Is Open Source the Answer to ERP?

When Mark Alperin went looking to replace his aging ERP system in 2006, he found himself in the same place as many CIOs of midsize companies — not feeling terribly sought after by software vendors who prioritize large enterprise accounts, and facing few choices. Alperin serves as COO with CIO responsibilities for Vertex Distribution, a manufacturer and distributor of rivets, screws and other fasteners. He wasn't happy with the two main packages for his industry, from Activant Solutions and Microsoft (neither of which he was using, nor did he want to use).

"I had lots of concern over the consolidation of the industry. I felt locked in to those two guys," recalls Alperin. That lock-in made him nervous, since he was already frustrated by lack of flexibility with his old home-grown ERP system, which was not built around a relational database. Also, customization was a vital need when Vertex acquired other companies or needed to integrate with new customers. "We've grown because of our flexibility," Alperin says. He didn't want to risk that growth.

So Alperin chose to use the Compiere open-source ERP suite, so he wouldn't be subject to a vendor's shifting priorities. "The primary motivation was the ability to control our own destiny," he says.

Alperin shares that desire with plenty of mid-market CIOs, more of whom are now tapping into open-source ERP, for reasons of cost and flexibility.

Custom Fit

Open source addresses a key concern in this instance. Often, ERP vendors pitch smaller enterprises with packaged applications that they can run as is, requiring little or no IT investment. It's a logical pitch in environments with scarce technology resources. But a substantial percentage of smaller companies want or need to customize the applications to fit their specific business needs — just like larger enterprises, notes Paul Hamerman, vice president of enterprise applications at Forrester Research.

"There's such a diversity of needs. Some companies want a system they can mould to their business, which gives them more inherent flexibility. And open source is designed to be customized," he notes.

And customized without astronomical cost. In Alperin's case, he first asked a systems integrator he's used over the years, Transitional Data Services (TDS), to develop a custom ERP application. Alperin wanted an ERP system he could directly control, with functionality equivalent to getting a customized version of commercial software, he says. But TDS suggested a money- and time-saving solution: Base Vertex's new ERP application on the open-source Compiere project. "They said it doesn't make sense to develop all that code when there's an open-source basis to get started from, eliminating 30 to 50 percent of the coding needed," Alperin says.

The results? Alperin can now delve into the open-source code to move quickly on business needs. "We have our own programming staff, and the ability because of that to customize services on our own and respond to customer needs is an advantage," he says, "so the direct access to the source code is very important."

Prevention Partners, a maker of prevention program posters, buttons and other health-related signage, had a similar desire for customization when it decided to replace an aging ERP implementation: As the company grew, its Windows-based ERP software could not scale with it and was becoming unreliable, among other faults. "I assumed the Oracles, SAPs and Baans would be out of our price range," says Scott Rosa, CTO. So he looked for mid-market-oriented vendors.

Rosa found that they were cheaper than the large vendors, but licensing costs were "still six figures" — and that even more money would be spent on customizing whatever it bought. "We didn't want to spend our limited budget on licensing," he says. By saving licensing dollars with open-source ERP, he could redirect monies to additional customization efforts — getting a better fit at the end, for the same outlay as commercial software, Rosa says. The company has deployed the open-source WebERP software for its manufacturing arm.

"Flexibility means money to me," says Rosa. His experience with the company's previous commercial ERP system made it clear that, no matter its source, ERP software would require significant customization effort.

"We had to build a whole ecosystem around our existing ERP to fill the gaps," he recalls. "Every business does something outside of what the software has in its business process," whether that software is commercial or open source, he says, "so if I need to have that customization, I'm going to do it myself."

Truly, control ranks right up there with costs on the list of CIO concerns regarding ERP. The open-source community, of course, values individual control as a key part of its culture. When Galenicum, a three-year-old supplier of raw materials for the pharmaceutical industry, sought its first ERP system in mid-2006, customization and control were key requirements. The company looked at two commercial applications — SAP Busi­ness­One and Microsoft Dynamics — but chose instead the Openbravo open-source ERP software. For COO Erich Buchen, "the most important factor was that it is easier to customize Openbravo than the other two. SAP and [Microsoft] Dynamics are much more rigid in what they can do, or at least in what their consultants say they can do."

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