Wary of mounting acquisitions in the business applications sector harming his enterprise resource planning investment, John Rogelstad searched for an alternative that could carry his small cut-and-sew manufacturing company to the next level.
He took an unexpected turn down the open-source ERP road.
The director of operations at Marena Group, a manufacturer for post-surgical garments, Rogelstad had a Lilly Software Associates ERP system in place, but after Lilly was acquired by Infor Global Solutions, he found a dramatic decrease in support. With several big IT initiatives in the pipeline, Marena started to feel uneasy with Infor as a partner. "We felt like since Infor acquired Lilly, they were getting very bureaucratic and disorganized. Our sense was they were more interested in acquisitions than working on their core product or developing a new core," said Rogelstad in Lawrenceville, Ga.
In the course of his due diligence to find a replacement suite, Rogelstad found Lilly wasnt the only ERP company to be acquired; just about every suitable midmarket player out there had been (or was in the process of being) acquired. In addition to Lilly, Infor had acquired Datastream, Formation Systems and Mapics before it acquired SSA Global earlier this year; SSA Global had acquired a dozen companies since 2001, including Baan, Marcam, Epiphany and Provia. Oracle, which has been on an for the past two years, snatched up PeopleSoft, JD Edwards and Siebel Systems, along with a host of vertically aligned vendors such as Retek and G-Log. Then theres Microsoft, which, between 2001 and 2002, acquired two ERP mainstays—Great Plains (which had acquired Solomon) and Navision (which had acquired Axapta).
"That really pulled us down the road of open source," said Rogelstad, who chose OpenMFG, of Norfolk, Va., for his ERP system.
A Good Fit
Open source and ERP generally are not terms that go together, such as hand and glove. However, with recent market conditions playing a part, the two seemingly disparate areas are at a convergence point, at least in the small and midsize business sector.
While IT research companies such as Gartner Group and AMR Research do not have any current research documenting the rise of open-source ERP—analysts at both companies are just beginning to research the topic—its clear more companies are turning to open source for core functionality.
Interestingly, these newer users are not the typical open-source proponents—some might say fanatics—turning to open-source ERP but, instead, companies looking for a safer, cheaper and more flexible option offered by proprietary ERP companies.
"Really, it wasnt an open source versus proprietary decision. Were not a Linux shop; we look for tools that work. We viewed this as a business decision," said Steve Reh, vice president of operations at Pertronix, in San Dimas, Calif., which implemented Compieres open-source ERP package. "We kind of understand this open-source thing, but we were a little hesitant about it; were not in the IT business, and we didnt want to become an IT shop."
The numbers tell a better story. One of the better-known providers of open-source ERP and CRM (customer relationship management), Compiere has had more than 1 million downloads of its software, averages 60,000 unique visitors each month (May 2006 topped the charts with more than 100,000 visitors), and has between 20,000 and 30,000 forum postings. It also has 70 partners, about 50 developers contributing code and about 240 customers.
"There is a difference in users and customers," said Kathy Pink, co-founder and chief operating officer of Compiere, in Portland, Ore. "We dont sell our software—its open source, so its free. What we do sell is services—security, support, that type of thing."
Likewise, OpenMFG, which recently announced the 1.3.2 version of its OpenMFG software, has about 100 open-source developers contributing code and 35 customers who represent companies that span the SMB spectrum from startups to companies with about $70 million in revenue, according to Ned Lilly, the companys president and CEO.
Yet its not so much the functionality of open-source ERP thats causing growth spurts—open-source capability (though not usability) seems on par with proprietary ERP software, according to users. Instead, its the less tangible assets, such as lower cost of ownership, more flexibility, community expertise and participation, that are bringing initially circumspect participants to the open-source table.
"Because were a startup, there was no way we could get into a larger ERP package," said Pat Stream, director of operations at e-BuckMail.com, in Hudson, Wis. "We needed the power of a Lawson, but there was no way we could afford it … and we were not going to get the customization we needed."