by Thomas Wailgum

Open Source ERP Applications: They’re Real and They’re Spectacular

Jan 26, 20095 mins
Enterprise Applications

How about we play an ERP word-association game: I say “ERP costs” and what words come to mind? “Expensive”? How about “never ending”? “Increasing”? “Heartburn-inducing”?

Do the words “cheap” or “decreasing” come to mind? Probably not.

It doesn’t take a Nobel Prize-winning economist to realize that IT needs to be doing everything it can to reduce ongoing expenses right now. Two of the chief responsibilities for CIOs and IT staffers in 2009 are increasing implementation speed and lowering costs. Our most recent “State of the CIO” survey data, which we combined with Forrester Research survey data of 600 CEOs, shows that at the top of CEO’s to-do list for their IT departments is to “lower company operating costs.”

Does a massive, 18-month, multimillion-dollar ERP rollout, with the odds of implementation and user acceptance stacked against you and 22 percent annual maintenance costs to boot, seem appropriate now? ERP industry guru Vinnie Mirchandani likes to say that there are too many “empty calories” in ERP spend, especially in SAP and Oracle maintenance fees. Now is clearly not the time to be ordering up large portions of highly-caloric ERP software rollouts.

So let’s play some more word association: I say “open source ERP.” And you think: “Untested”? “Unreliable”? “Not for us”? Maybe, “free”?

In late 2007, CIO magazine surveyed 400 IT leaders about their ERP systems. Despite innovation, integration and cost issues, CIOs told us they remained committed to on-premise, traditional ERP systems. Just 9 percent of respondents reported using an alternative ERP model. Those models included software as a service, open-source tools and various in-house applications.

As to open source, in particular, two CIOs whom I interviewed summed it up best: “There’s some open source that I’m using in IT, but would I want to go open source ERP?” said one. “I’m not so sure. I’m pretty conservative.” Said another CIO: “It’s not proven yet.”

Some time has passed since that survey, and IT shops might want to look again at the open source ERP options available from vendors such as Openbravo, Compiere, ERP5, Open ERP and xTuple (formerly OpenMFG).

According to one ERP analyst, 2009 could be the year that open-source ERP apps finally get a second look from corporate America. Cutter Consortium Senior Consultant Vince Kellen says that open source will get a “second chance to get a toe in the door” in the coming year. “Initially, 2009 adopters will look for focused or niche applications, including office software for desktops, rather than ‘rip and replace’ ERP swap-outs,” Kellen notes in a Cutter opinion piece. “However, I wouldn’t be surprised if a few more early adopters attempt large-scale open source ERP.”

I spoke with Openbravo COO Josep Mitja the other day, from his corporate offices in Spain. Openbravo has an interesting startup history, but here’s what you most need to know now: They published their ERP code on Sourceforge in 2006 (so it’s had a couple of years to “germinate,” so to speak), and today Openbravo’s ERP application has been downloaded more than 1 million times via Sourceforge. (That’s a 100 percent free download, just in case you weren’t 100 percent sure. Openbravo makes it money on the partnerships it signs with technology integrators and via its Openbravo network.)

A couple of the things Mitja told me were quite relevant to on-premise/traditional vs. SaaS vs. open source discussions today. “Users and business owners don’t care whether it’s open source or not,” Mitja says. “They want something to solve their needs at best possible price.”

When asked about the perception that open source ERP applications can’t handle the complexity and scale of today’s corporate environments, Mitja acknowledges that “the barriers to entry” have been higher for open source providers like his. But, not surprisingly, he says that the collaborative environment in which the products have evolved and near constant feedback Openbravo has received have strengthened Openbravo’s products. (It also offers an open source point-of-sale, POS, application). Plus, he adds, if (or when) other ERP providers decide to offer some open source products, Openbravo’s business model will already be proven.

As to Openbravo’s and other open-source ERP providers’ challenges, there are many—from battling skepticism from CIOs and system integrators who don’t fully trust “free software,” to standing out in a market with thousands of ERP providers such as SAP and Oracle to the legions of smaller players. Openbravo will also be attempting to crack the U.S. market. “You cannot be successful worldwide,” Mitja says, “if you are not successful in the U.S.”

Of course, open source ERP applications, just like SaaS and other cloud computing-type solutions, are not the answer to all of ERP’s woes—those complexity, cost and vendor lock-in issues that can be overwhelming. But open source ERP is now a viable and cost-effective alternative during these unpredictable economic times.

Everybody seems to want change these days. But just how open are you to changing your IT strategy and software-buying habits?