NetSuite, Informatica team up on two-tier ERP

NetSuite and Informatica have announced a partnership that seeks to exploit the concept of "two-tier ERP" (enterprise resource planning) deployments.

The companies are co-developing a connector, which will be available in the second quarter, that will tie departmental or divisional implementations of NetSuite’s cloud-based OneWorld suite with a core on-premises ERP system from the likes of SAP or Oracle.

Multinational corporations find it extremely expensive and time-consuming to standardize on one ERP system throughout the business as the company grows, said Paul Turner, senior director of product marketing at NetSuite.

NetSuite already had a data-integration partnership with Cast Iron Systems, which is now part of IBM. The new arrangement with Informatica speaks to that company’s high profile among large enterprises, which NetSuite is hoping to court more aggressively.

But SAP, for one, is trying to keep customers entirely in the family, recently moving to position its on-demand Business ByDesign suite as a potential player in two-tier ERP deployments.

The difference is "they’re talking a scenario where we’re talking proven reality," Turner contended. "We have actual customers [doing two-tier ERP]."

NetSuite customers interested in the connector will purchase it from Informatica and its partners under either a perpetual license or subscription agreement, said Ron Papas, senior vice president and general manager of Informatica’s on-demand business unit.

Customer interest in two-tier ERP is growing significantly, according to a report from Constellation Research. Forty-eight percent of respondents to a recent survey the analyst firm conducted said they were considering such a strategy, up 27 percentage points from a 2009 survey, it states.

Two-tier deployments tend to make sense for companies in four general situations, according to the report.

For one, some companies may have diverse lines of business. "The drive to standardize on a single ERP system makes little sense when one subsidiary delivers services and the other manufactures goods," wrote report author Ray Wang.

Enterprises may also not wish to expand their core ERP system into new subsidiaries or countries, when it would save money and time to go with an alternative.

A third scenario involves companies that have a proliferation of tier-two ERP systems, and wish to standardize on a single one. A fourth centres on enterprises that want to phase out legacy ERP systems; two-tier ERP strategies enable them to test out new products on a regional basis, Wang wrote.