Why Dynamics 365 Finance and Operations Customers Should Consider a Two-Tier ERP Strategy with Business Central
As organizations grow, expand globally, and acquire subsidiaries, they often face a common challenge: how to manage operational complexity without overcomplicating ERP systems.
If your company is running Microsoft Dynamics 365 Finance and Operations (F&O) at corporate headquarters, you already benefit from a powerful, enterprise-grade solution. But what about your smaller subsidiaries, joint ventures, or regional branches?
This area is where a two-tier ERP strategy, powered by Microsoft Dynamics 365 Business Central, can drive cost savings, agility, and operational efficiency.
In this article, we’ll explore:
What a two-tier ERP strategy is and why it's trending
Why Dynamics 365 Finance and Operations is best suited for HQ
Why Business Central is ideal for subsidiaries
The business benefits of adopting a two-tier ERP model
A real-world example to visualize how it works
How to assess if this strategy is right for your organization
What Is a Two-Tier ERP Strategy and Why Does It Matter?
Two-Tier ERP Defined: Managing HQ and Subsidiaries Differently
A two-tier ERP strategy uses two integrated ERP systems—one for corporate headquarters and another for subsidiaries or smaller business units.
Tier 1 ERP: Enterprise-grade system (e.g., Dynamics 365 Finance and Operations) managing corporate functions such as consolidated financials, supply chain, compliance, and reporting.
Tier 2 ERP: Lightweight, flexible system (e.g., Business Central) managing subsidiary operations, local compliance, and day-to-day business activities.
Why Large Enterprises Are Shifting to Two-Tier ERP Models
Modern companies face unique demands:
Rapid acquisitions and growth
Entry into new markets
Managing regional compliance and tax
Keeping subsidiaries agile and cost-effective
A single, monolithic ERP doesn’t always meet these needs—leading more enterprises to split core and local ERP functions via two-tier strategies.
Why Dynamics 365 Finance and Operations Is Built for Corporate HQ
The Power of Dynamics 365 F&O for Global Enterprises
Dynamics 365 Finance and Operations is designed for complex, multinational organizations, offering:
Advanced financial consolidation
Global supply chain and manufacturing management
Robust compliance and regulatory controls
Enterprise-wide reporting and analytics
For corporate HQ, it’s a powerhouse solution that ensures centralized control and governance.
When F&O Becomes Too Complex for Subsidiaries
However, for smaller subsidiaries, F&O may be too heavy, costly, and complex for their limited operations. Many subsidiaries need:
Faster setup
Local compliance handling
Simplified workflows
Lower cost of ownership
Business Central: The Ideal ERP for Subsidiaries
Fast, Flexible, and Cost-Effective
Business Central is a lightweight, scalable ERP designed for small to mid-sized organizations—making it a perfect subsidiary ERP.
Key strengths include:
Rapid deployment and easy customization
Lower licensing and implementation costs
Cloud-based for anywhere, anytime access
Localized Financials and Compliance
Business Central supports:
Local tax and compliance in multiple regions
Localized chart of accounts and reporting
Handling currency, language, and regulatory nuances
Seamless Connection to Dynamics 365 Finance and Operations
Through Microsoft’s native connectors and APIs, Business Central integrates easily with Dynamics 365 F&O, enabling:
Data synchronization for consolidated reporting
Consistent financial oversight
Real-time updates for leadership
Top Benefits of a Two-Tier ERP Strategy for Dynamics 365 F&O Customers
1. Lower Subsidiary ERP Costs and Faster ROI
Avoid extending F&O’s complexity to every business unit. Business Central reduces licensing, implementation, and maintenance expenses.
2. Speed and Simplicity in Subsidiary Rollouts
Set up new entities quickly—ideal for M&A, joint ventures, or regional expansions.
3. Corporate Oversight with Subsidiary Flexibility
Maintain corporate visibility and control while giving subsidiaries freedom to operate efficiently.
4. Unified Data and Integrated Reporting
Business Central feeds real-time data to F&O for company-wide analytics and reporting—all in a Microsoft environment.
Can Dynamics 365 Finance and Operations Integrate with Business Central?
One of the most common questions we hear when discussing a two-tier ERP strategy is whether Dynamics 365 Finance and Operations (F&O) can integrate effectively with Business Central.
The Short Answer: Yes—with the right tools and strategy.
While both systems serve different business needs—F&O for large, complex enterprises and Business Central for smaller subsidiaries—they can work together as part of an integrated ERP landscape. Microsoft provides several robust integration options to connect these platforms, ensuring that your corporate and subsidiary systems are aligned.
How Can Dynamics 365 Finance and Operations Integrate with Business Central?
1. Native Microsoft Tools & APIs
Microsoft offers a suite of technologies to support direct and secure integration:
Microsoft Dataverse: A unified data platform that allows data synchronization between F&O and Business Central through standard connectors.
Microsoft Power Platform (Power Automate & Power Apps): Automates workflows and data movement using low-code/no-code solutions, enabling seamless business processes across both ERP systems.
Azure Logic Apps: Advanced integration workflows for more complex or custom scenarios.
OData and REST APIs: Both systems expose robust APIs for custom integrations when unique data flow requirements exist.
2. Common Integration Scenarios
Business Function | Handled in F&O | Handled in Business Central | Integration Purpose |
Corporate Financial Consolidation | Global financials, consolidated reporting | Local financials, tax compliance | Sync subsidiary results into corporate reporting |
Supply Chain Management | Global supply chain, centralized procurement | Local purchasing and inventory management | Share inventory and procurement data |
Sales and Operations | Corporate forecasting and planning | Local sales, customer management | Roll up sales data to HQ, feed forecasts down |
Master Data (Vendors, Items) | Global item/vendor lists | Localized versions or additional local records | Share or sync master data as needed |
Reporting & Compliance | Global consolidated reporting | Local statutory reporting | Ensure unified data while meeting local needs |
3. Third-Party Integration Solutions
In addition to Microsoft-native tools, third-party middleware platforms (such as Scribe, KingswaySoft, and Celigo) can accelerate integration efforts, especially for companies with unique data structures or complex business processes.
Benefits of Integrating Dynamics 365 F&O with Business Central
Unified corporate and subsidiary data without forcing all entities onto the same system.
Faster onboarding of new subsidiaries using Business Central while maintaining corporate control via F&O.
It ensures local compliance and regulatory reporting at the subsidiary level.
Streamlined financial consolidation and corporate visibility.
Lower ERP costs by using Business Central for subsidiaries instead of extending F&O licenses.
Key Considerations Before Integrating
Clearly define the data that needs to flow between systems (e.g., financials, inventory, master data).
Ensure consistent data mapping—especially for financial consolidation (e.g., matching chart of accounts).
Address data security and compliance in cross-system workflows.
Be aware of API limits and integration frequency needs for real-time vs. batch updates.
Example: How a Two-Tier ERP Strategy Looks for a Global Manufacturer
Corporate HQ on Dynamics 365 F&O
The location is responsible for managing global finances, enterprise reporting, and supply chain.
Handles regulatory compliance and consolidations.
Subsidiaries Running Local Operations on Business Central
Local production, inventory, and customer management.
Compliance with local tax laws and currency handling.
Data Flow: From Subsidiaries to HQ
Business Central sends real-time financial and operational data to F&O.
HQ consolidates and analyzes group-wide data without micromanaging local systems.
Result: streamlined operations, cost savings, and faster market responsiveness.
Is a Two-Tier ERP Strategy Right for Your Organization?
Common Indicators You Need a Two-Tier ERP:
Subsidiaries operate differently from HQ.
Local units need simple, rapid ERP without corporate complexity.
• We are expanding into new markets or acquiring companies.
• We are facing challenges managing local compliance and reporting.
Questions to Assess Your ERP Landscape:
Are subsidiaries slowed down by F&O’s complexity?
Do they need local autonomy but corporate oversight?
Is ERP cost a barrier for smaller business units?
Do you struggle with real-time consolidated data?
Are You Ready to Explore a Two-Tier ERP Strategy?
If you're using Dynamics 365 Finance and Operations and facing challenges managing subsidiaries, a two-tier ERP strategy with Business Central could be your solution.
➡️ Request a Business Central Demo for Subsidiaries—See how it can work for your organization.
➡️ Contact Us—Let's discuss how to implement a tailored two-tier ERP strategy.
