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Finding a niche in open source ERP

Service provider takeaway: Open source ERP systems are gaining traction; by finding a quality vendor to partner with, service providers can help customers migrate to a new open source ERP platform.

As you know, enterprise resource planning (ERP)

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systems are critical to many companies' business processes, such as purchasing, order management and financial management. Because those processes are key to a company's success or failure, and because ERP systems are used predominantly by big, slow-to-change companies, traditional closed source vendors have been a natural source of software to run ERP systems. But that's beginning to change, and the timing is good for service providers to find a niche in the world of open source ERP.

The top traditional commercial vendors of ERP systems are Oracle Corp. (with its PeopleSoft and E-Business Suite systems) and SAP AG. On the whole, customers have the same requirements for migrating from a traditional ERP system to an open source ERP system as they do for migrating any of their systems to open source, albeit on a much grander scale. Here are the types of questions a site will ask when evaluating a migration to open source ERP:

  • Can migration to open source be achieved economically?
  • Can it provide for an enhanced business model?
  • Can it be deployed without putting the business in jeopardy?
  • Can the business expect a certain level of support during and after the transition?

Companies that are considering a move to open source ERP will likely be driven by the following motivators:

  • To obtain a significant return on investment (ROI) while maintaining functionality equivalent to commercial tools.
  • To leverage open source solutions by avoiding proprietary software.
  • To harness the open source model to accelerate innovation and the speed of application customization.

A company is much more likely to adopt open source ERP when it decides to enter into the world of ERP systems via open source or when it's been using a legacy system whose future support prospects are dubious. Migrating from traditional ERP systems such as PeopleSoft and Oracle E-Business Suite will not be easy, because there has usually been a great deal of customization on the reporting side of these systems.

Compiere ERP

One open source ERP company that has embraced this dynamic is Compiere Inc., which backs the Compiere ERP open source system. The company isn't trying to take on commercial enterprise vendors; instead, it's looking for customers that are just now getting into ERP and/or moving off very old systems. One of the company's many advantages is its model-driven architecture (MDA), which stores business logic in an applications dictionary rather than hard-coding it into programs. System administrators can use the Compiere client to access and change the business logic in the applications dictionary, often without any programming.

To date, there have been more than 1.2 million downloads of Compiere ERP. The company doesn't charge for the software but does offer for-fee training and support subscriptions -- value beyond the code. Compiere is extremely reseller-friendly and supports three partner business models, including:

  • Systems integrators: In this model, customers purchase a support subscription from Compiere for direct access to vendor support. Customers purchase implementation services and local support from a Compiere partner.
  • VAR: In this model, the partner provides a turnkey solution to the customer. Compiere bundles the subscription with partner services, including an advanced level of support.
  • Hosting provider: This permits partners to offer the solution by using a Software as a service (SaaS) model (Compiere also offers the system using the SaaS model directly to customers).

Compiere also provides three levels of service to its partners, including Authorized, Silver and Gold, with the models above supported at all three levels.

I strongly advise service providers to consider vendors similar to Compiere, such as OpenMFG and Openbravo, when looking to sell and support open source ERP systems. Customer requirements for ERP will be stringent since ERP is critical to a customer's business, so it's important that you partner with a quality vendor that also has a strong partner channel.

About the author: Ken Milberg heads a consulting firm, Unix-Linux Solutions. He has 20+ years of experience with Unix and Linux systems, as well as broad technical and functional experience with AIX, HP, SCO and Solaris.


This was first published in December 2007

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