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open source erp

The Real Cost of Open Source ERP

Small to medium businesses will typically outgrow their off-the-shelf accounting software (Quickbooks, Quicken, Peachree, etc) when their distribution demands push the systems to their limits. At this point, inventory-centric businesses often dive into Enterprise Resource Planning (ERP) to integrate accounting, sales, production and distribution.

Searching for the right ERP Software, especially for Mac-based business, is highly confusing to most small business owners and developers. ERP is a whole universe of knowledge and skill. It comes with its own vocabulary, a massive consulting & sales culture, and a dizzying ambiguity in its definition as you compare and contrast ERP from one company to another; one operating philosophy to another.

Open Source ERP is on the rise, and we see a lot of questions, especially from young businesses wanting to figure out if it is a viable route.

What is Open Source ERP?

Open source simply means that the source code for the software is available to third party developers for tweaking and rewriting. This allows a community of users and developers to evolve the program and create new modules that integrate with the base program. This is the same thing that proprietary ERP developers do, however they are in-house and the code is not available to third parties.

Open Source ERP Does Not Mean Free ERP

People often think of open source as free, however on the implementation side this is rarely the case. The base program may be free but it is a standardized setup and is typically limited in its functionality for your specific business processes until customized. This is why the marketplace gives birth to a broad base of third-party modules or code re-writes are used to add-in the functionality that is lacking in the base program. These modules are usually not free. Since they are developed by different people, they lack uniformity in form and function. Therefore when a business decides that it will implement an open-source ERP solution, it must determine exactly the functionality it requires, what the base program offers and where the gaps exist. Then the business must research, find and purchase the modules that it requires to fill those gaps.

We often hear that the success of an Open Source ERP implementation begins and ends with the expertise applied to the implementation. So let’s assume that a great consultant is hired.¬†Depending on the complexity of your business systems, implementation may take anywhere from a couple days to several months or even longer. This ties up in-house resources that are already committed to running the business. Further, the personnel that implement and configure the open source ERP system may not be around indefinitely, requiring further training resources that would not be required with a proprietary system. In general, and particularly for businesses with any real business process complexity, open source ERP implementation will be more expensive and take longer than a proprietary ERP system. If you run your business on Macs, or across multiple platforms, you may find that open source ERP solutions are not as capable of cooperating in your environment and across platforms as a proprietary ERP solution designed for cross-platform use.

This is a 2-part article. We’ll post the conclusion on Tuesday, January 19.