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Open Source ERP Reasons to Consider Open Source for ERP

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By Alison Diana

Businesses wishing to reap the benefits of enterprise resource planning (ERP) software without paying the hefty initial price tag often associated with commercial applications may want to consider open source ERP solutions as an option.

Unlike the world of commercial software - where the developer such as Oracle, SAP or Microsoft owns the code - in open source, the source code is owned by no one and everyone. As such, there are no high-ticket admission costs or lengthy relationships. You are not locked into proprietary support contracts or high one-time licensing fees.

Typically, open source ERP systems are available under a General Public License (GPL); the GPL version of the software is free, and the source code and documentation are available for download. In many cases, open source developers also make available a professional or enterprise version of their software for a per-user monthly fee, including support.

"Initially, [open source ERP] adopters will look for focused or niche applications, including office software for desktops, rather than "rip and replace" ERP swap-outs. However, I wouldn't be surprised if a few more early adopters attempt large-scale open source ERP," said Vince Kellen, senior consultant at Cutter Consortium.

The ERP market reached about $50 billion in 2012, according to Forrester Research. Experts estimate as much as 10% to 18% of businesses are using open source to power-up their ERP solutions, which amounts to a sizable $5 billion share of the market.

"Though traditional licensed ERP systems account for a majority of the ERP market, the scope of open source ERP has increased, and the trend is expected to continue in the future. Currently, a number of open source ERP projects exist," according to the "ERP Systems Market Primer" by Focus Research. "However, only a few of them, such as Compiere, Open For Business (OFBiz), Adempiere and Openbravo, have gained traction and have grown to a level of functionality. Compiere, Apache (OFBiz) and xTuple (OpenMFG) are the key players in the open source ERP space."

Even the largest commercial software developers are exploring open source software, incorporating some of this technology into their offerings, according to analysts.

Open Source ERP Pros

So what are the benefits of open source ERP?

One of open source's biggest strengths is the low cost of entry. The International Organization of Standardization (ISO) improved productivity, streamlined business processes and enhanced customer service by selected open source-based ERP from Compiere. ISO, the world's largest developer and publisher of International Standards for the public and private sectors, is a network of the national standards institutes in 161 countries and serves more than 50,000 new customers every year.

When it needed a new ERP solution, ISO selected Compiere ERP because of the software's ability to reduce business process complexities, lower IT infrastructure costs, ease of integration with existing internal systems and the flexibility to quickly and cost-effectively make changes using Compiere's Model Driven Application Program, according to ISO. "Thanks to the powerful application platform model, we now have the ability to more quickly adapt our organization to a constantly changing environment and, of course, to our customers' expectations," said Nicolas Fleury, director of marketing and communication at ISO, in a statement.

For its part, Frilac - a Spanish distributor and commercial seller of frozen and cooled products that manages more than 100,000 orders per month - needed a highly flexible and agile ERP solution to manage its high volume of operations and information. The company chose Openbravo ERP and attributes a 32% increase in sales directly to its investment in the open source ERP solution, according to Frilac.

Open source, which builds upon the community's common experience, is flexible and adaptive, giving businesses the ability to quickly adapt the software to meet their needs, proponents said. Since it is based on open standards, many programmers can work simultaneously on a project, rather than relying exclusively on a handful of software-specific experts. And businesses easily can shift partners or providers since they are not bound to a proprietary system.

The Flip Side

Open source detractors argue that, other than up-front fees, the cost of open source ERP software are the same - or more - than commercial applications. Since there is no single vendor fine-tuning the software, much of the development is done at the user-site. However, open source relies on common programming tools, meaning there are no company-specific tools, tricks or knowledge requirements hindering advances.

And some of this additional cost is dependent on the amount of customization your company needs: With open source's growing popularity and the expansion of open source-based developer's software families, the number of available modules continues to swell, increasing the odds of finding a strong match for your company's needs without the need for any or much customization.

And since the ERP applications are written in open source, your programmers know the code without requiring expensive, time-consuming classes in proprietary coding. Your human resource costs are, therefore, smaller, since you don't have to invest as much in people proficient in a particular vendor's product.

Perception may be the biggest hurdle for open source ERP to overcome. Many CIOs are leery of entrusting their organizations' data lifeblood to open source, preferring to stick with the tried-and-true, albeit more expensive, safety of a brand-name commercial ERP application.

"The vast majority of companies prefer the vendor to maintain the system for technical support and compliance,” Paul Hamerman, vice president of enterprise applications at Forrester Research, told CIO magazine.

Whether you choose to dip a toe or jump right in, the open source waters no doubt will continue to warm, as both commercial vendors and the user community explore the possibilities, opportunities and benefits of non-proprietary software and the savings - in both dollars and times - their organizations can enjoy. End

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Experts estimate as much as 10% to 18% of businesses are using open source to power-up their ERP solutions, which amounts to a sizable $5 billion share of the market.






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