The decision of which deployment option to select often depends on the degree of standardization versus the degree of flexibility required by a customer in their enterprise software, and the implementation method. The different implementation methods are:
- New Implementation / Greenfield: New Implementation with a clean system.
- System Conversion / Brownfield: System Conversion from your existing SAP ERP system.
- Selective Data Transition: Typically combines greenfield and brownfield, often in a two-tier ERP scenario. For example, the SAP ECC system is converted to SAP S/4HANA Cloud Private Edition, and SAP S/4HANA Cloud Public Edition is deployed for a specific line of business, such as Professional Services. This allows standardization in the core ERP, with a fast-moving and frequently updated public cloud solution for a specific LoB.
Two-Tier ERP Deployment
An enterprise resource planning (ERP) system needs to be both agile and reliable, so an organization can quickly respond to evolving business conditions, while also maintaining a sustainable environment that serves stakeholders and business users. A two-tier ERP strategy is when a company uses different ERP systems (either from the same vendor or different vendors) at different layers of the organization.
There are several possible two-tier ERP scenarios, but a common model is where Tier 1 serves as the global backbone running administrative ERP processes (e.g. finance) and Tier 2 is tailored for localized business needs, a subsidiary, or a smaller business unit. This allows an organization to standardize on Tier 1 to meet functional and budgetary requirements, while maintaining flexibility with the business functions in Tier 2.
With SAP S/4HANA Cloud Public Edition, an organization can quickly deploy the public cloud for a subsidiary, while keeping the total cost of ownership low. This approach offers agility to the subsidiary, while the tight integration with SAP S/4HANA (on premise) or SAP S/4HANA Cloud Private Edition deployed for the headquarters will ensure a high degree of visibility into the data and operations of the subsidiary.
Other market drivers to adopt a two-tier ERP may include:
- Onboard new acquisitions quickly
- Standardize subsidiaries on a harmonized platform
- Prepare for an anticipated divestiture
- Adapt to new processes or entirely new business models
- Centralize services like finance or procurement
- Extend the supply chain control with business partners
- Expand through joint ventures
- Adapt to evolving geo-political situations
- Prepare for changing data residency regulations
Two-tier ERP Scenario Examples
In the Headquarter and Subsidiary scenario, the headquarters runs a highly customizable on premise or private cloud ERP and subsidiar(ies) run a standardized public cloud ERP with a specific scope. There is seamless integration between the headquarters and subsidiaries, which allows the subsidiaries to maintain flexibility, focus on innovation, and onboard quickly.
In the Central Services scenario, an organization could have a line of business spin-off running a standardized public cloud ERP. For example, finance would be a separate legal entity and run in the public cloud as "Shared Services", with the rest of the business running on a highly customizable on premise or private cloud ERP. This enables a large organization with many different lines of business to keep up a fast pace of innovation. The structure also makes it easier to introduce new innovations into the business without interfering with the highly customized on premise or private cloud system.
In the Supply Chain Ecosystem scenario, the headquarters runs a highly customizable on premise or private cloud ERP system and brings their subcontractors or dealers on a standardized public cloud system. Integrating an organization with their vendors, dealers, and subcontractors forms an entire supply chain network. With this model, there is high visibility and transparency across the supply chain, and implementing process automation results in a reduction of manual interventions.
Building an effective two-tier ERP strategy is about more than just integration scenarios. It is critical to conduct a thorough analysis of the functionality necessary for each subsidiary or satellite, and the strategy must define how the interdependence of the organizations will affect reporting, in addition to business processes. For example, the reporting strategy for intercompany transactions and company-wide reporting should be defined up front. In addition, master data management will follow integrated process requirements, and therefore should also be planned for early in an implementation project. Last, change enablement is multi-dimensional, because there are new systems that require sufficient end-user training, and potential changes to business processes with the interdependence between organizational entities.