Open Source ERP: Today’s Hottest Emerging Technology?

What’s the most exciting emerging technology for enterprises in the next 3 to 5 years? Hint: It’s not going to be designed by Apple. It just may be open source ERP, Gregor Bailar, former CIO of Capital One, told attendees of the CIOΙ08 The Year Ahead conference, being held this week in San Diego. Surprised?

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Maybe you’re not. You don’t meet many CIOs who don’t have some ERP angst. Worse, that angst has been simmering for three to five years now. In CIO’s recent 20th anniversary issue, we noted the “ERP hangover” that so many CIOs experienced in the 2004 timeframe after completely revamping their ERP systems, only to realize that the replacements were big, expensive, and took a lot of time and money to customize. Today, most CIOs still run newer versions of that same ERP software, from the two biggest vendors in this marketplace, Oracle and SAP.

The lack of competition means that there hasn’t been terrible pressure to innovate or slim down that software to make it more nimble—a serious flaw at a time when business needs IT to move fast. No wonder the hunger to find a worthy open-source alternative strikes IT leaders such as Bailar. “I’d love to have an open source ERP system that would just wail on what we have,” Bailar told the conference audience. (Bailar also cites WiMax as a second candidate for the most important emerging technology.)

Bailar’s fellow conference speaker, JP Rangaswami, a well-known CIO who authors the blog “Confused of Calcutta”, and serves as managing director, service design for British Telecom Group, noted that his IT team is playing with an open-source ERP application called Thingamy. (For more info, check out the Thingamy blog: Start with this entry, which details why these open-source developers don’t want to compete with SAP and Oracle, they just want to “make those products irrelevant.”)

Thingamy is certainly not the only game in open-source ERP town. Many CIOs at midsize shops in particular would love to divorce their expensive, rigid ERP systems. And some of these midmarket CIOs have blazed a trail doing just that, using open source products such as the Compiere ERP suite and OpenBravo.

Mark Alperin, who serves as COO with CIO responsibilities for Vertex Distribution, a manufacturer and distributor of rivets, screws and other fasteners, told CIO magazine in February, that his move to Compiere came down to one key desire: flexibility to act quickly on business needs. “We have our own programming staff, and the ability because of that to customize services on our own and respond to customer needs is an advantage,” Alperin says, “so the direct access to the source code is very important.” For more on Alperin’s experience with Compiere, see “Is Open Source the Answer for ERP”.

The 451 Group’s senior analyst Martin Schneider summed it up this way in that same article: “The reality is that the people who do all the work [in ERP deployments] are in-house teams or system integrators, not the commercial software vendors. The availability of open source points out that disconnect in the value chain. It’s almost a miracle that SAP got as big as it did; they’re just selling a skeleton.”

And as Gartner research director Laurie Wurster notes, open-source ERP should have increasing appeal because of the wave of ERP consolidation.

When will we reach the tipping point where a large number of CIOs at midsize companies, and even at larger enterprises, can get their heads around using open source ERP? That’s still to be determined. But consider the larger open-source picture in enterprises today. Many CIOs already run virtualized servers based on Linux for some core enterprise apps. They’ve developed in-house development expertise and security knowledge around open source. They’ve made open-source SugarCRM a success. In other words, they’ve done some of the prep work necessary to weigh and plan an enterprise’s move to open-source ERP.

Here’s one other hint: Rangaswami works for this little company called British Telecom. Bailar, who will be inducted into the CIO Hall of Fame class of 2007 as part of this week’s conference, used to run IT for Capital One and before that, for NASDAQ. It’s not just the CIOs of midsize or smaller companies who see why a solid open source ERP solution would be a hot technology development.