Types of ERP Systems

In order to provide Milwaukee County employees with a general understanding of the current state of the market for Enterprise Resource Planning tools, as well as an overview of the capabilities and functions of modern ERP software solutions, IMSD and partner vendor Plante & Moran conducted market research on modern ERP systems available on today's market. The result of that research includes the following information and sample videos provided by several vendors of ERP solutions. These sample videos provide an introduction into different types of ERP solutions and their capabilities, to give County users context.

Those videos can be viewed on the Demonstration Videos page.

Types of ERP systems that exist in the modern market are ranked by tier. ERP Tiers are a method of classifying a vendor's software based on the size of the entity the solution must accommodate and the type of processes the entity will require from the software. Tiers are useful measures of a vendor's ability to scale its software solution and the capabilities of that solution.

There are 3 Tiers in ERP software solutions: Tier 1, Tier 1.5, and Tier 2.

In general:

Tier 1 Solutions are focused on private sector business processes. These solutions can handle complex needs of a variety of types of entities. They are flexible, configurable, and able to scale up to handle the largest entities' needs. However, they can be difficult and costly to implement and maintain due to their complexity.

Tier 2 Solutions are focused on public sector business processes. These solutions are tailored to meet the needs of local, state, and federal governments and often have more "built-in" features targeted toward government requirements. However, they are also less flexible than Tier 1 solutions, offer less configuration options, and can be difficult to scale up for use in large entities. Their rigidity does make them more cost- and time-efficient to implement and maintain.

Tier 1.5 Solutions fill the market gap between Tier 1 and Tier 2 solutions. Often, they are more flexible and configurable than Tier 2 solutions, but more rigid and easier to implement than Tier 1 solutions. Tier 1.5 solutions have aspects of both Tier 1 and Tier 2 solutions and their pros and cons are dependent on the particular solution being analyzed.

 

Solution Tier  Tier 1 Tier 1.5 Tier 2
Pros

Offer broad solutions geared toward businesses in the private sector. They are designed to accommodate the varied and complex needs of private businesses and handle manufacturing and supply chain operations. As a result, they are often highly configurable and flexible and can easily accommodate the functions of large organizations. They include a number of modules and often offer robust core financial modules. Most Tier 1 providers have a large network of implementers available to assist in the implementation of their solutions, many of which have dedicated public sector practices.

Tier 1.5 solutions offer enhanced functionality in areas such as HR and Payroll, which Tier 2 Solutions do not. They also offer modules that are able to scale up to a larger client's complexity and transaction volume, but at a lower cost and implementation time compared to a Tier 1 solution.

Many Tier 2 solutions are focused heavily, if not exclusively, on government. These solutions often have their origin in the government sector. This focus gives Tier 2 solutions the advantage of experience improving and updating their software products in a government environment to offer a greater range of products, modules, and functionality. As a result, they often have a wide range of products that includes some constituent-facing applications as well as government-specific functionality (e.g., permitting). These solutions are often more prescriptive - for example, governmental best practices are designed within the application. Tier 2 solutions can be less cumbersome to implement than Tier 1 solutions. Nearly all Tier 2 solution providers implement their own software and do not rely on third party implementers.

Cons

Tier 1 solutions were born in, and live in, the private sector. As a result, their functionality is more geared toward the needs of private business. Because of their flexibility and configurability, Tier 1 solutions can be difficult for government agencies to implement due to an inability of many government agencies to dedicate enough technical resources to leverage the expansive capabilities of the system to meet their needs. In other words, government agencies may not be utilizing Tier 1 solutions to their maximum capability and thus not getting as much bang for their buck as private sector entities do. The complexity of Tier 1 solutions means they are most successful at organizations with structured IT governance or ERP process governance, not typically demonstrated in organizations which have implemented a fragmented software approach. Strong IT project management is also necessary for Tier 1 deployment. Plante & Moran has had experience with some public sector clients who have implemented Tier 1 solutions and run into two situations which prevented those clients from realizing the full benefit of the Tier 1 system (which diminished return on investment):

1. The governmental body did not budget the necessary capital to implement the solution and optimize current business processes due to cost factors related to capital budget and resource constraints.

2. The operating costs to maintain Tier 1 solutions relative to software maintenance and support consumed operating budgets, thus creating a situation where hiring the necessary internal resources to maintain and enhance these systems (e.g. data mining, workflow, custom reporting, etc.) was not feasible.

Tier 1.5 solutions are positioned between Tier 1 and Tier 2 solutions. As a result, they are not as flexible & configurable as Tier 1 solutions, and may not include as much government-focused functionality as Tier 2 solutions.

 

Tier 2 solutions are less configurable and less flexible. The rigidity of these solutions can make it difficult for them to fully service all business needs of larger organizations. Beyond their enhanced functionality, the scalability of the services being offered is a strong consideration when determining the best overall solution.

 

 

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