Open Source ERP

The popularity of cloud computing, 0pen source ERP software applications are driven in large by the affordability factor.  On top of that, web-based ERP applications, or on demand Software as a Service, SaaS ERP solutions are also considered easier to deploy.  However, with respect to cost, a factor that is often missed is the integration piece of an ERP software total cost of ownership (TCO).  The integration of an ERP application is in many occasions considerably more than the licensing fees charged by the ERP vendor regardless of whether it is an on-premise ERP software vendor or a cloud vendor.  As it turns out, the general rule of thumb is the integration piece of the TCO is lower for open source ERP vendors as well when compared to proprietary on-premise applications.

What is often misunderstood about open source applications in general is that although there may be some free or more clearly a zero cost component to these applications, be very clear that opensource vendors are for profit entities, and they have considerable financial goals and targets equal to if not greater than their on-premise company rivals.  The difference is the business model in which open source vendors are structured both from a product development, delivery, pricing, and application/software management that is enabling open source developers to offer solutions at a more affordable, pay as you go , on demand model with little to no upfront antes to get into the game.

The affordability of web-based ERP solutions is driven in a few key areas.  Cost of sales is dramatically decreased as the open source community adoption factor is a key. Projects and applications usually start small and the adoption viral growth starts to balloon with “freeware” versions.  The opensource community also plays an integral part in the design, development and Q&A of the application which dramatically reduces traditional software development costs.  Another benefit of open source ERP vendors is they are usually new entities, and don’t have any legacy baggage and compatibility issues with prior versions that they need to synch with from a decade ago.

With respect to ERP implementations, in general project comparisons between custom development integrations, proprietary software (on-premise) software integration have shown that with respect to small, medium and large ERP project, on average open source implementation have a TCO savings of around 50% than other implementation alternatives.