Case Study of Open Source ERP Evaluation in a Small Business

Case Study of Open Source ERP
Evaluation in a Small Business
David L. Olson
Jesse Staley
Department of Management
University of Nebraska - Lincoln
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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
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Open Source ERP Products
• Compiere
• OpenMFG
• Open for Business Project
• Tiny ERP
• Open Office
• OpenPro
Sourceforge.net listed over 1,000 ERP projects
May 2009
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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
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Small Business & ERP
• Raymond & Uwizeyemungu [2007]
Studied 356 small Canadian manufactures
– Internally predisposed – higher commercial dependence
– Externally predisposed – larger, more decentralized
– Unfavorable to ERP – more diverse customer base, low
networking
• Snider et al. [2009]
Five Canadian small business cases
– All needed to integrate legacy systems
– All needed scalable solutions for growth
– Successful project used consultants, external training
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Six Primary Risk Dimensions in IT/IS Implementation
Poba-Nzaou et al. [2008]
• Organizational
– Personnel, organizational structure
• Business-related
– Business process consistency & reliability
• Technological
– Information processing systems
• Entrepreneurial
• Contractual
• Financial
– Cash flow, licensing, upgrading
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Weld Engineering Technology Inc.
WETI
• Industrial automated welding systems
• Engineer to order manufacturer
– Each job different
• Major jump in growth
– Early 2003 old system inadequate
• Track sales
• Track parts
• Document work
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1st Round: Business Case
• Alternatives considered
– In-house development
• Had experience in software, but lacked time, personnel
– Primary vendors (SAP, Oracle)
• Owners had worked for large companies, saw horrors
– Low cost vendors (Microsoft, others)
• Great Plains, Sage, Infor Visual considered
• Average cost $60,000, rejected
– Off the shelf software
• QuickBooks, Microsoft Office Suite
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1st Round: Selected ERP Lite
• Price per user about $300
– Much lower than SAP, Oracle
• Provided basic inventory tracking, order
management
• Had MRP functionality
• Started with Microsoft Access database
– Could be upgraded to Microsoft SQL Server or
MySQL
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Systems Design
• ERPLite provided basic needs
• Would need additional software
• Microsoft Access database
• Support optional, inexpensive
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Bill of materials
Revision tracking
Work orders
Purchase orders
Sales order entry
Accounting
Inventory
MRP
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Decision
• Mid-2004
• Purchased 3 user seats
– Intended to buy more once system proved itself
• For a few months things worked well
• Testing went smoothly
– Limitations:
• Work order processing took too much time
• Overwhelming paper trail
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ERPLite Tradeoffs
• One positive feature was the ability to access
most of the source code with Visual Basic for
Applications
– Could customize easily
– Modified work order system
• But created problems in other parts of the ERP
• Maybe because WETI left on its own to decipher bast
practices for system optimization
– Modifications made it more troublesome to talk
to ERPLite
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Within 1 year
• WETI dropped monthly support
– Chose to pay on per case basis
– Meant they didn’t get bug fixes or patches
• In 18 months head of manufacturing dropped
work order system
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Accounting
• ERPLite didn’t meet WETI accounting needs
– Could integrate with COTS accounting software
– Used QuickBooks
– When Manufacturing dropped work order system,
accounting presented a problem
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Round One Results
• 4 years later only purchasing and sales quote
modules used from ERPLite
• Instead of integrated system
– QuickBooks
– Excel spreadsheets
– Separate Access databases
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Round 2
• OPTIONS
– Low cost vendors
– DBA Manufacturing
– Fishbowl inventory
• Rejected due to lack of functionality
– Mid-market ERP vendors
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Sage AccPac
Epicor
Made2Manage
E2 Shop System
Exact JobBoss
Infor Global’s Visual
M1
– Open Source
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Focused analysis
• Visual & M1
– Both claimed the functionality needed
– Spent a couple of months demonstrating
– Asked for bids on 10-user system with onsite
support and training
• Range $18,000 to $42,000
– Plus $5-8,000 for dedicated server & SQL database
– Owners rejected as too expensive
• WETI had just build modern manufacturing center,
automation project over budget and late
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Open Source
• Google search yielded:
– OpenBravo ERP – web-based
• Tested, looked good, but poor timing & owners rejected
– xTuple
• Head engineer had a friend who used in another firm
• Procurement, production, costs
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xTuple
• Offers 3 versions
– PostBooks free
• Support service charged
• Could upgrade to other editions
– Standard, Manufacturing editions have
commercial license
• Decided to try free version
– If looked good, could upgrade
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Implementation
• Installer downloaded through SourceForge.net
via xTuple project page
– Needed source code
– PostgreSQL database (open source, free)
– Report writer OpenRPT to query database
• Installation took minutes
• Tested on data available on SourceForge.net
Postbooks project page
– Assessed in a few days by 2 people
– Functional, easy to use
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Initial Application
• Owners never asked for approval
– Since it was free, they didn’t object
• After a month of segmented testing
– Populated database in batches
• Slow due to unstructured format
• Many missing data
• Within weeks, 750 to 1000 parts out of 16,000 entered
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Company Events
• Four months into data entry
– WETI sales suffered from recession
– Layoffs imminent
– 15% of WETI employees laid off
• Including Open Source developer
– Shortly thereafter the Head of engineering and
manufacturing left
• Thus the two project champions were gone
• No hard decisions made about continuing
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Conclusions
• Demonstrated the feasibility of Open Source
ERP
– BPR positive
– Several best practices adopted
– Could modify functions & reports (customizable)
• Time consuming activities
– Master parts list generation
– Updating BOM data for hundreds of products
– Organizing inventory
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Inferences
• Proof of concept
– OSS ERP Can Work
– Takes a great deal of effort
• New type of Systems Analysis
• Web search for components instead of programming
• Nothing is for free
– You have to pay for features
– OSS makes it possible to pay less
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