Tapping a new source for professional ERP

With growing numbers of SMEs adopting They have built upon their initial business plans
sophisticated business processes to embrace the huge demand that now exists
traditionally associated exclusively with global around Open Source products to produce a
enterprises, web-based Open Source ERP profitable business with a comprehensive blend
systems are becoming an increasingly of professional services and tools around their
compelling solution, argues Manel Sarasa, core product technologies. In a recent IDC
CEO of Openbravo. 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
The essence of Open Source today brings a professional approach and
unique value proposition to end clients, software
The history of Open Source, the movement integrators and individuals around the world
and the broad philosophy, are well while still delivering a refreshingly different ap-
documented and discussed online by proach to the way software is built, distributed
devotees and critics alike, but we believe this and serviced. For example, Open Source soft-
model has now come of age, moved on and ware can be downloaded anywhere and any-
evolved considerably from its initial ‘ethical time, and tested by users before any service is
software’ roots. bought. Flexibility like this generates significant
In practice, developers of Open Source interest from end users all over the world, which
software are a hard grafting, practical in turn translates into demand for Open Source
community of expert developers and project specialists.
managers producing not loose ideas, but tight
code that promotes access and cooperation. This is the reason why Open Source is now
The source code and other materials created having such an impact in a range of software
are not conceptual either; they are the stable segments, including development tools, data-
building blocks and sound foundations of bases, operating systems, office products - and
some of the most rigorously tested and inevitably this will have a knock-on impact for
maintained software systems created today. the application layer. Names such as Linux or
MySQL have been well known by IT profes-
Open Source has been transformed so sionals for some time, but recently open source
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. 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
Finally, professional Open Source certainly
Open Source software has come of age, and means business for its own developer com-
in a number of vital sectors has evolved to munity. They can still contribute and influ-
form extremely professional development ence in the development effort, while at the
platforms. Far from being a new phenomenon, same time leveraging the resources invested
Open Source software development has ma- by the original software vendor in necessary
tured over more than two decades of refine- but arduous and non-glamorous tasks such
ment online. Not only has this model proved as quality assurance. In addition, localizing
itself many times over to be successful com- applications or developing plug-ins and prod-
mercially, it has also begun staking a claim for uct extensions has already proven to be a
serious market share in the business software good business model for many independent
market, able to produce bulletproof, flexible community members.
systems and applications that can be applied
up to true enterprise level. Development environments too are rock-
solid, and yet it is commonplace for these to
Open Source now means business on a num- be 100% web-based. Source code is open,
ber of different levels, and from different per- but highly secure, and made available under
spectives. Software vendors benefit directly flexible, common-sense copyright licenses
from this model because they can leverage on that allow contributors and customers to re-
a wealth of Open Source components already view, edit, version, port, share or redistribute
available as well as interaction with the com- code with others. This community of devel-
munity to take full advantage of a more nimble opers also has an interest in locking down
development approach. Even word of mouth security vulnerabilities, fixing bugs, providing
publicity for successful Open Source projects guidance for fellow developers and generally
significantly lowers overall commercial costs, keeping the project running smoothly and
which can sometimes account for as much progressively.
as one third of the price for a traditionally
licensed software product. Security and robustness of software sys-
tems are obviously key concerns for busi-
For the end users this trend represents better nesses. Open-source developers will argue
value, allowing individuals to get more appro- that because the source code of traditional
priate solutions for their needs for less invest- proprietarily developed software is ‘closed’,
ment, while at the same time gaining greater security vulnerabilities and bugs that would
control over when and how to invest their have been spotted by a wide and varied
capital. In a recent trend report, researchers Open Source development community can
at Forrester revealed that although fewer than more easily exist and survive undetected.
half of the largest enterprises in Europe and Open Source code makes it easier for pro-
North America are actively using or piloting active bug-fixers to report holes and protect
Open Source software, a majority of those are software than it does for crackers to abuse
using it for mission-critical applications and those same vulnerabilities. Professional
infrastructure. As with all other technology Open Source software developers also
trends, it is inevitable that SMEs will follow employ automated bug detection and report-
larger enterprises down this road. ing tools. Tellingly, Open Source software
usually boasts a shorter period between the
Open Source also represents good business discovery of vulnerabilities and the creation
for the channel. Because Open Source of suitable patches.
software vendors sell services rather than
licenses, they value their channel very highly The overriding ambition of professional Open
as a crucial line of revenues and are more Source developers is of course to keep core
determined to build genuine two-way relation- code accessible at all times, while simulta-
ships with them than proprietary software neously creating products that are reliable,
companies who have a more fickle relation- intuitive and valuable to business-critical
ship with their routes to market. target markets.
The ERP challenge confronting SMEs

One of the most enticing markets for any group If this relative lack of resources within SMEs
of software developers targeting business cus- makes ERP an attractive option, it is also the
tomers today is ERP, or Enterprise Resource reason why many of these businesses still
Planning. According to analyst firm IDC, the find it hard to stretch budgets and personnel
global ERP applications market (excluding the to accommodate a leading-brand, traditionally
professional implementation services, which developed ERP system. Such systems were
could easily double or triple the figure) grew by initially developed within proprietary software
6.5 per cent to $28.3 billion (€21.5bn) in 2005 companies incurring enormous R&D costs,
as demand for integrated solutions continued to while each subsequent revision and upgrade
grow across diverse regions and industries, and was performed at considerable cost, supporting
ERP applications vendors release products that a wide cast of additional third-party developers,
are easier to implement. partners and the extra costly bells and whistles
associated with launching commercial business
ERP itself isn’t a new idea. For decades large software versions into a crowded marketplace.
organizations have battled to tie together all of For this reason server and site licenses for ERP
their business process into a single system. The software traditionally don’t come cheap, typi-
first attempts at ERP really only linked inventory cally accounting for several tens of thousands
control and asset planning with accounting, but of dollars. ERP systems can be very expen-
these early efforts soon evolved into highly so- sive to install. Implementing complex software
phisticated, cross-functional, multi-component necessarily involves systems integrators, certi-
IT platforms integrating all the core functions fied programmers, vendor and channel partner
of any sizeable organization, including corpo- consultants and support packages – in short a
rate accounts, human resources, supply chain list of ongoing costs that may be swallowed by
management, distribution, data warehousing, successive annual IT budgets planned across a
purchasing, sales, marketing, CRM and much global enterprise, but could cripple a relatively
more. modest SME.

Now ERP is taking a new direction, and like That’s not to say there is a lack of choice avail-
so many high-end resources that were until able. Indeed the ERP market offering is vast,
recently only within reach of the very largest with tens of thousands of ERP systems being
enterprise-level companies, ERP has moved developed to cover bespoke needs. However
into the SME arena. Last spring in its report most of the ERPs are built in isolation by small
entitled “Trends 2006 : ERP Applications for companies marketing solutions locally, but
SMBs”, Forrester Research said: “A grow- largely failing to compete with big multinational
ing SMB market, opportunistic investors, and products on any scale. For SMEs therefore,
middleware technologies converge to make there is still a big gap that needs to be closed.
the SMB market for ERP applications one of Worldwide penetration of ERPs in the SME
the most competitive environments for market segment is still only between 20 per cent and
growth and product innovation within enterprise 50 per cent, which is very low considering that
applications.” Small-to-medium sized enterpris- nearly all modern SMEs need greater access
es now frequently boast myriad disparate busi- to unified information in order to better support
ness processes of a level equal in complexity their decision making processes and improve
to much larger organizations, and require ERP competitive positioning. The on-demand revolu-
systems equally capable of unifying these pro- tion may only be in its early stages, with only
cesses and relieving increasingly overburdened a very small number of ERP solutions on offer
IT departments. 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 A broad range of industry vertical and function-
ally specific ERP implementations are
Open Source delivers compelling value in developed for Open Source systems
this segment. The first attraction of an Open continually by the community on a project
Source ERP system to an SME is undoubtedly basis, with many customers also sharing that
its accessible and affordable curve of adoption. code burden and learning skills along the way.
Customers generally appraise Open Source
ERP software for themselves, even running Any SME choosing to adopt web-based ERP
demos on their own live networks and will also feel enormously relieved that by
applications in a controlled sandbox definition they will avoid any client side
environment simply by downloading freely installation, while benefiting from relatively
available software and documentation and simple cross-platform deployment and the
trying it out. additional bonus of centralized maintenance
via a standards-based web browser. A
Another core driving force behind Open professionally developed Open Source ERP
Source, is to slash access costs even further project supported by an enthusiastic
for customers and contributors by reducing the community will produce a stable, robust,
restrictions of copyright. Licensing is adaptable and relatively easy to use web-
often based upon GPL, GNU General Public based system highly suitable for SME
License, or MPL, Mozilla Public License, the deployment.
two most popular licenses for free and Open
Source software used by over 80 per cent of Of course there are still sizeable hurdles to
all free software project licenses. Both licenses confront when deploying any system as
allow the initial developer to maintain basic involved as ERP, but these obstacles are the
copyright conditions while offering the kind that can certainly be overcome, partly
maximum degree of flexibility for further through the collaborative spirit embodied by
community and customer development. The Open Source. These hurdles will undoubtedly
difference lies in the implications for derived require dedicated, skillful, willing and
works, while GPL requires that those must also determined personnel granted sufficient time
be licensed in GPL, MPL provides more and support by their organization to train and
freedom, accommodating both Open Source understand ERP in general terms, as well as
and traditional licensing for the larger works. how to make the specific system run smoothly,
but vitally they will not demand financial
However, there are reasons other than license resources beyond the reach of an ambitious,
cost that should cause SMEs to consider the growing SME.
Open Source road to ERP. For example, many
proprietary ERP packages can be quite Both small and large systems integrators can
inflexible and generic, demanding take this chance to build on top of flexible
customization for every implementation. existing Open Source projects in order to
Tailoring an ERP package is not a simple develop their own powerful next-generation
undertaking and can prove impossible for bespoke software able to compete in a
anyone other than an experienced specialist in number of vital levels with the largest
that specific system. 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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