Why Open Source ERP?
One of our readers, Chris, commenting on Open Source ERP Activity Trends, had some very good questions and I decided to answer them, one by one, in a dedicated post.
Q: Is Opensource integral to the success of companies like Compiere and Openbravo, or is it more a marketing tool?
A: I’ll start by answering the latter part of the question - definitely NO!, it’s not a marketing tool. All open source projects start with a genuine intention of making things better. Programmers grouping together to write a piece of software for no money, usually in their spare time (after working 10 hours for their commercial employer) don’t think about marketing. They only think about writing the smartest,cleanest,coolest software ever written. And many such projects yield some the best software ever written - the Linux kernel, The Apache web server,the Firefox browser.
Is open source integral to the success of these open source ERP companies? My answer would be that it’s just a different business model. These companies can start hiring programmers and stop publishing the source code, but then they would have to play head-to-head with the big sharks and that won’t be easy. I don’t see any open source ERP vendor completely abandon the open source model.
Q:Who are the people writing the Open Source?
A: Open source software is written by programmers who voluntarily join a project they find interesting and contribute their own code. Usually there is a “core team”, most likely the programmers who started the project, who are project administrators. They make sure all code from different programmers is in sync, they design the software architecture and build the projects’ roadmap.
In most projects you will find programmers from all over the world,many of them collage students or employees of the world’s largest software companies.
Q:It’s not the CTOs of SMEs, so is it the ERP partners?
A: I hope I understand this question correctly, but I think what you are asking about is customization. Open source ERP projects deliver a product with a certain set of functionality, but since business requirements are so complex and rate of change is so high, almost every company using ERP will have to customize it to meet their needs. The project itself obviously cannot write the code to support all requirements.
Who is doing this customization? If the company implementing ERP has an in-house IT department, they will need a business analyst to define business requirements and some programmers to write the actual customization. Many SMEs do not have in-house IT, so they would need to find an implementation partner. Some open source ERP solutions have a list of certified partners on their website, although due to the fact that the source code of these solutions is available to download, it is possible for any outsourcing company who has programmers familiar with the programming language the solution is written in (currently, Java is most popular) to customize open source ERP solutions.
Q:How does being Opensource translate into a concrete competitive advantage for these ERPs?
A:To answer that, I will raise the main arguments open source ERP companies are raising and will provide my own opinion on their validity:
- Open source ERP will release you from the single vendor tie-up familiar from commercial ERP projects - since organizations pay so much money in licensing fees for commercial ERP solutions (sometimes up to millions of dollars a year), switching from their current ERP provider to another one is almost impossible. I believe that an SME who has invested his money in customizing a certain open source ERP solution is in the same position as his commercial ERP user counterpart - he will not easily switch to a different provider. Even if the level of investment in an open source ERP is smaller, I think that deciding to throw away that investment is a very tough decision.
- Giving the software away for free will save the cutsomer money he can later put into customizing and implementation costs - This is one the of the strongest arguments for open source ERP. I think everyone - customers and the software companies-understand that free,open source ERP is not really free. You will need to invest money in customizing the software. This implementation project will be where your money will go. If you don’t pay for a product license and invest heavily in implementation, you can get a much higher ROI on your ERP project.
- Open source projects create higher quality products - That is of course a generalization, but there are factors you can’t disregard in these type of project. The most important thing in open source projects is the community. Other than the programmers who write the actual code, there is a much larger group of people who contribute to the success of the project - people who download and install the software write installation and configuration guides. Many bugs are found by users who just wanted to “play around” with the software. Some volunteer to write Wiki pages,explaining how to use the software.
Active project programmers will often answer questions posted in forums (if you are a customer of a commercial ERP solution,there is very little chance you will get an answer directly from the programmer who wrote the code..). In addition, open source projects employee some very good programmers, all of them are highly motivated and enthusiastic about what they are doing (they do it for free..).
These factors contribute to the creation of very high quality products.
One note - I have created the open source ERP Activity Trends page because I believe there is a direct correlation between the level of activity of the project’s community and the quality of the product. I plan to add some more metrics within the next few days.
I hope I answered Chris’ questions well. I would be glad to get comments from anyone reading this post on his view of the issues raised here.
Comments
6 Responses to “Why Open Source ERP?”
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Many thanks for your answers. My thoughts are as follows:
I understand (and agree with) the benefits of Open Source in general, however I’m not sure if the model can be successfully and scaleably transferred into the ERP arena. I get the feeling that SaaS is a better model for ERPs, and I don’t know if an ERP can be both SaaS and Open Source successfully.
I also worry that there won’t be a core group of Open Source programmers in the ERP space as it is often perceived as a less attractive area than some others. Furthermore, ERPs need to be very region-specific to take into account different regulations, legislation, and cultures… so a strong community is essential for an Open Source ERP to flourish.
Any thoughts?
I totally agree with you in regards to SaaS as the preferred model for ERP (back in year 2000 I started writing a “mini” ERP software and it was designed to be SaaS), but I don’t think there is a contradiction here - hosting companies are constantly looking for ways to improve ROI on their hosting facilities, and offering open source ERP solutions can make a lot of sense to them. This is a model similar to that of SugarCRM - an open source CRM solution that is now offered by numerous hosting providers.
It’s true that the developers of the open source ERP solutions will probably not offer it as a hosted service due to scalability issues, but a partnership between one of the solution providers, a hosting company and implementation partners can make open source ERP in a SaaS model a viable solution to SMEs.
As for your remark about the the relative non-attractiveness of ERP projects as opposed to other types of open source projects - what amazed me most when I started writing this blog was how active open source ERP projects are. Just go to Sourceforge.com homepage and take a look at the list of the most active projects - 3 of the 6 most active are ERP(!!!) - Openbravo at no.1, Adempiere no. 2 and Postbooks at no. 5.
I must agree with you on your last point-the one factor that will determine if open source ERP solutions are to suceed is the strength of the partners’ ecosystem. Without strong implementation and customization partners, customer adoption and successful projects of these type of solutions will be minimal.
I think most open source ERP solutions already understand that writing great software is not enough to succeed in the ERP arena and are working hard to broaden their partners network.
Another factor that we need to consider is the possibility of an open source ERP solution being acquired by one of the larger IT companies, which will then be able to provide a turn-key ERP solution to SME’s - operating system,application server, ERP software and services. In my opinion, open source ERP is a perfect fit for some of the world’s largest IT vendors, but that is a subject for a separate post.
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Saas Erp…
Thanks for creating this blog. I thought it was a very interesting read. It is so interesting reading other peoples personal take on a subject….
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We are a large manufacturing comapny looking at open source solutions. In your experience which solution is best suited for production scheduling, MRP and purchasing? Which one’s are the most scalable and easiest to customize?