Understanding Two-Tier ERP Strategy and Microsoft’s New SAP – Dynamics AX Connector

Thursday, May 20, 2010 by Julie Stankey

This week, Microsoft introduced a new connector that accelerates two-tier enterprise resource planning (ERP) deployments between Microsoft Dynamics AX and SAP Business Suite.  This connector would allow a company with SAP installed at the corporate headquarters to integrate and connect their data to subsidiaries, divisions or branch entities that are using Microsoft Dynamics AX.  This kind of solution is referred to as a “two-tier erp strategy.”

According to Microsoft, the two-tier connector will enable consolidation of financial data, integration of intercompany supply-chain, and plan automation.

So how do you know if a two-tier strategy (like one using the Microsoft Dynamics ERP connector) is right for your business? 

R. Ray Wang, an analyst and blogger, recently conducted a survey for Software Insider to spot trends in two-tier ERP strategy.  Through his analysis, he explains the three scenarios in which a two-tier approach makes the most sense:

1. Organizations that have different lines of business or business models sometimes find it beneficial to use separate ERP systems for each line of business
2. Companies with international subsidiaries can often save on operating costs with country specific deployments
3.  Organizations that choose a phased approach to modernization, updating one system at a time rather than all systems at the same time

According to Software Insider, the key drivers behind companies considering a two-tier strategy are:

• Desire for an industry specific or purpose built system
• Existing systems are too costly
• Expensive upgrades of existing systems
• A need for innovation that outpaces the solutions on the market
• Regulatory compliance issues
• Geographic requirements
• Rigidity of existing systems

All of these factors are working together to increase interest in two-tier ERP strategies.  Software Insider reports the number of organizations considering two-tier solutions has increased 10% since Q3 2009. 

If you are considering a two-tier ERP solution for your organization, request a complimentary Business Strategy Assessmentwith Socius to help you determine the best strategy for your company.