By Mark Symonds

A recent blog posting at www.business2community.com points out that cloud-based ERP use is accelerating faster than research firm Gartner had predicted it would. Most of this growth is in the small- to-medium-business (SMB) segment – companies with fewer than 200 employees. The blog attributes SaaS ERP’s appeal to lower total cost of ownership and time-to-benefit advantages as well as the flexible interfaces and workflows that allow the systems to be tailored to these companies’ specific requirements.

Interestingly, the blog points out that according to Gartner, only 2% of large companies (revenue of more than $500 million) use SaaS ERP. Yet the post mentions “two-tier ERP strategies,” a model in which corporations implement one of the “big” on-premise ERP solutions at headquarters (e.g., SAP or Oracle) and choose an easier-to-deploy and arguably more appropriate system for manufacturing sites.

The two-tier strategy has gained traction after more than a few companies experienced costly and embarrassing failures attempting to achieve standardization of a single ERP platform across diverse enterprises. In those cases, the expected benefits of consolidating data across the enterprise and the anticipated savings in support costs through standardization proved inadequate to overcome the difficulty in implementing and using a too-complex solution at divisions and subsidiaries.

The alternative that evolved, two-tier ERP, rests on a kind of split personality. Corporate still implements the “big” system. A second, less cumbersome, and more flexible solution becomes the standard for sites such as manufacturing that have specific needs.

Now that scalable, flexible, and affordable SaaS ERP solutions have been tested and shown to offer “industrial strength” capabilities and superior time-to-benefit and usability, SaaS will increasingly be the choice for the second tier of two-tier ERP implementations in large, dispersed enterprises. The current 2% SaaS penetration in large-company environments will undoubtedly increase rapidly in the coming years.

Mark Symonds is president and CEO of Plex Systems, and a Manufacturing Leadership Council member.