The value of 2-tier ERP for small and large businesses

There is no doubt that SAP is the world's largest provider of ERP software. According to the website www.erplists.com, it has about a third of the market. But that still leaves a lot of share for other vendors, many of which do not trip of the tongue. Understanding where the applications of some of the smaller players are being used can be tricky.

ERP is one of those categories where getting an accurate picture of market share is not that easy. The reason for this is twofold. First it depends on the size of companies; SAP and its closest rival Oracle are most closely focussed on larger businesses, other vendors such as Microsoft and Infor are more focussed on the mid-market—so overall market share does not tell you that much.

The second reason tying down ERP market share is tricky is that it turns out that large enterprises also buy mid-market ERP products. That is not to say they eschew the big players, but that they select other products to fit niches that SAP and Oracle do not serve well.

For example SearchManufacturingERP.com cites an example of the French company Areva using Infor SiteLine for site operations alongside SAP for its financials. It was felt that the Infor product was more cost effective and easier for its employees to learn to use for that particular purpose or group of users.

Such mixed use is referred to as 2-tier ERP and it is making a muddle of market share figures because many product usage surveys only ask questions like "what is the main ERP product that you use", or they only interview representatives from the finance department who forget about products used by other departments.

In fact the mid-market vendors actually see the 2-tier market as a significant opportunity for increasing their market share. Microsoft actually has a page dedicated to 2-tier on the Microsoft Dynamics area of it web site. It provides a number of case studies including the German company Wurth that uses Microsoft Dynamics' Navision in branches whilst maintaining SAP at its HQ.

However, it is not a one way street. SAP has been targeting the mid-market for many years with its Business All in One product. Quocirca spoke to a number of SAP's mid-market customers last year. A motivator for some of these organisations to use SAP, including Dishman, a UK based pharmaceutical components supplier, and Consol, a South Africa bottling company, was, they reported, the ease of participating in the business processes of larger organisations that also used SAP.

To enable this, larger organisations need to open their ERP applications to authorised outsiders and the degree to which they were doing so was examined in Quocirca research conducted a few years ago. 50% of the enterprises surveyed were allowing external users to access their ERP systems, putting it third behind supply chain management (SCM) and customer relationship management (CRM). In the past this may have been done using electronic data interchange (EDI) but it is now usually accomplished by web-enabling the application—that is, allowing secure external access via a web browser.

It is interesting that CRM is at the top of this list with over 60% of organisation allowing external access. Of all enterprise applications, CRM is the one that has been most successful in moving over to the software as a service (SaaS) delivery model as evidenced by the rise of salesforce.com and others in the last decade. So why isn't more ERP being delivered like this, as it seems an obvious way to enable the sharing of ERP functions between businesses?

The answer to that is that ERP is being web-enabled but on a more modest scale. Businesses have been slower to web-enable their own ERP applications ahead of other more obvious candidates such as portals, content management and CRM, but even when Quocirca's research was published, 25% had done so.