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Two tier ERP approach for the SAP S/4HANA implementation

The two tier ERP approach offers companies a flexible and scalable way of optimally adapting their ERP system landscape to the individual requirements of the various business units. This is particularly relevant for groups with international subsidiaries, fast-growing companies or companies with diverse business areas. With SAP S/4HANA – both in the cloud and in the on-premise version – these structures can be mapped efficiently and future-proof.

What is the two tier approach?

In the two tier ERP approach, two different ERP systems are used in a group of companies:

  1. Tier 1 – Central ERP system: the group headquarters or parent company operates a comprehensive, often customized ERP system that covers complex processes such as financial consolidation, global reporting, complex manufacturing processes and strategic management. SAP S/4HANA is often used here as a private cloud variant or on-premise. This offers maximum adaptability and deep integration into existing IT infrastructures.
  2. Tier 2 – Local ERP systems for subsidiaries: Subsidiaries or regional branches use a leaner, standardized ERP system. The SAP S/4HANA Cloud, Public Edition is ideal here, as it enables fast implementations, lower operating costs and automatic updates. Integration and expandability is possible via the SAP Business Technology Platform, among other things.

Benefits of the two tier approach

1. Flexibility and agility in business processing:

Subsidiaries have the opportunity to react quickly and independently to local market requirements. They can implement specific business processes that correspond to their regional circumstances without affecting the complexity of the central ERP system.

2. Cost efficiency through standardized cloud solutions:

The use of SAP S/4HANA Cloud in subsidiaries not only reduces implementation time, but also IT costs. As it is a SaaS solution, many maintenance and infrastructure expenses are eliminated, which significantly reduces the total cost of ownership.

3. Rapid scalability for growth and acquisitions:

The two tier approach is particularly advantageous for companies that are growing through acquisitions or mergers. New subsidiaries can be quickly and easily integrated into the existing ERP landscape without the need for extensive adjustments to the central ERP system.

4. Standardization combined with innovation

While the head office benefits from customized processes, subsidiaries use the latest innovations from the SAP S/4HANA Cloud. Regular updates and new features ensure that the local systems are always at the cutting edge of technology.

5. Optimized governance and compliance:

The two tier approach facilitates compliance with global standards and local regulations. The head office retains control over corporate guidelines, while subsidiaries can adapt their processes to local legal requirements.

Use cases for the two tier approach

  • Multinational corporations:
    A globally active group can use a highly customized SAP S/4HANA on-premise or SAP S/4HANA private cloud system for global management and reporting at its headquarters. At the same time, subsidiaries in different countries can use a standardized SAP S/4HANA cloud solution to efficiently cover their local requirements.
  • Fast-growing companies:
    Companies that are expanding through acquisitions or mergers can use the two-tier approach to quickly integrate new units. This allows the operational systems of the acquired companies to be quickly replaced with SAP S/4HANA Cloud, while the central ERP system remains unchanged.
  • Companies with diverse business units:
    Companies that offer different product lines or services benefit from the two-tier approach by standardizing central business processes while meeting the specific requirements of their business units.

Technological integration and harmonization

A key success factor of the two-tier approach is the seamless integration between the two systems. SAP offers a variety of standard integrations and APIs that ensure smooth data transfer and process harmonization. This applies in particular to

  • Financial consolidation: Automated transfer of financial data from subsidiaries to the central ERP system for consolidated reporting.
  • Supply chain management: Transparent presentation of global supply chains by synchronizing local inventory and logistics data with the central systems.

Why the two-tier approach is relevant for your company

The two-tier approach to the introduction of SAP S/4HANA represents a modern and flexible solution that takes into account the complexity of global corporate structures and promotes the agility of individual business areas. Companies can use it to make their IT landscape more efficient, reduce costs and react more quickly to market changes.

If you are thinking about optimizing your ERP strategy or taking the next step towards digitalization, the two-tier approach with SAP S/4HANA is worth considering. We can help you find the right solution for your company structure and implement it successfully.

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