Aug
26
Big ERP vs. Tier 2 ERP – Is the Gap in Functionality as Big as it Appears?
Filed Under (Software Selection, Industry Observation) by Aleksey Osintsev (see bio)
 

Recently, we have witnessed Infor’s aggressive advertising campaign against its bigger rivals that are conjointly called “Big ERP,” where it is blaming them for inflexibility, neglecting customers’ interests, and charging enormous amounts of money for their software and service. As an alternative, Infor and its competitors offer a variety of tier 2 systems that can supposedly satisfy rigorous business’ requirements and, at the same time, are more agile, and less costly. This also applies to the small and medium size ERP market, where Big ERP vendors have been trying to aggressively invade in the last few years. I was interested to see what the difference was, by having the opportunity to compare features and functions of not only software products but groups of them.

The Experiment

I created a new project in TEC Advisor, TEC’s online evaluation system, using as an example the discrete manufacturing ERP model, and selected some ERP applications to represent my virtual Big ERP and Tier 2 ERP competitors.

The first group contained the following ERP applications: SAP ERP, Oracle E-Business Suite, and Oracle JD Edwards Software. For the second group, I selected a few typical tier 2 applications, such as Epicor ERP, IFS Applications, Infor SyteLine, Lawson M3, Microsoft Dynamics NAV, Microsoft Dynamics GP, Pronto ERP, QAD, IQMS, Syspro, and Jeeves. To have a more accurate result, I excluded our section of Product Technology criteria from the comparison and assigned equal priorities to all remaining functionality criteria.

So, what has this exercise concluded? (Please note that this comparison is features/functions-based and does not cover the technology area.)

1. The overall rating (fig.1) of tier 1 ERP for discrete manufacturing is expectedly higher that the overall rating of tier 2 products. However, the difference is not as dramatic as one would expect and is only 4.96 points lower than the tier 1 average.

This can be explained by the fact that more and more ERP vendors are capable of delivering strong basic functionality for manufacturing, such as master production scheduling (MPS), material requirements planning (MRP), and related activities: purchasing, inventory management, sales, etc. The main functional differentiator between tier 1 and tier 2 vendors can be found when analyzing advanced manufacturing such as engineer to order (ETO) and process management, but also industry verticals with very complex activities (oil and gas, mining, electronics, etc.).

 

Figure 1. Tier 1 vs. tier 2 overall rating comparison

2. The biggest differentiator between the two groups of products is in the human resource management area. So, for example, if a company’s functional priorities include a fully integrated HR module, the better option would be to have a look at Big ERP systems as the ones that are rich in this type of functionality.

Reason: HR, as well as enterprise asset management (EAM) or product lifecycle management (PLM), is one of the areas where Big ERP vendors either acquired and incorporated software solutions, or developed their own add-ons, in order to address the complex needs of large multi-national corporations. Though tier 2 ERP vendors are also working on developing the above mentioned functionalities, they usually decide to work with third-party tools or use application programming interfaces (APIs) to integrate with existing HR, EAM or PLM systems that their customers already use.


 Figure 2. Tier 1 vs. Tier 2 ERP comparison by modules

3. The differences in Manufacturing Management, Inventory Management, Sales Management, and Procurement Management areas are minimal and are within two percent of one another.

Reason: These are basic functionality groups that any manufacturing company needs, and tier 1 ERP vendors are not the only ones providing strong support for all of them. Tier 2 ERP and even smaller vendors are getting closer to tier 1 because they concentrate on the basics, whereas tier 1 ERP are more interested in expanding to other areas such as supply chain management, product design and collaboration, business intelligence and business performance, etc.

We can go deeper into the research and drill down into each and every module, sub-module, and leaf level unit of functionality, but the idea is already clear: Tier 2 systems are getting stronger and are nipping at the heels of the Big ERP players in terms of their features and functions for ERP discrete. Furthermore, in one-to-one comparisons between standalone systems, you can see that in some areas, the rating of Tier 2 software can be even higher than its Tier 1 competitor, especially when it comes to budgets comparison. At the same time, it’s still fair to say that SAP and Oracle products—in general—surpass lower ranking systems.

In the 20 years since ERP was introduced, many things happened and the new technologies and the experience vendors gathered while dealing with manufacturing companies allowed them to have very similar offerings for discrete manufacturing. For light manufacturing companies looking for discrete ERP, the functionality will not be the main differentiator between tier 1 and tier 2 vendors. Since many vendors offer similar functionality, factors like delivery model, cost, professional services, integration with other systems are the new must haves for companies looking for discrete ERP.

A decision between Big ERP and the smaller rivals really depends on the particular company’s situation, needs, and priorities. Businesses, that have a user base of over 100,000 may be better served by going with a tier 1 vendor because these companies need more than ERP functionality. Though tier 2 ERP vendors are developing their products to address the challenges of large corporations (e.g., multinational accounting, forecasting and performance management, project management), they usually concentrate on one or a few of these challenges, as opposed to tier 1 vendors who can do pretty much everything.  However, in some cases it might turn out that a tier 2 vendor could be also a very viable option, at least from a functional point of view, but also because they can prove to be more flexible and cost-effective.

I can confirm that in some situations the tier 2 systems can be a strong alternative to Big ERP products, but this will only show up during the selection process— depending on the specific needs and requirements of the company. And in addition, I would encourage readers to try TEC’s online comparison system (TEC Advisor) to create their own projects and make their own conclusions.

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Comments

Tom McHugh on 26 August, 2010 at 1:23 pm #

Tom,
I ran across this article on various ERP’s and thought you might find it interesting.

Regards,
Mike O’Brien


Henrik Aaen on 1 September, 2010 at 11:54 am #

Absolutely execelent idear to compare the basic functionality between Tier 1 and Tier 2.

For sure there is more than 5% diffrence between a BIG ERP and SME ERP… but my guess is that 95% of the clients of a big ERP don’t use all the modules… so I belive your app. 5% diffrence is realistic.

But one thing TEC Evaluation comparison is lacking is the Vertical/Industry features which count for 20-40% of the features.


ERP systems student on 20 September, 2010 at 8:41 am #

Really really good article on comparing the two different tiers of ERP. Not come across such a comparison before, let alone one in such detail!

Agree with Henrik too, from what I’ve seen in case studies etc many users of Big ERP don’t use all of the modules.


JohnD on 29 September, 2010 at 12:36 am #

I have found very little differences between say Oracle r11/12 vs 2nd Tier like Epicor. The functionality regarding GL/AP/AR/Purch/PR/FA/MFG-Inventory was up to par with Oracle. Epicor was much easier to use as Oracle felt more clunky and had more screens(forms) to navigate. It certainly was much cheaper. We certainly used all the modules to capacity and cross training was easier due to the ease of use vs Oracle. Bottom line, the 2nd tier isnt bad and should be highly considered when selecting a ERP solution.


ERP applications user on 25 October, 2010 at 10:46 am #

Hey great insignt into the comparisons into the different tiers of ERP. haven’t come across an article as detailed as this yet so was a really nice find.

Thanks for sharing


PeterD on 6 December, 2010 at 12:13 am #

Thanks for the insightful article, Aleksey. I see you mention Epicor, Infor, IFS, etc., as well as Microsoft Dynamics GP and NAV as good two-tier solutions. I’d also include Microsoft Dynamics AX on that list.

Thanks for sharing.


Aleksey Osintsev on 6 December, 2010 at 11:08 am #

Thank you all for your feedback.

To PeterD: There was no specific reason I did not include Microsoft Dynamics AX in my selection of Tier 2 solutions. Moreover, my understanding is that AX is positioned between Tier 1 and Tier 2, and given a choice between the two lists, I would rather put it in the Tier 1 group. But the principal idea behind this post was to verify the validity of Infor’s statements with respect to “Big ERP” vendors.


Gireesh Sharma on 28 December, 2010 at 11:03 am #

I think the difference is functionality is not really TOO much. However, the choice of ERP must though depend on your specific needs than on the Tier.


Malek on 5 January, 2011 at 8:05 pm #

To Peter D: Could you please shed some light on how you consider Ax as tier 2 ERP?

To Aleksey Osintsev: Good article, but I would like to remind of two things were missed since you’re comparing Tier 2 to Tier 1 ERPs in general:

1- Discrete Mfg is the simplest between the manufacturing types, where the Mixed-mode is the most common and more complicated than the Discrete Mfg. I agree, your comparison applies for Discrete Mfg but not Process Mfg nor Mixed-mode Mfg. It won’t even apply when it comes to Project Management or Service Management.

2- I had a look at the ERPs functionalities listed in the TEC Evolution System, and unfortunately it’s not accurate. So, I suggest picking the functionalities and features from the ERP vendors itself in order to make this comparison as credible as possible.


Aleksey Osintsev on 6 January, 2011 at 11:47 am #

To Malek: Thanks for your participation in this discussion.

re #1: ERP for discrete manufacturing is TEC’s most populous knowledge base in terms of vendor presence, which is why I decided to start with that. I’m planning similar analysis for other ERP types, and will publish the results. I agree that we cannot extrapolate these conclusions into another ERP segment; it can be quite different.

re #2: Picking functionalities and features from the vendors in order to make a comparison, in my opinion, would not lead to any comparison at all. For viable results, we should use the same comparison base, and this is the whole TEC approach: use the same criteria for different applications within the KB. The criteria should be updated and include new functions from different vendors, that is true, but that’s a bit of another story.


Corporatewear software on 12 January, 2011 at 8:43 am #

Really great blog post on comparing the two different tiers of ERP.

Thank you so much for sharing!!


Terry Leister on 27 January, 2011 at 8:59 pm #

Now that PRONTO-Xi is shipping with IBM Cognos10 integrated as the standard Reporting and BI system the functional gap between the products perceived to be Tier 1 and Tier 2 is becoming even further blurred. Take a look at www.pronto-software.com for more details


Dr.Vanitha Vaidialingam on 16 March, 2011 at 2:09 am #

I am a technology and content management consultant. I found this article extremely interesting. An NPO consulting assignment required me to examine several ERPs and make suggestions to them. I found EPICOR most suited to their needs. Of course a second best would have been NET SUITE or AccTech Systems. All these ERPs claimed that they could customize their product to the NPO requiremnts. But, I made the recommendation with an uneasy feeling that the NPO would require to get the products customized extensively before it could actually be put to work for them. So, what are your views on what will suit NPO’s best?

Looking forward to your reply.
Dr.Vanitha Vaidialingam


Anton Zelnik on 16 March, 2011 at 2:49 am #

It’s excellent article, the message is there is no difference almost between Tier 1 and 2, except price. In what group do you rank Infor ERPLN, it’s missing in your evaluation, it deserves to be mentioned at least.

Looking forward to your reply.


Henrik on 16 March, 2011 at 9:36 am #

Dr. Vanitha Vaidialingam storry is a typical example how a ERP Project are being scoped and decided. Call in some software companies - try match the software - select one (typical as the diffrence is not very visable between these it become a matter of who give most discount and lowest rates).
After selection of the software its to find someone who can customise this software and somebody to give a training (freelancers are normally cheaper) and the project can start.

To make a proper selection you need to evaluate all 3 key aspects - Software Vendor - Vertical/Industry Module - The Consultants who should deploy.
Only if you find the right match in all 3 areas a ERP project should be done.


Malek on 1 April, 2011 at 10:09 am #

To Dr.Vanitha Vaidialingam: NPO for NonProfit Org?


Guss on 17 November, 2011 at 6:05 am #

I’ve come across this blog as I was comparing Tier 1 ERP with Tier 2s.
But i also noticed that EPICOR a tier 2 ERP seemed to deliver comprehensive functionality from this discuss and from doing some research on the product.

I have a question how ever and was wondering if any of you have hard facts to confirm whether or not EPICOR can be suited to run in a company that is into Contracting Construction Projects and EPCI.

As far as I know most ERP systems evolved from MRPII and have their roots in Manufaturing. EPICOR does have a solid manufacturing module but can it address Construction Contracting BEst Practices?

Looking forward to hear you valuable comments.

regards


LeMon on 21 November, 2011 at 11:22 pm #

Excellent article about tier1 and tier2 ERP solution. I will think more when choose ERP product from my company based on this article.


Joe Noll on 30 March, 2012 at 5:41 am #

It would be great if you would have some Sage product(s) in your comparison. Was there a reason you did not include them?


Aleksey Osintsev on 30 March, 2012 at 8:30 am #

Joe Noll: you can easily compare different solutions (Sage and many others) on your own using TEC Advisor tool http://www.technologyevaluation.com/products-and-services/decision-support-software/tec-advisor/. Indeed, this is exactly the core idea of TEC’s website - to provide instruments and information for end users to make a legitimate decision. Good luck!


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