is a very good chance you just haven’t yet found the system to match your environment.

People: People are complex by nature, and the more of them, generally the more complex your business becomes. Keep in mind, however, that if you have appropriate organizational change management strategies and practices in place, that will negate much of the perceived complexity.

Regulatory Compliance: Most industries and countries have varying regulatory or reporting requirements depending on your industry. This naturally makes a business complex, but software packages have already taken regulations into consideration. If you are looking at software that doesn’t yet have the functionality to handle your regulatory requirements already in place, move on.

Ultimately you will have to match your requirements to your business environment, and if there are truly a large number of moving pieces, people, processes and locations then you may be a candidate for a Tier I solution. Just don’t make that assumption before taking a closer look at your business.

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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