Global Versus Local ERP Software
Making the decision to invest in a modern Enterprise Resource Planning (ERP) solution is something all growing businesses face as current legacy systems become outdated, sluggish and no longer fit for purpose in our digital world. If you find yourself in this position you will soon discover a myriad of choice and levels of software available which can get a bit confusing.
Do you go with a global ERP software vendor because they’re a recognisable brand, can consolidate your IT assets and provide a certain level of commonality across all divisions? Or do you go with a lesser known vendor who may be highly specialised in your vertical space but with more scope to tailor to your individual needs?
Given the number of ERP software options out there, choosing the right system for your business is no easy task. It doesn’t help that the industry uses a tiered system to categorise the different software packages available. This can further complicate the situation and make the decision of what to go with (and where to start) harder.
While it is not important to dwell too much on this tiered classification, it’s good to be able to distinguish where various packages sit in the marketplace.
Tier 1 ERP Software
‘Tier 1’ level packages like SAP Enterprise, Oracle and Infor are global multi-billion dollar operations designed to service the needs of the ‘big guys’ - large complex businesses that have many departments, a global presence and often complicated operational structures. Companies in this tier would expect to invest 7 figure sums into their business solutions. Government agencies, banks, airlines and multi-national companies feature in this tier.
Tier 2 ERP Software
The ‘Tier 2’ market is the largest of all the tiers in terms of the number of potential customers. Software in this class are often less complex to implement and costly than Tier 1 applications and can go from full ERP software packages to very industry specific solutions. Targeted at mid-size companies of a <500 users, the level of complexity can vary greatly here which is why you’ll find so many vertical market players in this space. Packages in this tier would typical range from 30k to <€1m and include solutions such Intact iQ, Sage X3, MS Dynamics Nav, Sap Business One etc.
Tier 3 ERP Software
‘Tier 3’ level packages such as TAS Books, Quickbooks, Sage 50 are chosen by SMEs across a wide and varied spectrum of industries. Functionality tends to be reasonably standard and processes are adapted to meet the functionality of the software. They are designed for single site customers, tend to have less than 10 users and in general have less demanding needs. Companies who opt for this solution will work in conjunction with a local supplier and invest a few hundred euro to €30k.
In recent times, new technology and players in the market have blurred these lines somewhat. For instance, Intact Xline, a recent addition to our product range, falls between Tier 2 and 3. It’s designed for small to medium sizes business from single business owner type businesses right up to multi-branch, multi-location, multi-currency organisations, and provides access to new technologies for a digital economy but doesn’t quite go as far as a full ERP solution, unlike Intact iQ.
While it is good to be aware of the different levels of ERP software available, one of the most distinguishing features between the tiers is what happens once you’re live with your software. Ensuring you have reliable ERP support when you need it is a key element to the future success of your business. Access to development services also plays a crucial role particularly if you’re looking to fine tune your software to adapt to your way of doing things now and long-term.
This is why you need to weigh up your case for going with a Global ERP Software Solution Vs a Local ERP Software Solution.
Some of the things you need to look into include;
- What levels of support is available?
- Where will your support be based – is it local, regional or in another country?
- What are the response times for queries?
- How do issues get elevated?
- What if you want changes made to the software?
- Is there a program change development process? Is there a local training facility?
There are also a few other important elements to consider. For instance, is the package sold directly from the source code owners or through resellers? Global ERP tends to be through resellers so find out what their experience is in your industry. Are their support and development services global or local? How much input do you have into the future development roadmap of the software? How close are the lines of communication between you and the developers? The further the degree of separation the harder/longer/costly it may be to get changes made to your package.
In terms of tiers, tier 1 vendors are more likely to have support anywhere in the world while tier 2 vendors can be in a number of countries or regions and tier 1 generally within one country. Again the lines are slightly blurred between tier 2 and 3 vendors so it is crucial you know early on where your support and development services are based.
To help you on your road to choosing your next ERP software and in deciding whether to go for a global or local ERP software, we’ve outlined below the advantages and disadvantages for both.
Advantages of Local ERP Software
- Tends to be more cost effective as you pay for what you need
- Opportunity to tailor the software to individual business nuances
- In-house developers can make changes on a per customer basis
- Support is generally localised and have a closer relationship with the implementation team/consultant
- Many are modular based so additional functionality can easily be added on
- Sector specific solutions available and consultants have deep insight into how businesses in your industry optimally operate
- On demand service and support
- Lower Total Cost of Ownership (TCO)
- New technology and players in the market offer better scalability
- Access & influence on future product roadmap
Disadvantages of Local ERP Software
- Non-standard delivery as it differs from vendor to vendor. This may not be an issue if your software vendor is also the developer of the software.
- Companies in the vertical space are smaller than the global giants. Find out if their financials are robust. How much are they investing in R&D to futureproof your investment? Are their employee numbers increasing, what recent sites have they added to their portfolio? Review the structure of the board, their level of expertise and their future strategic plans. All of these factors will provide you with the security and peace of mind you need to feel confident that this provider is invested in your industry for the long term.
- May outgrow quickly unless future proofed – a less expensive package may not be the best option for you if you have to use add on’s to meet all your business needs. Find out if the platform the system is developed on is a new modern technology stack or are they using legacy technology with a new user interface.
Advantages of Global ERP Software
- Recognisable brand
- Consolidation of ERP software across multiple locations
- Ability to standardise processes globally
- Provides global visibility into operations
- Access to a wide range of features
- Conform with a variety of global and local compliance requirements
- Can drive down overall IT costs with a single package running the business
- Regional barriers including multiple languages, time zones, support hours/localisation are typically handled effectively.
- Phased implementation
Disadvantages of Global ERP Software
- Customisation is difficult to achieve due to lack of flexibility
- More features than you may ever need
- Support is often carried out in different countries
- Businesses often find themselves shoehorned into a certain way of doing things
- Long implementation timescale
- Implementation is generally carried out through partners and resellers. Ensuring consistent processes globally presents challenges and increases project risk
- Can receive some resistance by end users who have to conform to a standard set of processes
- Program changes can be quite costly and time-consuming especially if your partner or reseller has to go back to the source code owner.
- Total Cost of Ownership (TCO) can be high – cost is dependent of the level of complexity
To sum up, there are a number of elements to consider when deciding whether to go global or local for your ERP software solution. Crucially however, it is more important to define how and where your ERP software is going to be managed going forward.
ERP support for your organisation is always a major consideration through your systems lifecycle. You are investing in a solution; not just a piece of software. Take time to consider what type of solution prospective vendors offer taking into account the software, support, consultant, development and management expertise & pedigree.
Why not check out: How to choose an ERP Software vendor