In ERP world there’s no shortage of software solutions and a variety of pricing. Software is sometimes described as Tier 1 solutions (examples include SAP and Oracle) and Tier 2 solutions (software companies like IQMS or NetSuite) and the list goes on.
The concept is the lower the number the more sophisticated the system. Tier 1 solutions are the most robust (read complex) and are typically adopted by large companies with complex infrastructures. Tier 2 solutions typically offer good functionality but may not be as comprehensive and may target specific industries. Tier 2 software can offer significant cost advantages. IQMS for example specializes in manufacturing software at a very fair price – but may not be a good fit for all types of manufacturing. If this all sounds confusing, it’s because it is.
You don’t know what you don’t know
The best ERP systems for your company may be the ones you have never heard of. There are some great software solutions available. There are also a plethora of Tier 3 software offerings from companies that might be too immature or have operating or support issues. Immature in the sense that they’re not proven or developed enough – and you’d probably want to stay away from them until they’ve grown a bit (in my opinion).
I can guarantee you most software companies don’t have the coin for front-page Wall Street Journal ads like SAP does, so brand name recognition isn’t all that’s it’s cracked up to be. You may not be able to (or want to) commit to SAP or Oracle’s total cost of ownership and their platforms might be overkill. A Tier 1 solution is only better if it fits the needs of your company and budget.
You do want to seek the advice of an independent ERP consultant who knows the software landscape. A consultant who can present you with choices based on the requirements your organization is seeking to meet now and in the future. Functionally and budgets are primary considerations.
How to evaluate Tier 2 ERP software
As an ERP consultancy, we commonly encounter companies that have somewhat randomly decided on evaluating a few software solutions with little rational on why they were chosen to begin with. Sometimes this stems from internal biases – someone in IT or upper management having worked with a certain software in the past.
It’s important to broaden your search and to get a “current pulse” of the software that’s available because things are constantly changing. A good example is NetSuite. The current version of NetSuite software is heads and tails above the version that debuted in 1998. The reality is your perception of any given software may or may not be up to date, and you need to carefully plan for a NetSuite implementation – or whichever software you may consider implementation.
Sidebar: If you’re working with an ERP consultant or vendor that’s associated with software companies (and most are) you’ll need to be realistic and understand the motivations in these types of preferential relationships. If your vendor was awarded the “Oracle Partner of the Year Award” (or pick any software accolade) chances are the consultant or vendor promotes and sells a lot of that product.
You don’t have to pick just one ERP software
While the concept of “one fully functional software” to run your entire enterprise sounds great in theory, the concept often doesn’t end up working out well for companies. It’s sometimes more beneficial and effective to select complementary software packages that can work together. You may have one core software running financials, marketing, etc. and a different unique software running your manufacturing arm.
When the right software packages are chosen and implemented correctly it could very well end up costing you less than trying to implement a “one system approach” that you might need to customize to death to do the job. Done right, this is not duplicative and yes you can mix Tier 1 and Tier 2 software typically without an issue. (For more on this, see our “What is Best of Breed ERP Software?” article).
In Conclusion: Three Takeaways
- Understand what “Tiers” in software mean. Tier 1 and Tier 2 software packages got their ranking from continuous development, multiple successful implementations, and years of actual use. However, just because it’s a Tie 1 or Tier 2 software doesn’t mean it’s the right choice for your organization.A professional software assessment/fit consultation from an independent ERP selection and implementation consultant will help you determine your best choices. You will be assuming more risk with a Tier 3 software, but if you have a very specialized need there are instances where it might be a logical (or your only) cost-effective choice.
- There has never been more movement and development of ERP software choices. The impetus for this was (and is) the adoption of the Cloud. It’s unlikely that your organization can keep up with this rapidly changing environment. Chances are you have enough challenging business issues to deal with. You can’t be expected to know what emerging technologies are available and if they are supported in your location. For example, some popular software packages available in the United States may be available in countries or regions that don’t offer good support.
- Focus on determining your company’s tech priorities before considering any Document what type of automation you’ll need now and in the future. Most likely there are some great software choices for your organization, but you’ll have a hard time finding the right one if your business processes aren’t well defined.
You’ll also want help in evaluating your company’s propensity for change. The software look and feels must fit the culture of your organization, or your employees need to be ready to adapt to the software. The result is usually a little give and takes in both directions – but don’t underestimate the importance of user adoption. We’ve seen highly rated SAP fall flat when users couldn’t or wouldn’t navigate the software’s complexity.
Whether you’d like more information on how a certain software ranks, or to discuss your automation goals – that’s a conversation we’d love to have. Please contact us to arrange an informal conversation – we are happy to be a sounding board for you as you continue your transformation journey.