When companies are deciding on which Enterprise Resource Planning (ERP) system to purchase, they will generally look to the major players in their industry or market segment. SAP, Oracle, and Infor offer the most popular ERP systems that can be customized to incorporate a company’s business processes but will often require a company to adopt some of the best practices incorporated in the ERP software they purchase.
For many thousands of companies, this approach to implementing ERP software has worked extremely well and will continue to attract the majority of large and medium-sized businesses. There is an alternative that can give medium and smaller companies the same advantages of implementing a larger ERP solution but with the ability to customize the product to suit their needs completely. Open-source ERP solutions offer companies freely available source code base as a starting point for their implementation from which they can adapt the code to suit their particular needs.
Advantages of Open-Source ERP
Open-source software has gained a significant foothold in the business work and it is natural that open source ERP and customer relationship management (CRM) solutions are the next evolutionary step in the process. The open-source ERP and CRM solutions can be purchased by a company and used as-is.
The software companies offering open-source ERP solutions have developed products that can be used straight out of the box with limited configuration and data entry. A company can then use the product without customization in an evaluation mode before deciding on what, if any, changes are to be made. As there are no upfront licensing fees there is no major risk for the company reviewing an open-source ERP solution.
Customization of an open-source ERP is simpler than with a traditional ERP solution as the company already has the source code. Changes can be achieved by using a company’s in-house programming staff or an external programming team, which can be provided by the open-source ERP provider or by open source community developers. As consultants and programmers for the major ERP solutions such as SAP can exceed one hundred dollars an hour, the programming for an open-source solution would be considerably less.
Operating an open-source ERP solution does give a company the option of continuing to update the existing code when changes to their business processes occur or with changes to the company, such as mergers and acquisitions. With an open-source ERP implementation, there is no software provider to force upgrades when they want to discontinue support of a certain release.
Disadvantages of Open-Source ERP
There are of course disadvantages to operating an open-source ERP system which includes support, updates, maintenance, and risk.
- Support – Open-source ERP is mostly free to download but the support of the software is not. If a company has an in-house technology department then the development and support of the system may not require any outside companies. For smaller companies without limited technology experience, they may have to rely on the provider of the open-source software or other technology companies to develop and support the product. This reliance on external sources for support of an enterprise system may be extremely expensive.
- Updates – With many open-source ERP solutions the code is constantly undergoing development by the software provider and they may supply numerous updates and patches to fix problems or enhance functionality. These updates may require additional testing on the part of a company to ensure that the update or patch does not cause any issues with the installed solution. If a company has limited resources to perform regression testing then this may require hiring a technology company to perform this.
- Maintenance – If a company has modified the source code of an open-source ERP then the changes may make troubleshooting and general support difficult, so much so that support may be difficult to obtain. If significant changes are made by an in-house technology department then the system may only be supportable by that organization. Major outages and system crashes may not be
- Risk – there are many risks to operating an open-source ERP solution that has been mentioned above, such as support, maintenance, and updates, but there are other risk issues such as the viability of the software provider, the possibility that the open-source software may be changed to a closed source in the future, and legal issues that may arise around the open source ERP.
The open-source ERP solution can give some companies the opportunity to own and operate an ERP system with limited capital outlay. When a company then purchases support for their system and development work to incorporate unique business processes, the cost increases accordingly. There are disadvantages to open-source ERP that should be considered including the ability to obtain support for the software and the possibility that a company may be on their own in the case of a major system failure that could bring operations to a grinding halt for a period of time.