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How would you explain the difference between a Tier I and a Tier II ERP system to non tech Execs?
Putting together a presentation for our Executive Team about ERP. We are making a recommendation - but need to explain the differnce between Tier I (SAP and Oracle) and Tier II (MS Dyanamics and others)without getting too deep in the weeds. Anyone have three of four sentences that can summarize the differences?
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2 Answers
Hi Tom,
The tiered structure refers to market share, with ERP-related revenues serving as a proxy. Tier I vendors include SAP and Oracle. Tier II vendors include Infor, Sage, Microsoft, Lawson, Epicor, IBS, IFS (among others). Tier III vendors include many, many others.
Tier I vendors typically serve large organizations. Tier II vendors typically serve medium-sized businesses. Tier III vendors typically serve smaller organizations. However, it is important to note that the landscape is shifting. The Tier I and II vendors are now going after the SME market.
With respect to functionality, a general rule-of-thumb is that the larger vendors offer software with deeper functionality (partially a function of higher R&D spend).
I hope this helps. Please let me know if you have additional questions.
Without knowing more about your business, it is a little hard to say definitively. But the first things I would say about the difference between Tier I and Tier II is simple: 2 years and $2 million vs. 6 months and $150K. A Tier I implementation will cost much more, and require far more internal resources. What are you getting in return? Tier I will certainly have broader functionality, but you may be paying for functionality you don’t need, which in turn will create maintenance plans for item you don’t use.
Questions to ask:
1) How will the Tier I solution handle customizations?
2) Will your business need to adapt processes to fit the new solutions way of doing business?
3) How much will you need to rely on the Tier I implementation team going forward?
None of what I am saying is meant to suggest there aren’t good reasons for going with a Tier I solution, and full disclosure here – my firm handles Tier II. But there is no question that a Tier I solution will cost much, much more. Make sure the all the costs as well as the Return on Investment are clearly spelled out.
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