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Continued globalization in today’s business, combined with fast-paced digitization, newly-emerging technologies, and ever-more demanding customers have changed the dynamics of any modern and intelligent business, especially with regard to the following:

  1. Proliferation of businesses through mergers and acquisitions

  2. Diversification of Lines of Business (LoBs)

  3. Businesses venturing into new markets, thus extending the supply chains (suppliers, dealers, and customers) and, eventually, the entire ecosystem

Company leaders – CEOs, just as well as CTOs or CFOs – increasingly face the challenge of having to onboard or integrate new mergers and acquisitions into their existing IT systems. This means that they take care to adapt their existing IT systems to the needs of new LoB business processes and/or to support the extended ecosystem. To address these and similar issues, Gartner, in 2014, introduced the concept of Bimodal IT, which deals with the concept of an organization’s IT landscape operating simultaneously in two different models:

  • Model 1, focusing on the stable and traditional areas in the business processes requiring, above all, stability

  • Model 2, for the innovative and disruptive aspects of the business requiring, more than anything else, agility

A challenge like that of the Gordian know, as both models need to coexist to successfully transform an organization towards digital. Can there be a solution? There must be.

In most cases, leaders will go for Model 2, pushing subsidiaries, new LoBs, and any other supply chain towards a more agile IT infrastructure. The reasons for this are pretty straightforward and even human, I would say. What they want to go after is this:

  1. Reduced costs

  2. Reduced time to go live

  3. Higher quality through improved functional coverage and innovation

  4. Tighter integration with the existing IT landscape

The two-tier ERP deployment option leveraged with our SAP S/4HANA solution offering addresses exactly these pain points. How?

Typically, the parent organization, i.e. the headquarters, runs an on-premise ERP system allowing them to fulfil the requirements of their complex business processes. In contrast, the subsidiaries, supply chain partners, or even new businesses go for a cloud-based ERP solution such as SAP S/4HANA Cloud. It is such a cloud-based solution that makes them agile enough to run their respective business processes and allows them to scale easily. However, let me reinforce that the two-fold approach outlined here is not a must. Companies may also go for the other way round, running their headquarters in the cloud and their subsidiaries on premise. We are aware of both, which is why SAP S/4HANA leverages diversetwo-tier scenarios that were delivered with earlier releases:

  • Group consolidation at the headquarters from subsidiaries and upload of planned data to the subsidiary

  • Drop shipment from subsidiary to customer on behalf of the headquarters

  • Subsidiary as production unit and internal supplier to the headquarters

If you want to find out more about the different two-tier ERP use cases deployable with SAP S/4HANA, check out this blog collection.


Here are my top 5 reasons why SAP S/4HANA Cloud is a company’s best choice for successfully adopting a 2-tier ERP scenario:

  1. Complete choice of deployment

  2. Common data model and entities, as well as analytical structures across all SAP S/4HANA solutions

  3. Common user experience based on SAP Fiori

  4. Common platform-as-a-service based on SAP Cloud Platform

  5. Global support and localization

The figure below shows the possible deployment options of two-tier ERP with SAP S/4HANA Cloud along with the respective value propositions.


If we’ve piqued your interest, check out all details about our two-tier deployment options in our Whitepaper called Two-Tier ERP with SAP S/4HANA Cloud and deployment possibilities.

At SAPPHIRE NOW 2018, which takes place from June 5 to 7 in Orlando, Florida, we will share more details about our recent developments in the area of two-tier ERP with SAP S/4HANA Cloud. Register nowto meet us live and in person!

Follow us also via @SAPand #S4HANA, or myself via @SDenecken.