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ERP for SMBs: Open source, proprietary or hosted

Open source expert Bernard Golden spells out the ABCs of ERP for SMBs.

Are open source enterprise resource planning (ERP) suites the right choice for your small or midsized business (SMB)? Open source expert Bernard Golden think it could be. Here, Golden compares the various ERP choices for SMBs and offers tips for choosing ERP software.

Golden, who serves as CEO of Navica Inc., a systems integrator based in San Carlos, Calif., is also the author of Succeeding with Open Source and the creator of the Open Source Maturity Model, a formalized method of locating, assessing and implementing open source software.

There is no inherent reason open source ERP cannot provide very rich functionality and scale well.
Bernard Golden
CEONavica Inc.

Would SMBs fare well if they chose an open source ERP product rather than one of the commercial alternatives?

Bernard Golden: The strengths of the large players -- global reach, sophisticated service arms, etc. -- are in some way a handicap for SMB customers. By this I mean [that their ERP] products assume a sophisticated IT staff, plenty of consulting money, time to develop customizations, etc. Those aren't the SMB reality, which is more cost-focused and has thinner IT staffs. The big players have attempted to address this through templates, etc., but it's not clear that they've solved this issue. Therefore, SMBs looking for more cost-effective ERP solutions may be well-served by open source.

Overall, most companies that have adopted open source ERP fall into the SMB category; however, I am aware of a few larger enterprises that have implemented open source ERP.

Are existing open source ERP suites scalable?

Golden: There is no inherent reason open source ERP cannot provide very rich functionality and scale well. Architecturally, there are no secrets in the software industry, so open source can certainly be architected and built to provide large-scale functionality. One has only to look at Linux to see that open source products can provide world-class features and performance.

The open source ERP projects I'm familiar with are fairly young and have been building out their functionality set. Most do not yet provide a level of functionality comparable to the well-known commercial products. But nothing stands in the way of them growing to have that capability.

What point solutions would an ERP package replace? What's better about a suite than point solutions?

Golden: Products that might be replaced by an ERP suite would be order tracking, materials handling, materials requirements planning, work progress, project status tracking and invoicing. For many customers, the app being replaced would be Excel.

The advantage of a suite, as opposed to a set of point solutions, is a common data structure, information sharing, and probably a better, more modern architecture. A friend whose business would be a good candidate for this type of product currently runs his business on an order tracking system that uses flat files. I didn't know there were any of these types of apps left in the world. [laughs]

If you ran an SMB IT shop, how would you determine whether you needed an ERP package?

Golden: First and foremost, I would understand what business I was in and the critical business processes by which we operate. Based on this, I would try and create a list of the required functionality to support those processes. I would look at the functionality I needed and evaluate whether ERP systems could provide it. I would look at information available about ERP, and particularly the systems I wanted to consider, to see if it seemed like a good fit for my business requirements. Then I would see if I could pick the brains of someone using the product whose business seemed similar to mine.


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If your SMB had few in-house IT resources, how would you evaluate an ERP package?

Golden: I wouldn't try. I would engage with an outside service provider that could understand my current infrastructure and applications and help me go through the process outlined above. Having people focused on this while trying to do their regular jobs means it doesn't get high-quality attention. Also, many times the regular resources are specialists in administration, not implementation, configuration and integration, which means they'll be in over their heads for those types of tasks.

When would outsourcing ERP to a hosting company be the best option for an SMB? When would it be the wrong choice?

Golden: Hosting can address the administration issues, such as keeping machines up and running, keeping apps up and running, doing backups, etc. Hosting can lower the cost of running the system. However, it can be difficult to integrate with a hosted solution. So, depending upon your need to integrate, this may present a challenge. It's very appropriate to use a hosted solution when you don't have talent on staff. However, keep in mind that hosting firms may be good at the technology, but not very good with the application itself.

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