An ERP system, if implemented within an organization the right way and used the right way, can drive significant benefits, including better information sharing, reduced operational costs better synergy between marketing and sales leading to more revenue, better automation and integration of processes. All in all, a healthy proposition.
But the cost of implementing commercial ERP systems like SAP prohibits smaller organization to benefit from a well integrated ERP system. That’s the reason why open source ERPs are increasingly becoming popular.
But before you go ahead with an open source ERP you would do well to understand the benefits and drawback of using an open source ERP system.
1. Free to own & use
Open source systems are usually (though not always) free to own and use as there are no licensing costs or maintenance fees. As compare to commercial software the entire cost of ownership is less in open source ERP solutions. Secondly, there is no lock-in or dependency on the vendor, and you are free on how you are free to use the software anyway you want. You can do this all by yourself or hire a ERP solutions provider. This is the reason why many companies – mostly SMBs but also some larger enterprises – chose open source software, more specifically, open source ERP system.
2. Fully Customizable
Like any open source software, the source code of an open source ERP can be altered and tailored to meet your organization’s business needs and there are generally wide range of integration formats. Changes can be achieved by using a company’s internal programming staff or by external ERP Developers. Even if you have to spend money on custom development for an open source ERP system, it would still be much more cost effective than hiring consultants for commercial ERP solutions like SAP.
3. Future Proof
With any open source software, more do with ERP (because of its complexity) you have a huge developer community backing up the software with their own review, criticism, enhancements, etc. So you know your software is tried and tested. Also if the software vendor decides to shut down, you are not left in the lurch. Since its open source you, can take the help of other developers to continue working on the same ERP system, which would be possible with any commercial ERP provider.
Since many developers are simultaneously working on a software, and are constantly enhancing the codes, you get regular updates for an open source ERP. All open source software come with a set of core files that get replaced during each update. If you implement your customization leaving the core files untouched, updating your ERP will become a breeze. Which is not so for a commercial ERP system, because most of them are customized deeply and even simple updates require consultancy from the ERP vendor (as you don’t have access to the source code).
With open source ERP there is always a risk involved that the software or its enhancements (since multiple developers are involved) may not have been developed keeping the best practices in mind and may be susceptible to security attacks. Also, there is a risk that the open source software may become closed source in future and then, you may have to become dependent on the vendor.
Generally most of open source ERPs are free to download but the support of the software is not. While bigger organizations may have a full fledged IT department who can take care of the support for the ERP system. But for smaller companies getting adequate support may be a costly affair. Such dependency on external sources for support of an enterprise system may not go down well with your initial expectation from an open source ERP.
Not just support, having an on-premise ERP system using open source code means that you have your use your own servers and databases and maintain these. Cost for maintaining a server environment that works 24X7 and is protected against security threats and disaster may be much more than you bargained for. You may find a cloud ERP more hassle free in this regard.
Implementing an ERP system itself is a critical decision for your business as a failed system will do you more harm than good. And if you add to it the choice of a managed, enterprise ERP system Vs. a self managed, open source system, right decision becomes even more important.
Generally speaking, implement an ERP only if you need to. That is, only if you have an organization complex enough and disparate enough to warrant an all encompassing software that can provide enough benefits to justify the investment involved.
Also, think through clearly on what kind of support and maintenance your open source ERP will require and whether you have the resources or money to take care of that. If you have thought through these aspects clearly, going for an open source ERP can really be a smart decision for you.