Open Source ERP
Business Model Framework
David L. Olson, Univ. of Nebraska
Björn Johansson, Lund Univ.
Rogério Atem de Carvalho, Instituto Federal
Fluminense
FAIM 2012 the Baltic
ERP
•
•
•
•
Integrated
BPR efficiency
Reduced IS payroll
MANY OPTIONS
– International differences
• SELECTION
– PIRCS meta-method
– SMART multicriteria selection
FAIM 2012 the Baltic
Alternative Supply Chain Software Sources
Method
Advantages
Disadvantages
Develop in-house
Best fits organization
Most difficult to develop
Most expensive
Slowest
Stand-alone APS
Less expenditure
Simpler installation
Harder to integrate
Full vendor ERP
Relatively fast
Less expensive than customization
IT efficiency
Easier to upgrade
Inflexible
Employees change work methods
Selected vendor
modules
Less risk
Relatively fast to install
Least expensive vendor approach
Expansion problems in time and
cost
Customized vendor ERP
Retain flexibility while gaining vendor
expertise
Slower
Usually more expensive
Best-of-breed
Gain best of all systems
Difficult to link (middleware)
Slow
Application service
provider
Least risk of ERP change
Least cost
Fastest
At ASP provider’s mercy
No control
Subject to price increase
Open source system
COST (it’s free to install)
Flexible
Greatest risk (after in-house)
Need computer-literate employees
GMRG Data Analysis
Olson, Chae, Sheu: International Journal of Production Research
accepted 2012
Category
Number (736)
Use Strategic
Planning (1-7)
Perceived
Benefits
(1-7 good)
Perceived Cost
Impact
(1-7 good)
None
42
1.27
4.17***
4.07
Spreadsheet
25
2.76
4.50
4.13
In-house
152
3.77
4.49 best
3.90**
Small
361
2.86
4.66*
3.72***
MSD
8
2.50
4.75
3.88
BOPE
38
3.71
4.37
3.82*
SAP
110
4.08
4.53
4.13 best
CONFENIS 2011 Aalborg
Methods Used – Planning & Control
1-manual; 2-desktop software; 3-custom software; 4- commercial software- 5-modified commercial software
1
Category
None
Spreadsheet
In-house
Small
MSD
BOPE
SAP
MRP Inventory Labor
control planning
1.87
2.33
3.02
3.55
4.14
4.17
3.88
2.13
2.71
3.16
3.41
4.00
3.95
3.89
1.63
2.70
2.62
3.06
3.50
3.18
3.07
CONFENIS 2011 Aalborg
Shop
floor
control
1.63
2.63
2.67
3.17
4.00
3.25
3.38
Cost
planning
2.00
2.83
2.94
3.28
4.00
3.91
3.72
Methods Used to Record Data
Category
Manual
Typed into
computer
Bar codes
None
0.51
0.39
0.06
Automatic
data
capture
0.03
Spreadsheet
0.04
0.83
0.04
0.08
In-house
0.04
0.67
0.20
0.09
Small
0.09
0.65
0.19
0.07
MSD
0
0.75
0.25
0
BOPE
0.05
0.62
0.27
0.05
SAP
0.02
0.52
0.31
0.15
CONFENIS 2011 Aalborg
ERP Selection Criteria
Baki & Çaki [2005]
Criteria
Fit with allied organizations
Cross module integration
Compatibility with other systems
References
Vision
Functionality
System reliability
Consultancy
Technical aspects
Implementation time
Vendor market position
Ease of customization
Software methodology
Fit with organization
Service & support
Cost
Vendor domain knowledge
Hecht
[1997]
Brewer Rao
[2000] [2000]
*
*
*
*
*
*
*
*
*
*
*
*
*
*
FAIM 2012 the Baltic
Verville & Kumar
Mean
Hallingten et
al.
[2002]
[2003]
*
4.79
*
*
4.72
4.28
4.24
*
4.22
*
*
4.15
*
4.08
4.06
*
4.01
3.94
*
*
3.87
*
3.84
3.83
*
3.83
*
3.77
*
*
3.65
3.46
Open Source Software
• Operates under license allowing release of
source code free of charge for others to use &
modify
– Free redistribution
– Open source code allowing modifications
• Modifications to be distributed same as source code
Open Source Development
Red Hat [2009]: Can save by:
1. Enabling use of commodity hardware rather
than proprietary machines
2. Avoids maintenance contracts
3. Greater functionality, reliability, performance
4. Faster learning curve, available support tools
5. Avoid vendor lock-in
6. Reduce need for security consultants & tools
FAIM 2012 the Baltic
Open Source ERP/EIS
• Jaisingh et al. [2008]: OSS ERPs can be
customized to modify code, gain competitive
advantage
• Serrano & Sarriegi [2006]: OSS ERP benefits:
– Increased adaptability
– Decreased reliance on single supplier
– Reduced costs
FAIM 2012 the Baltic
Open Source ERP Products
• Compiere
• OpenMFG
• Open for Business Project
• Tiny ERP
• Web ERP
• Open Office
• OpenBravo
• OpenPro
Sourceforge.net listed over 1,000 ERP projects May
2009
FAIM 2012 the Baltic
Open Source ERP Benefits
• Cost
– Blue-Star reengineered, switched to new open
platform
– Total investment $2.5 to 3 million
• Much lower than proprietary would have been
– Saved $100,000 to $150,000 per year
• Streamlined processes
• Updated best practices
• Eliminated third-party vendors
– Save $25 million in license & maintenance fees
Open Source ERP Benefits
• Agility & Scale
– Can modify, grow
– Paypal increased server farm to meet demand
• Linux enabled upward scalability
– Chicago Mercantile Exchange
• Switched to Linux
• 20% drop in time to process trades
• Higher customer satisfaction
Open Source ERP Benefits
• Quality & Security
– Constant testing & improvement
• Breaking Vendor Lock-in
– High investment in vendor software leads to
stickiness
– Open source avoids this
• Compiere maintains lift of available consulting partners
Open Source Risks
• ADOPTION NOT WIDESPREAD
• Licensing issues
– Often written by software engineers, not lawyers
– License-detection agents exist
• Competitive worries
– Any competitor can obtain the same system
– Can customize
• Expertise required
• Documentation
• Support
BUSINESS MODELS
1.
2.
3.
4.
5.
6.
7.
8.
9.
Cost sharing
Risk spreading (offer software free, share maintenance)
Loss leader
Widget frosting (have hardware vendors add your
software)
Give recipe, open restaurant (sell service)
Accessorize (give free, sell associated products)
Free software, sell the present (expiration date)
Free software, sell brand (sell validation tests)
Free software, sell content (fees for complementary
products)
FAIM 2012 the Baltic
Watson, Boudreau, York, Greiner & Wynn
CACM [2008]
1. Proprietary
Public cannot view source code
2. Open Communities
SourceForge.net
3. Corporate Distribution
RedHat, SpikeSource, OpenOSX
4. Sponsored Open Source
Apache Software Foundation, IBM (Sun)
5. 2nd Generation Open Source
Hybrid - corporate distribution & sponsored OSS
CONFENIS 2011 Aalborg
The Metropolis Model
Kazman & Chan [2009] CACM
• Crowdsourcing
– Both for software development, general business
• Move to service orientation vs. product
• Emphasize:
–
–
–
–
–
Crowd management
Separation of kernel content and peripheral components
Less formal requirements process
Focus on architecture
Many eyes testing
FAIM 2012 the Baltic
Yochai Benkler
The Wealth of Networks [2006]
Proprietary
Public
Intrafirm
Barter/Share
Rights-based
exclusion
Strict patent
enforcement
Romantic
Maximizers
Authors to
publishers
Mickey
Disney reuses
inventory
RCA
NonexclusionMarket
Profit from
selling
information
Scholarly Lawyers
Write articles
to get clients
Know-How
Profit from
lowering costs
Learning networks
Profit from
early access
(engineering
societies)
NonexclusionNonmarket
Joe Einstein
Los Alamos
Give away
Share ininformation for
house, gain
status
government
funding
CONFENIS 2011 Aalborg
Few
companies
create patent
pools
Limited sharing
Share with few
colleagues to
gain
comments
ERP’s Future
• SAP, Oracle prospering
– High end of the market will continue to be strong
– Upgrades
• Microsoft moving into SME market
– Very large potential
• International vendors finding niche
– Local advantages
• Open Source opportunities
– Parallel to Linux
– Related SOA/SaaS model
Conclusion
• Open source ERP projects are increasing
– Not all projects are highly structured
• Reluctance to use open source ERP in firm’s
core activities
• PROVIDES OPTION FOR SME
• VENDORS CAN USE TO REFINE THEIR SYSTEMS
– Open source an access to free labor
Spectrum
• Major vendors
– SAP, Oracle (BAAN) for large organizations
• Outsourcing
– Application service providers (EDS, IBM,…)
• Mid-range vendors
– Microsoft (Sage, Lawson, etc.) for smaller organizations
• Local vendors
– Country specific vendors (China, Korea, Taiwan)
• OPEN SOURCE
– Compiere, Nexedi,…
CONFENIS 2011 Aalborg