Many businesses that run the SAP ERP application as their corporate ERP (Enterprise Resource Planning) system are leading to a two-tier model to support their subsidiaries. With this two-tier model, they prefer a subsidiary ERP system that meets subsidiary functional requirements and is less expensive to deploy, easier to change, and simpler to manage. Yet it also captures corporate requirements, which typically include regulatory transparency, operational metrics visibility, use of centralized business functions, and key data rollup.
Many of these businesses are choosing the SAP Business ByDesign solution as their subsidiary ERP system for those reasons. This powerful solution meets functional and industry requirements, fast to deploy, offers a low cost of ownership and provides deep integration with SAP ERP used at headquarters (“HQ SAP ERP system”).
Challenges being faced by Subsidiary Systems as Companies Expand
Fortune 5000 companies are growing their footprint to take advantage of market opportunities. As a result, they are doing the following:
- Opening offices in new geographies and growing existing sales and distribution operations
- Acquisition of new companies to either consolidate their position in existing market segments or expand into new areas
- Setting up new joint ventures
Such actions increase the number of subsidiaries within their corporate hierarchy: be it an international and local sales and distribution offices or small operating division or customer service units or joint ventures.
The IT solutions at these subsidiaries will be under pressure because they have to:
- Maintain the current business model of the subsidiary in an efficient manner – meeting both industry and business-specific requirements
- Assure that they can scale and are flexible to meet the changing needs of a subsidiary
- Provide enough transparency to the HQ for risk and compliance, as well as for tracking operational performance against plans
- Maintain intracompany transactions such as buying and selling between corporate and subsidiaries
- Facilitate a shared-services structure such as centralized purchasing
- Maintain financial consolidation for global financial reporting
- Empower organizations to easily and rapidly deploy systems at new subsidiaries, so they can achieve business integration quickly
The integrated business solutions implemented in subsidiaries which don’t meet the requirements listed above and should be replaced.
Implementing a Two-Tier ERP Model
IT budgets are generally small at most of the subsidiaries. Adding, these subsidiaries typically don’t have adequate IT resources to deploy and support a corporate ERP system. The most desirable approach for these subsidiaries is to standardize on an integrated business solution that satisfies their functional requirements and is less expensive to deploy, easier to change, and simpler to manage. On the other hand, it still must
- Meet corporate requirements for regulatory transparency
- Support visibility into operational metrics
- Leverage centralized business functions
- Deliver key data rollup
This deployment model, where corporate and subsidiaries have different ERP systems by choice, is called a two-tier ERP model.
SAP Business ByDesign: The Right Choice
SAP Business ByDesign – a single, integrated business management solution that helps in improving control, efficiency, and visibility within the subsidiary and across the organization. Adding to its rich functionality, it integrates with the HQ SAP ERP system like no other SaaS offering available. Hence, you get an integrated view of the entire operation, your data is synchronized, and cross-functional processes become more efficient. SAP Business ByDesign provides a deep portfolio of integration because SAP understands SAP ERP better than anyone else. The combination of rich functionality, SaaS delivery model, and analytics, as well as support for multiple integration scenarios, makes SAP Business ByDesign an ideal solution for a two-tier ERP model.