Choosing the Right ERP System for Your Mid-Market Company: Horizontal vs. Vertical
- Roger Pujol, CPIM, CSCP
- May 9
- 3 min read
Updated: Jul 19
When selecting an ERP system for your mid-market company, a crucial factor often overlooked is whether the solution is horizontal or vertical. This choice can significantly impact implementation speed, customization costs, and long-term value.
Let’s explore these two options in detail.
Understanding Tier Two ERP Software
Tier Two ERP systems are tailored for mid-sized businesses, typically with revenues between $1 million and $250 million. They combine enterprise-grade capabilities with the flexibility and cost-effectiveness required by smaller organizations. However, it’s important to recognize that not all Tier Two ERPs are the same. They generally fall into two categories:
Horizontal Tier Two ERP Systems
Horizontal ERP systems serve a diverse range of industries. They provide a robust set of core features, including accounting, inventory management, order processing, and basic manufacturing or project management. However, they lack specialization in any one vertical.
Key Characteristics:
Industry-agnostic: Designed for flexibility across multiple sectors.
Highly configurable: Can be adjusted to meet unique business processes.
Broad ecosystem: Supported by extensive app marketplaces and third-party add-ons.
Pros:
Ideal for companies with varied operations.
Easily scales as businesses grow or enter new markets.
Often excels in reporting and integration capabilities.
Cons:
May require additional customization or third-party integrations.
Implementation can take longer for niche industries.
Examples:
Acumatica
Microsoft Dynamics 365 Business Central
SAP Business One
Macola
Vertical Tier Two ERP Software Systems
Vertical ERP systems are specifically designed for certain industries, such as food and beverage, pharmaceuticals, field services, or process manufacturing. They come with pre-configured features and workflows that align with industry best practices.
Key Characteristics:
Industry-specific: Developed with extensive functionality suited for a particular sector.
Faster deployment: Pre-configured modules shorten implementation time.
Compliance-ready: Often includes tools for managing regulations and quality.
Pros:
Provides a quicker time-to-value.
Lower total cost of ownership for industry-specific use cases.
Minimizes the need for customization.
Cons:
Less adaptable for industries outside its target market.
Limited cross-industry applicability if your business grows.
Examples:
Aptean (Process Manufacturing, Food & Beverage)
Deacom (Process Manufacturing)
Infor CloudSuite Industrial (vertical-specific editions)
Factors to Consider in Your Decision
When deciding between horizontal and vertical ERP systems, consider the following elements:
Nature of Your Industry
If you belong to a specialized sector, such as process manufacturing or food production, a vertical ERP could be your best option. These systems offer quicker value with minimal customization.
Operational Scope
If your business operates across various industries and has complex or evolving needs, a horizontal ERP offers the necessary flexibility and scalability.
Budget Constraints
Evaluate the total cost of ownership for each option. While vertical ERPs might have a lower initial cost, consider long-term expenses associated with customizations and integrations.
Future Readiness
Plan for growth. Choose an ERP system that not only fits your current operations but will also accommodate potential expansion.
The Bottom Line
Choosing the right Tier Two ERP system requires more than just comparing features; it’s crucial to assess the strategic fit for your organization. The ideal ERP solution should support your present operations while being equipped to scale with your future aspirations.
If you find yourself uncertain about which path to take, we can help. At Champion Business Solutions, we specialize in evaluating, selecting, and implementing ERP solutions tailored to your industry and business goals. Contact us for a FREE ERP Consultation!
Conclusion
Understanding the differences between horizontal and vertical ERPs is essential for making an informed decision. Each offers unique advantages and limitations based on your specific business model. Take the time needed to evaluate your industry requirements and long-term plans for growth.
Roger Pujol, CPIM, CSCP, the founder of Champion Business Solutions, LLC, is an ERP consultant & advisor specializing in ERP Business software for the manufacturing and distribution industries. He shares insights and experiences on assisting small and medium-sized businesses (SMBs) to enhance their operations.
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