High-growth companies that outgrow their small company accounting systems (QuickBooks, Peachtree, Solomon, etc.) are challenged with finding a cost-effective and robust ERP. The tier one ERP solutions, Oracle eBusiness and SAP ECC, provide fully functional ERP and reporting solutions across all industries. However, the associated costs may drive a high-growth company to look at tier two options. The tier two list is longer and includes SAP B1, Microsoft Dynamics, Infor, NetSuite, and Epicor, to name a few. Investments by tier two vendors over the past five years allow these applications to offer a tantalizing alternative by providing integrated solutions at a much lower total cost of ownership.
Selecting the right tier two package is daunting given the number of alternatives available. How can a company be confident when determining which tier two package will support a growing company? It’s all about finding and addressing the Achilles heel of tier two alternatives:
Chart of Accounts Structure
Companies implement new ERP systems to improve the quality and timeliness of information required to support the business. Capturing profitability across a variety of dimensions including geography, division, product or service line, and customer is critical. Most tier two packages incorporate profitability dimensions as part of the chart of accounts. In this case, all valid combinations will need to be entered into the system. This makes the chart of accounts difficult to use and maintain for larger companies with complex organizational structures. However, there are a few tier two packages that support dimensionality. These solutions should be short listed when considering a new ERP.
Accounting for the transfer or sale of products and services in a complex legal entity structure can be difficult with many tier two packages. There are few tier two packages that offer intercompany transaction processing as core package functionality. In this case, intercompany transactions would need to be processed and consolidated manually, resulting in data entry errors and delayed month-end closes. Many fast growing companies have legal entity structures that result in intercompany transactions and should only consider tier two solutions that have automated intercompany processing capability.
Foreign Exchange Support
Many high-growth companies differentiate services by operating globally. Sales transactions can result in product being sourced in USD but sold in local currency. Bills are generated and collected in local currency while profits are transferred to headquarters in USD. It sounds simple, but many tier two packages do not support this functionality without modification or a third-party solution. Both add cost and complexity to the implementation.
Configuration for Ease of Use
Tier two ERP solutions provide a variety of experiences for end users. Some provide a green-screen-like environment that is comforting for users who don’t want to click through the transaction entry process. Other tier two ERP solutions have completely rewritten the user interface to take advantage of modern technology and provide a Windows-type interface. A few tier two ERP solutions have taken the middle ground by taking advantage of the best of both options while providing powerful tools to simplify transaction entry processing. The packages that have taken the middle ground can be easily configured to support company-specific processes.
The majority of tier two implementation consultants take the homework or workbook model approach to installing and configuring software. The implementers bring in setup checklists and questions to decide how the system should be configured. Critical report design, workflow settings, and data integration work is assigned to customers and must be completed before the implementation consultant can configure the system for testing. Tier two ERP consultants leave and do not come back until the homework assignments are completed by the customer. This works well for small, simple companies. However, rapidly growing companies require more assistance to navigate the organization and leverage best practices from across the industry to determine the appropriate future state. As a result, fast growing companies require more systems integrator attention to ensure these tasks are completed correctly. Many tier two ERP consultants are not comfortable working in this environment and should be vetted carefully.
Tier two ERP solution providers vary in size and ability to provide post-implementation support. Customers of smaller tier two ERP solutions may have difficulty obtaining support during critical outages because their one support consultant is on vacation hiking Mount Kilimanjaro.
Selecting a tier two service provider that has a sound financial position, invests in new functionality, and offers the right level of post-implementation support is critical for a successful implementation.