Outgrowing QuickBooks? Maybe open source ERP can help

Open source ERP packages are gaining traction as midsize companies increase adoption of open source software

Recent surveys have found that small and medium-size businesses are increasingly willing to consider open source tools. Not surprisingly, small businesses and large enterprises are predisposed to different categories of open source software. Survey data suggest that ERP is one category where small businesses are more likely to adopt open source than their large enterprise peers.

Several open source ERP vendors are vying for a share of the action. Small-business owners and/or their IT department heads should consider whether an open source ERP package could meet their business needs as their companies grow.

[ InfoWorld's Neil McAllister argues that open source desktop apps are a dead end. | Keep up with the latest open source trends and news in InfoWorld's Technology: Open Source newsletter. ]

Growing adoption of open source in small business

Just 15 months ago, Forrester published survey data that suggested small businesses were much more apprehensive about using open source software than large enterprises. In summarizing the Forrester results at the time, I wrote:

The Forrester study also found that more than half of small businesses (57 percent) also expressed concern that open source software would be complex and hard to adopt, but only 32 percent of enterprises expressed a similar sentiment. In addition, 68 percent of small businesses cited the availability of service and support for open-source software as a concern, compared with 47 percent of enterprises.

More recently, however, Jay Layman of the 451 Group reported that a study from CompTIA suggested small businesses were more willing to consider and invest in open source products:

In terms of open source, the study indicates nearly 20 percent of small businesses polled plan to begin using open source software in the next year. We believe that is a significant figure, particularly when we consider all of the open source software -- from OS to middleware to applications -- that small businesses may already be using, but just are not necessarily aware it is open source (via system integrators, resellers, service providers, and others that are increasingly using and incorporating open source).

Open source ERP usage small, but growing, in small business

Forrester analyst Jeffrey Hammond's recent LinuxCon keynote contained a wealth of data [PDF], including a view of open source adoption by software category across company sizes.

According to a fourth-quarter 2009 survey of more than 1,900 IT decision-makers, companies with 20 to 999 employees were 50 percent more likely to have adopted open source CRM and ERP business applications than companies with more than 1,000 employees.

It should be noted, however, that only 9 percent of companies surveyed with 20 to 999 employees were using an open source ERP offering. But the adoption rate for ERP was higher than for portals, such as Liferay, or for business intelligence tools, such as Jasper Reports, across companies of all sizes.

All this begs the question: Could an open source ERP package be right from your small business?

When to consider open source ERP products

Ned Lilly, CEO of open source ERP vendor xTuple, tells me that his company is seeing strong interest from two types of customers:

  • Companies with annual revenues of $5 to $50 million that are outgrowing the capabilities of QuickBooks. Previously, their only logical choice was a small-business version of SAP or Oracle Applications. However, the complexity of an SAP or Oracle Applications implementation and the time required to deploy it ultimately forced customers to make do with QuickBooks.
  • Midsize companies that adopted an ERP package in the lead-up to Y2K and are now beginning to consider alternatives that provide greater flexibility without the need for an army of consultants and at a much lower cost. Access to source code, either directly or through service providers, is a key attraction to companies in this second camp, Lilly says: "We hear anecdotally from partners and customers that implementations are faster because of open architecture and ability to make low-impact changes to the source code or extensions around the core."

A quick survey of major open source ERP vendors

xTuple has a user community of more than 25,000 active members. Openbravo and Compiere, both previous winners of InfoWorld's Best of Open Source in the ERP category, are two other leading open source ERP products.

In addition to a traditional software package, Openbravo offers its ERP package as a software or hardware appliance to further simplify and cut deployment costs. Openbravo also boasts a large partner network, which can help midsize companies evaluate and adopt an appropriate product.

Compiere, on the other hand, was recently acquired by Consona, and coverage of the acquisition suggests that Compiere needs to refocus on its users, partners, and community if it hopes to grow again.

Businesses of any size -- but especially small businesses that don't have an ERP system in place -- that are considering ERP are encouraged to evaluate several packages. This, of course, is made easier through the low barrier for open source offerings.

Follow me on Twitter at SavioRodrigues. I should state: "The postings on this site are my own and don't necessarily represent IBM's positions, strategies, or opinions."

This article, "Outgrowing QuickBooks? Maybe open source ERP can help," was originally published at InfoWorld.com. Read more of Rodrigues et al.'s Open Sources blog and follow the latest developments in open source at InfoWorld.com.

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