Open-Source ERP Grows Up

By Renee Boucher Ferguson  |  Posted 2006-07-09

Open-Source ERP Grows Up

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.

Click here to read eWEEK Labs review of OpenMFG.

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, 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."

Next Page: The community aspect.


At the same time, the proliferation of open-source databases such as PostgreSQL and MySQL and open-source operating systems like Linux and its brethren are opening the door for more trust with open source for core business functionality.

In a previous position, Stream had used OpenOffice and liked what it could do, without the cost associated with leasing Microsofts Office platform. That familiarity led him to Compiere and its VAR KnowledgeBlue, of Salt Lake City.

"It was pretty amazing what OpenBlue [KnowledgeBlues open-source application based on Compieres technology] did for us to get [Compiere] working," Stream said. "Every time I touch this thing, I am amazed."

Its About Community, Right?

The vision of ERP is to integrate all the classic departments across a company into a single system that can then serve each departments particular needs. A typical breakdown includes modules for human resources, order processing, payroll, purchasing and shipping. For both proprietary and open-source offerings, functionality doesnt differ much across the board: General ledger is pretty much general ledger.

Where the difference lies is in the ability, with open-source ERP, to impact source code—be it through direct input to a community or to the vendor or VAR, which, in turn, writes new code.

"I personally dont [post code] because we have this relationship with Knowledge

Blue—they definitely share code," Stream said. "But I just love the fact that if I need something, I can turn around and, boom, [KnowledgeBlue] gets it done. At Oracle, youd pay a ton of money to get the same thing done."

According to users, that give-and-take can be a good thing, except when its in reference to core code. To this extent, open-source ERP companies tend to take a hybrid approach to software development. Compiere, for example, doesnt allow just anyone to contribute code—the majority of contributors are partners that have undergone training and understand Compieres business model.

"We make sure its new functionality—hard-core requirements," said Compieres Pink. "What were seeing now is real business applications—people who are basing their models off that open-source product."

The theory also is that if an open-source vendor closes its doors for whatever reason—for example, if it runs out of money, is acquired or has management issues—the community will continue to sustain the code.

OpenMFG takes a slightly different approach to code input from community members. Customers and partners get the source code and are encouraged to extend and enhance it, but the company is the one to bring the enhancements into the product.

That suits Rogelstad just fine. "Im not sure how open-source ERP would work if it was purely open source," he said.

Even with the upside to open-source ERP, there are challenges to finding and running the software: The movement is still in its infancy (good referrals can be hard to find), and application usability is still green. (User interfaces are, in some cases, downright inelegant.)

"My big hurdle has been that Compiere has somewhat of a European flair to it," Stream said. "Its not like a Windows-based application. Its a tad bit harder to use, more cumbersome, like doing 10 mouse clicks when there are other programs out there that wouldnt even require a click [to perform the same function]. But its working great."

Pertronixs Reh agrees, saying that Crystal Reports looks much better on other systems than it does on Compiere. But, he said, the applications themselves work great.

Then theres also the misconception that open source is free, but consultants are a necessity, just as they are with proprietary ERP implementations. At the same time, theres the myth that one has to be hard-core to implement and maintain open-source software.

"The biggest challenge for open-source ERP is stigma," Reh said. "Any time you have something in the small stage, you have fanatics that get it started, but theyre also what hinders it a bit; you view open source as something thats complex, and you need to be a fanatic to get it."

Thats just not the case, according to Reh and other users. Thats what consultants are there for.

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