ERP software implementations often cost more than expected. Couple that fact of life with the hype surrounding open source ERP software, and it should come as no surprise that organizations often consider open source ERP systems as a viable alternative to commercial off-the-shelf ERP applications.
However, because many manufacturing companies hold key misconceptions about open source ERP, it is important to understand the advantages and drawbacks of open source ERP for manufacturing compared with traditional ERP.
Every aspect of traditional ERP has its strengths and weaknesses. And like most ERP solutions, open source is not a slam-dunk or easy proposition. Below are four key considerations for evaluating open source ERP software.
Myth #1: Open source has stronger functionality. Open source ERP software can offer more flexibility than traditional ERP, but it is less likely to have best practices built in. Traditional ERP vendors have large installed bases and are constantly improving and expanding functionality. Users of open source ERP often need to modify the software in order to gain some of the functionality already in place in traditional ERP packages.
Myth #2: Open source is easy to set up. Traditional ERP software is often easy enough for less sophisticated IT staff and users to set up, configure and maintain. Open source ERP, on the other hand, requires more sophisticated IT skills. With traditional ERP software, users can manage set-up screens via GUIs. Open source often requires more robust programming and software development skills. The relatively low up-front license costs of open source are appealing, but total costs may actually be higher over time because of the specialized skills required of IT support staff.
Myth #3: Open source provides better support and maintenance. Traditional ERP vendors receive a lot of flack for their relatively high annual maintenance and support costs. While open source software has less onerous ongoing maintenance costs direct to the vendor, it can be quite costly to continuously update and improve the functionality of the software. Traditional ERP vendors use the relative scale and size of their customer bases to constantly improve software and offer new functionality. It is more likely that open source users will have to develop this same functionality on their own dime.
Myth #4: Open source costs less. Myths 1, 2 and 3 can actually escalate the overall cost of open source relative to traditional ERP. As is the case with any ERP option, it is important to understand the total cost of ownership rather than simply considering direct software license and maintenance costs. Other internal costs and tradeoffs can paint a vastly different cost picture.
Many manufacturers have found open source to be a less costly and more flexible ERP software option than traditional off-the-shelf software. Open source ERP is not for everyone, however, and many organizations have found open source to be more costly and cumbersome in the long run. Manufacturers considering open source need to conduct a rigorous assessment to determine whether open source ERP software is right for them.
About the author: Eric Kimberling has more than 15 years of international ERP business experience. He is the president and founder of Panorama Consulting Group, a Denver-based consulting firm that provides ERP consulting to international companies. Panorama helps clients with ERP software selection, ERP implementation, organizational change management and benefits realization.