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Welcome to the new SAP S/4HANA Cloud 2-tier ERP blog series. In this first blog, we will introduce the topic, describe what motivates enterprises to run independent ERP systems in their subsidiary and what advantages S/4HANA Cloud brings to the table. In the following blogs over the next weeks we will dive into details around supported business scenarios in finance, sales, procurement and manufacturing as well as relevant topics like integration, master data and reporting/analytics.

Stay also tuned for some customer perspective on 2-tier ERP. The last blog of this series will take a farther look into the future.

2-tier ERP?

As 2-tier ERP we describe the deployment of an independent ERP system for a subsidiary. Many of you might ask, why not managing the subsidiary directly from the headquarters system? Well in many cases this is the option of choice, however the more diverse the business is and the more countries need to be supported – the more complex the headquarters system gets.

Subsidiaries that need the agility to very quickly meet new market needs will prefer having their own ERP system to better control their destiny. And with the advent of S/4HANA cloud “owning” means having control over an ERP system without dealing with hardware, installation and IT management.

This approach offers agility to the subsidiary, while the integration efforts will rise, the tighter the integration of the second-tier ERP system into your headquarter is. However, leveraging S/4HANA Cloud in your subsidiary while using S/4HANA or ECC in your headquarters will give you an unfair advantage: the proximity of data and process models will ease your integration efforts.

The integration of your subsidiary S/4HANA Cloud system is done via application programming interfaces (API’s). Public APIs can be used to connect SAP S/4HANA with 3rd party systems. They are based on standards like ODATA, REST or SOAP, are published at the SAP API Hub and you can use the integration services of the SAP Cloud Platform. Private API’s are used to privately connect a SAP system on premise with a SAP system in the cloud. These API’s are normally based on BAPIs and IDOCs, message standards commonly used for SAP to SAP integration. Stay tuned for a dedicated blog that will go into more details on how the integration will be done.

First steps.

  1. First you need to evaluate the scope of the solution to ensure the requirements of your subsidiary are met. E.g. you can check the featured scope with 1702: https://uacp.hana.ondemand.com/http.svc/rc/PRODUCTION/pdfc1a5475583e86e31e10000000a441470/1702%20500...

If you are then running the business of a local sales office, a distribution center, a manufacturing site or just an independent subsidiary what then makes your S/4HANA cloud deployment a 2-tier ERP solution? Let’s define the following next steps:

  1. Enable Financial planning and consolidation

  2. Ensure Visibility into your subsidiary from headquarters

  3. Enable tightly integrated business processes between the tiers

The coming blogs will look deeper into Finance, Sales, Procurement and Manufacturing to provide a better understanding on the scenarios that will be supported.

It’s Cloud!

S/4HANA Cloud combines all the cloud qualities you prefer, especially if you are running a subsidiary and do not command IT resources headquarters do have: You get Software-as-a-Service (SaaS), so every few months you get the latest innovations, without hassle and any extra effort. And this without worrying about hardware aspects as your provider ensures your solution scales with the usage you need. While cloud solutions in ERP have now moved beyond an early deployment for a proof of concept to become the default for new deployments. Leverage your subsidiary IT to even spearhead or accelerate cloud deployments in your enterprise.

It’s the new digital core!

Digital transformation is happening everywhere. New business requirements mandate a significantly simplified digital core that allows you to efficiently and effectively run your business. Often business processes narrow down to the segment of one. This will increase the number of transactions significantly, so higher efficiency of the digital core is a must. Additionally the digital core overcomes the old divide in transactional and analytical systems and their inherent latency that prevented users to get real-time insights before taking the appropriate action. S/4HANA cloud is natively build leveraging the SAP HANA in-memory database to deliver the new digital core for your subsidiary business.

It’s the easiest way for headquarters running SAP!

If your headquarters are already leveraging SAP Business Suite, or if you are embarking on a route towards S/4HANA in your headquarters? In this case S/4HANA cloud is the ERP system, that from a business process and data semantics perspective and with a common user experience offer the biggest possible similarity. Since the underlying release cycle between S/4HANA cloud and on premise is synchronized yearly, this will also lower your integration and management efforts of this solution. And you can first innovate in your subsidiaries and then easily duplicate these innovations across your enterprise.

Stay tuned for the next blogs to highlight more details on 2-tier ERP and some customer co-innovation with customers in the coming weeks.

For more information on SAP S/4HANA Cloud, check out the following links:

Follow us via @SAP and #S4HANA, or myself via @SDenecken and @MHaendly