The Gartner Pace Layer Model advocates the adoption of appropriate systems for the corresponding organizational needs. Gartner, and many other analysts, are now touting the need for companies to build a more agile strategy for their application portfolio, to give them the flexibility to quickly adapt to changing conditions in their ecosystem. In as much, the old mantra of a single instance business system to encompass all the aspects of an organization is no longer relevant or feasible in these modern times.
There is now a growing prominence of the two-tier approach to designing the application strategy and deploying it in the organization. The two-tier approach is typically composed of two solutions; one solution supporting the administrative corporate functions of an organization, including Finance and Human Resources, and the second solution supporting the operating functions of the organization, from product engineering to sales and procurement, order fulfillment, maintenance and after-sales service. Typically, organizations that have made large investments in legacy systems find this as a way to protect those investments, while still being able to modernize the applications in their operations and providing much-needed user flexibility and access to important information.
In the research article, Two-tier Strategy a Way to 'Reinvigorate' ERP, author Drew Robb talks about the benefits of Two-Tier strategy, and why companies are increasingly adopting it. The article quotes one of the CEOs as saying:
I've not come across a single enterprise running globally on a single instance of SAP. It does not exist. It's never in the single digits, the instances running. The best case scenario, it's in the dozens.
Aberdeen Group puts the number of companies considering two-tier at 25 percent, while Constellation Research has found 48 percent of organizations considering it in their research. Aberdeen, however, also notes that they expect the number to rise. Regardless of the actual number, it is evident that this is an increasingly popular strategy among companies.
The article touts the following scenarios as being suitable for the two-tier strategy:
A business with a very specific local focus—single-site or multi-site within a single country or region—so there is less need for multicurrency or multilingual support
A business with operations geared strongly toward a specific industry, perhaps a vertical that doesn't feature strongly at corporate headquarters or elsewhere within the organization
A newly-acquired operation with a mismatch of multiple outdated, unsupported ERPs in need of a single SMB or mid-market ERP
A start-up or small subsidiary with no formal ERP in place where the enterprise is eager to use a second-tier ERP to impose business rigor
A small operation at the second-tier that doesn't warrant the use of enterprise ERP software, but down the road as the operation grows, it may be brought more into the corporate fold
It may be also interesting to note that the Two-Tiered approach is gaining even more prominence with the advent of the Cloud Computing and Software-as-a-Service (SaaS) models. With SaaS, the SaaS provider almost entirely manages the solution, and users have minimal or no access to, nor a need for, the technical infrastructure. More and more providers, including Microsoft, are giving customers both online and on-premises options for end-to-end or specific point solutions, thereby allowing the customers to be able to leverage the Two-Tier approach as a means to gradually shift their technology to the cloud. Companies can either chose to move to the cloud the applications to support one or more of their subsidiaries, or they may choose to move a specific function such as Expense Reporting or Indirect Procurement, to the cloud.
To enable this approach, companies such as Microsoft are touting the ability to implement the solution in Workloads. A workload can be an individual business process such as expense management, or can constitute multiple business processes within a function such as supplier relationship management, supply chain management, human capital management, or sales, marketing, or customer service. In as much, a workload can encompass both ERP and CRM workloads. A workload can also address the operational requirements of a vertical function of an organization, such as its manufacturing or retail operations. Essentially, the workload approach decomposes the system into multiple blocks, allowing companies to select those blocks that specifically fit their needs, and also giving them the ability to sequence the deployment of the blocks in a timeline that is most appropriate to their immediate and long-term business goals and user needs. The workload approach also enables shorter and less expensive implementation cycles.
The following diagram illustrates the Microsoft Dynamics workloads approach. This model was presented to customers and partners at the Microsoft Dynamics Convergence 2013 event in March, and is also depicted in the Dynamics Business 2.0 Vision paper.
As we can see from the following diagram, Microsoft categorizes its workload in three tiers—the Administrative Core for the corporate functions, Horizontal Operational Workloads that apply to multiple industries and can be tailored specifically to any of them, and Industry Operational Workloads that encompass the business processes for a specific vertical area such as Distribution or Manufacturing.
