When it comes to choosing an ERP system, it’s easy to get overwhelmed. The options seem endless, and everyone has an opinion about which one’s the best. Here’s the thing: There isn’t one perfect ERP system. Instead, the key is to understand the types of ERP on the market today and figure out which one makes the most sense for your specific situation. Let’s break it down.
“Is this on the cloud?” is one of the first questions we get when a client is evaluating ERP. And it’s a good question because how the ERP is deployed plays a big role in how you’ll use it and what it’ll cost. Here’s how to slice it:
This is where things get interesting. Once you decide on the deployment type, you want to narrow down your options by vertical. Some ERPs are built specifically for certain industries. For example:
Here’s the thing : Sometimes, what’s marketed as “industry-specific” is really just a general ERP with a few bells and whistles. That’s where experience matters. You need to talk to vendors who know your industry inside and out, not someone who’s figuring it out as they go.
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Traditionally, ERP systems are categorized into Tier 1, 2, or 3. We will review characteristics and players found in each of those spaces.
Tier 1 ERP applications are positioned to meet the needs of companies generating more than $750 million in revenue. That number is not firm, but an accepted baseline. These are enterprise-level solutions. The organization needing a Tier 1 type of ERP system typically has thousands of employees, multiple national and international locations, different financial entities, and many operational complexities.
The usual ERP solutions seen in this category include SAP S/4HANA, Oracle Fusion, Microsoft Dynamics 365 (Finance and Operations), and Infor LN and Infor M3, as part of the Infor CloudSuite options. Those are the big four, plus there are other niche players.
The problem is these applications struggle to adapt to different environments, as one size truly does not fit all. For example, large companies using SAP may attempt to push it into a discrete manufacturing division. It is a challenge to simplify SAP S/4HANA so it can be easily used by lower-volume discrete manufacturers, versus a right-sized ERP application that is purpose-built for manufacturing. Tier 1 ERP solutions like SAP and Oracle are so complex that you must spend a lot of time configuring these applications for different environments due to the volume of functionality they provide.
Also, remember that the financial component or the CFO of the organization is prescribing these monolith ERPs to be able to measure operational and financial performance of the enterprise. Unfortunately, there are many sites and divisions that must suffer lack of efficiency for the greater good of the enterprise.
Of note, the introduction of two-tier ERP is something we’ve seen being adopted more and more where large companies use an industry specific ERP at the division level, and roll up to a Tier 1 ERP for financial consolidation. This strategy allows the divisions to use right-sized and vertically proficient applications, including Infor VISUAL and Infor SyteLine, and yet still roll up financial and performance data to the parent ERP, such as SAP or Oracle.
Tier 2 is a crowded marketplace. Having so many players makes it exceedingly difficult for those trying to determine the best type of ERP for their business. Tier 2 solutions are usually suited for companies with revenue from $20 million up to $750 million. It is a noticeably big space. There is crossover of solutions capable of working at the Tier 1 and Tier 3 levels as well.
Leaders in this space include the Infor CloudSuites, Oracle NetSuite, Microsoft Dynamics 365, SYSPRO, Sage X3, and emerging ERPs such as Acumatica and Rootstock.
Many of these products have yet to scale north of $500 million in revenue, but that does not mean they are not capable.
Related: ERP for Mid-Sized Businesses
However, scalability, number of users, and revenue are indicators of fit as much as the ERP’s actual functionality. The ability to scale is often hardware related, and that has been effectively addressed by true multi-tenant cloud ERP providers like Infor and Oracle. Companies like SYSPRO and Epicor have solid functional applications, but are behind on the technology side, such as being a native browser-based application. This constrains them from offering multi-tenant cloud options.
Tier 3 is also a crowded market space. The most popular option is QuickBooks because it is excellent at accounting functions. It is easy to use, many people already have experience using it, and it’s inexpensive. However, as smaller companies start to grow and have more demands in a manufacturing environment, QuickBooks rapidly starts to fall short.
There are other Tier 3 players that are remarkably successful at suiting companies with less than $20 million dollars in revenue, including E2 and its related product, JobBOSS. These products meet more advanced needs (in comparison to QuickBooks), but struggle to provide functional depth on the accounting side. In addition, they are limited from a functional footprint to address manufacturing specific requirements. Another option in the Tier 3 space is Global Shop, which offers more functionality, but is still limited on technological architecture and offers only single-tenant (hosted) cloud.
Choosing an ERP is a big decision. It’s not just about features or price—it’s about finding a system that fits your business and will support your growth. Here’s how to approach it:
Before you start looking at vendors and the different types of ERP, get clear on what you’re trying to solve.
Keep in mind that cheap ERP isn’t always cheap in the long run. A system that looks affordable upfront can cost you more later in inefficiencies, lack of support, or needing to replace it altogether.
Deployment options are a big deal. If you’re a company that likes to control everything in-house, an on-premise ERP might be for you. If you want to avoid the hassle of hardware and updates, cloud ERP is the way to go. There’s no right or wrong answer—it depends on what’s important to you.
When you talk to vendors, don’t just focus on what the software can do. Ask about their experience in your industry and their support structure. Questions like:
One of the best things you can do is bring in someone who knows ERP to help you evaluate your options. As I always say, “It’s tough to be an expert on ERP and run your business at the same time.” An experienced consultant can save you from costly mistakes and help you find a system that fits.
ERP isn’t one-size-fits-all. Whether you’re a small business just getting started or a global enterprise with complex needs, the right ERP is out there—it’s just a matter of finding it. Take your time, ask good questions, and don’t be afraid to lean on experts when you need to.
If you’re ready to explore your options, give us a call. We’re here to help.