Tapping a new source for professional ERP
With growing numbers of SMEs adopting
sophisticated business processes
traditionally associated exclusively with global
enterprises, web-based Open Source ERP
systems are becoming an increasingly
compelling solution, argues Manel Sarasa,
CEO of Openbravo.
The essence of Open Source
The history of Open Source, the movement
and the broad philosophy, are well
documented and discussed online by
devotees and critics alike, but we believe this
model has now come of age, moved on and
evolved considerably from its initial ‘ethical
software’ roots.
In practice, developers of Open Source
software are a hard grafting, practical
community of expert developers and project
managers producing not loose ideas, but tight
code that promotes access and cooperation.
The source code and other materials created
are not conceptual either; they are the stable segments, including development tools, data-
building blocks and sound foundations of
some of the most rigorously tested and
maintained software systems created today.
Open Source has been transformed so
completely in recent years, we like to refer to applications such as Mozilla Firefox have also
today’s leading exponents as ‘Open Souce 2.0’ found their way onto mainstream user desktops.
companies.
They have built upon their initial business plans
to embrace the huge demand that now exists
around Open Source products to produce a
profitable business with a comprehensive blend
of professional services and tools around their
core product technologies. In a recent IDC
study, Sophie Mayo, one of the analyst firm’s
directors for Emerging Technologies said: “The
Open Source services opportunity has been
overlooked until now. The size of the market is
relatively small today, but the growth rates are
at least five times what they are in the overall IT
services industry. Should the next wave of Open
Source applications take off, we will see high-
double-digit growth in related services for the
next decade.”
Such collaborative software development is no-
toriously rapid and enthusiastic. This is largely
because developers have exploited the public
internet to employ concurrent working practices
across a community model. But Open Source
today brings a professional approach and
unique value proposition to end clients, software
integrators and individuals around the world
while still delivering a refreshingly different ap-
proach to the way software is built, distributed
and serviced. For example, Open Source soft-
ware can be downloaded anywhere and any-
time, and tested by users before any service is
bought. Flexibility like this generates significant
interest from end users all over the world, which
in turn translates into demand for Open Source
specialists.
This is the reason why Open Source is now
having such an impact in a range of software
bases, operating systems, office products - and
inevitably this will have a knock-on impact for
the application layer. Names such as Linux or
MySQL have been well known by IT profes-
sionals for some time, but recently open source
Ultimately, everything that can be built in Open
Source will be in time, and this means business
for those embracing the new paradigm.
Open Source Software means business
Open Source software has come of age, and
in a number of vital sectors has evolved to
form extremely professional development
platforms. Far from being a new phenomenon,
Open Source software development has ma-
tured over more than two decades of refine-
ment online. Not only has this model proved
itself many times over to be successful com-
mercially, it has also begun staking a claim for
serious market share in the business software
market, able to produce bulletproof, flexible
systems and applications that can be applied
up to true enterprise level.
Open Source now means business on a num-
ber of different levels, and from different per-
spectives. Software vendors benefit directly
from this model because they can leverage on
a wealth of Open Source components already
available as well as interaction with the com-
munity to take full advantage of a more nimble
development approach. Even word of mouth
publicity for successful Open Source projects
significantly lowers overall commercial costs,
which can sometimes account for as much
as one third of the price for a traditionally
licensed software product.
For the end users this trend represents better
value, allowing individuals to get more appro-
priate solutions for their needs for less invest-
ment, while at the same time gaining greater
control over when and how to invest their
capital. In a recent trend report, researchers
at Forrester revealed that although fewer than
half of the largest enterprises in Europe and
North America are actively using or piloting
Open Source software, a majority of those are
using it for mission-critical applications and
infrastructure. As with all other technology
trends, it is inevitable that SMEs will follow
larger enterprises down this road.
Open Source also represents good business
for the channel. Because Open Source
software vendors sell services rather than
licenses, they value their channel very highly
as a crucial line of revenues and are more
determined to build genuine two-way relation-
ships with them than proprietary software
companies who have a more fickle relation-
ship with their routes to market.
Finally, professional Open Source certainly
means business for its own developer com-
munity. They can still contribute and influ-
ence in the development effort, while at the
same time leveraging the resources invested
by the original software vendor in necessary
but arduous and non-glamorous tasks such
as quality assurance. In addition, localizing
applications or developing plug-ins and prod-
uct extensions has already proven to be a
good business model for many independent
community members.
Development environments too are rock-
solid, and yet it is commonplace for these to
be 100% web-based. Source code is open,
but highly secure, and made available under
flexible, common-sense copyright licenses
that allow contributors and customers to re-
view, edit, version, port, share or redistribute
code with others. This community of devel-
opers also has an interest in locking down
security vulnerabilities, fixing bugs, providing
guidance for fellow developers and generally
keeping the project running smoothly and
progressively.
Security and robustness of software sys-
tems are obviously key concerns for busi-
nesses. Open-source developers will argue
that because the source code of traditional
proprietarily developed software is ‘closed’,
security vulnerabilities and bugs that would
have been spotted by a wide and varied
Open Source development community can
more easily exist and survive undetected.
Open Source code makes it easier for pro-
active bug-fixers to report holes and protect
software than it does for crackers to abuse
those same vulnerabilities. Professional
Open Source software developers also
employ automated bug detection and report-
ing tools. Tellingly, Open Source software
usually boasts a shorter period between the
discovery of vulnerabilities and the creation
of suitable patches.
The overriding ambition of professional Open
Source developers is of course to keep core
code accessible at all times, while simulta-
neously creating products that are reliable,
intuitive and valuable to business-critical
target markets.
The ERP challenge confronting SMEs
One of the most enticing markets for any group
of software developers targeting business cus-
tomers today is ERP, or Enterprise Resource
Planning. According to analyst firm IDC, the
global ERP applications market (excluding the
professional implementation services, which
could easily double or triple the figure) grew by
6.5 per cent to $28.3 billion (€21.5bn) in 2005
as demand for integrated solutions continued to
grow across diverse regions and industries, and
ERP applications vendors release products that
are easier to implement.
ERP itself isn’t a new idea. For decades large
organizations have battled to tie together all of
their business process into a single system. The
first attempts at ERP really only linked inventory
control and asset planning with accounting, but
these early efforts soon evolved into highly so-
phisticated, cross-functional, multi-component
IT platforms integrating all the core functions
of any sizeable organization, including corpo-
rate accounts, human resources, supply chain
management, distribution, data warehousing,
purchasing, sales, marketing, CRM and much
more.
Now ERP is taking a new direction, and like
so many high-end resources that were until
recently only within reach of the very largest
enterprise-level companies, ERP has moved
into the SME arena. Last spring in its report
entitled “Trends 2006 : ERP Applications for
SMBs”, Forrester Research said: “A grow-
ing SMB market, opportunistic investors, and
middleware technologies converge to make
the SMB market for ERP applications one of
the most competitive environments for market
growth and product innovation within enterprise
applications.” Small-to-medium sized enterpris-
es now frequently boast myriad disparate busi-
ness processes of a level equal in complexity
to much larger organizations, and require ERP
systems equally capable of unifying these pro-
cesses and relieving increasingly overburdened
IT departments.
If this relative lack of resources within SMEs
makes ERP an attractive option, it is also the
reason why many of these businesses still
find it hard to stretch budgets and personnel
to accommodate a leading-brand, traditionally
developed ERP system. Such systems were
initially developed within proprietary software
companies incurring enormous R&D costs,
while each subsequent revision and upgrade
was performed at considerable cost, supporting
a wide cast of additional third-party developers,
partners and the extra costly bells and whistles
associated with launching commercial business
software versions into a crowded marketplace.
For this reason server and site licenses for ERP
software traditionally don’t come cheap, typi-
cally accounting for several tens of thousands
of dollars. ERP systems can be very expen-
sive to install. Implementing complex software
necessarily involves systems integrators, certi-
fied programmers, vendor and channel partner
consultants and support packages – in short a
list of ongoing costs that may be swallowed by
successive annual IT budgets planned across a
global enterprise, but could cripple a relatively
modest SME.
That’s not to say there is a lack of choice avail-
able. Indeed the ERP market offering is vast,
with tens of thousands of ERP systems being
developed to cover bespoke needs. However
most of the ERPs are built in isolation by small
companies marketing solutions locally, but
largely failing to compete with big multinational
products on any scale. For SMEs therefore,
there is still a big gap that needs to be closed.
Worldwide penetration of ERPs in the SME
segment is still only between 20 per cent and
50 per cent, which is very low considering that
nearly all modern SMEs need greater access
to unified information in order to better support
their decision making processes and improve
competitive positioning. The on-demand revolu-
tion may only be in its early stages, with only
a very small number of ERP solutions on offer
currently 100 per cent web-enabled, but this
trend will inevitably have a great impact in this
segment, as it removes a number of complicat-
ed obstacles to wider adoption.
The Open Source response
Open Source delivers compelling value in
this segment. The first attraction of an Open
Source ERP system to an SME is undoubtedly
its accessible and affordable curve of adoption.
Customers generally appraise Open Source
ERP software for themselves, even running
demos on their own live networks and
applications in a controlled sandbox
environment simply by downloading freely
available software and documentation and
trying it out.
Another core driving force behind Open
Source, is to slash access costs even further
for customers and contributors by reducing the
restrictions of copyright. Licensing is
often based upon GPL, GNU General Public
License, or MPL, Mozilla Public License, the
two most popular licenses for free and Open
Source software used by over 80 per cent of
all free software project licenses. Both licenses
allow the initial developer to maintain basic
copyright conditions while offering the
maximum degree of flexibility for further
community and customer development. The
difference lies in the implications for derived
works, while GPL requires that those must also
be licensed in GPL, MPL provides more
freedom, accommodating both Open Source
and traditional licensing for the larger works.
However, there are reasons other than license
cost that should cause SMEs to consider the
Open Source road to ERP. For example, many
proprietary ERP packages can be quite
inflexible and generic, demanding
customization for every implementation.
Tailoring an ERP package is not a simple
undertaking and can prove impossible for
anyone other than an experienced specialist in
that specific system.
www.openbravo.com
A broad range of industry vertical and function-
ally specific ERP implementations are
developed for Open Source systems
continually by the community on a project
basis, with many customers also sharing that
code burden and learning skills along the way.
Any SME choosing to adopt web-based ERP
will also feel enormously relieved that by
definition they will avoid any client side
installation, while benefiting from relatively
simple cross-platform deployment and the
additional bonus of centralized maintenance
via a standards-based web browser. A
professionally developed Open Source ERP
project supported by an enthusiastic
community will produce a stable, robust,
adaptable and relatively easy to use web-
based system highly suitable for SME
deployment.
Of course there are still sizeable hurdles to
confront when deploying any system as
involved as ERP, but these obstacles are the
kind that can certainly be overcome, partly
through the collaborative spirit embodied by
Open Source. These hurdles will undoubtedly
require dedicated, skillful, willing and
determined personnel granted sufficient time
and support by their organization to train and
understand ERP in general terms, as well as
how to make the specific system run smoothly,
but vitally they will not demand financial
resources beyond the reach of an ambitious,
growing SME.
Both small and large systems integrators can
take this chance to build on top of flexible
existing Open Source projects in order to
develop their own powerful next-generation
bespoke software able to compete in a
number of vital levels with the largest
multinational products. Open Source,
web-based ERP represents an excellent
opportunity for energetic companies to grasp
an exciting new business opportunity.
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Calle J, Landaben
Pamplona, Navarra
Spain