Spotlight: Is Open Source ERP Right For You?

Thomas Wailgum is Senior Editor at CIO, US.

How about we play an ERP word-association game: I say ERP costs, what words come to mind? Expensive? Never ending? Increasing? Heartburn-inducing? How about cheap? Probably not. It doesn’t take an 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 in 2009 are increasing implementation speed and lowering 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.

Now let’s play word association with Open Source ERP. Are you thinking untested or unreliable or “not for us”? In late 2007, CIO surveyed 400 IT leaders about their ERP systems. Despite innovation, integration and cost issues, CIOs said they remained committed to on-premise, traditional ERP systems.

Just 9 percent reported using an alternative ERP model. Those models included software as a service, Open Source tools and various in-house apps. With Open Source ERP, two CIOs I interviewed summed it up best: “Would I want to go Open Source ERP? I’m not so sure. I’m pretty conservative,” said one. The other said, “It’s not proven yet.”

Some time has passed since that survey, and IT shops might want to re-look at Open Source ERP options from Openbravo, Compiere, ERP5, Open ERP and xTuple (formerly OpenMFG). Cutter Consortium senior consultant Vince Kellen says that Open Source will get a “second chance to get a toe in the door” this year. “Initially,  adopters will look for focused or niche applications, including office software for desktops, rather than rip-and-replace ERP swap-outs,” Kellen notes.

“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. His company had published its ERP code on Sourceforge in 2006 (so it’s had a couple of years to germinate), and today, Openbravo’s ERP application has been downloaded more than 1 million times via Sourceforge. (It’s a 100%  free download.)

Mitja told me something that is 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 the 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.

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’s changing these days. But just how open are you to changing your IT strategy and software-buying habits?