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ERP Software Tier Definition

There are hundreds of ERP packages. Larger companies tend to require more complex financial structures, multi-currency and departmental organisation whilst smaller companies may be able to implement a package straight "out of the box". For this reason ERP software is often divided into tiers as a convenient starting point for software selection. If you use software designed for a different size of company from your own you could either be spending too much on "feature rich" (i.e. complicated) software or you could end up with software that does not have sufficient functionality or flexibility for your business. There is no absolute agreement on which software fits into which tier. Many software providers attempt to provide cut down or 'lite' versions to open up sales in lower tiers of the market.

There are no prizes for pioneering work in using software packages. Unless the package you choose is well supported locally, the chances of a successful implementation are seriously reduced. It is also worth saying that there is little correlation between the software and successful implementation. More important for a successful implementation than the choice of software is the method of implementation. You will find some sound practical implementation advice in the ERP Class "A" Implementation Toolkit.

You can see examples of packages in each tier, the current owner or "stable" and the number of times the products have changed hands at the ERP Graveyard Scorecard.

Tier 1
These are the most expensive packages and are characterised by the fact that they require a team of consultants with an in-depth knowledge of the software to "configure" the software to your business. The danger is that you "digitise the dinosaur" and transfer all your old problems to the new system. Very few tier 1 implementations result in a positive return on investment whilst 95% of lower tier implementations generate very definable positive returns. Companies with 100 or more concurrent users and/or 1,000 or more linked users will probably require a tier 1 package.

Tier2
It should be possible (and preferable) for most companies to be able to implement these packages "out of the box". Companies with over 50 concurrent users and/or over 200 employees should consider tier 2 packages.

Tier3
These packages are designed to be implemented "as is" and are for companies with between 30 and 200 employees.

Tier 4
Most Tier 4 (and even some Tier 3 packages) are not ERP packages but are financial packages with some basic material planning calculators for ordering raw material such as re-order points. They are applicable for companies with less than 50 employees who mostly operate a manual planning system.