Open Source, BI and ERP: A Match Made in Heaven?

Open source technologies may not be taking over the world, but they are finding a niche and a large one at that. To be sure, companies large and small are becoming more comfortable deploying open source technologies on the server.

Now, an an increasing number of firms are looking into the possibility of mission-critical Enterprise Resource Planning (ERP) and Business Intelligence (BI) solutions, according to analysts.

Experimenting, Embracing

ERP is an information system that integrates all departments and functions across a company into one computer system. ERP runs off a single database, enabling various departments to share information and communicate with one another. BI software is used to mine data.

It’s not just end users who are embracing open source ERP and BI, either. ERP vendors are also experimenting with open source technologies. SAP and Oracle are looking to Linux to drive down the total cost of ownership, and support for Linux and JBoss application servers is becoming commonplace, according to IDC analyst Albert Pang.

“There have been so many flawed implementations in the past and people were overspending and missing deadlines with ERP systems,” Pang told LinuxInsider. “Open source projects are coming in to reduce the headache associated with building this large infrastructure for an ERP system.”

Ready for Prime Time?

When new technologies come to market, there is typically a steep pent-up demand, and adoption rates can grow dramatically in a short period of time, analysts said.

There is no question that open source ERP solutions will steal some market share from traditional software applications, especially those written in C++ or even Java, Pang noted, when there is a critical mass of developers willing to enhance and innovate around the technologies.

The question is, are these open source ERP and BI solutions ready for prime time now?

The Cost Factor

Open source can be a natural fit, particularly with small- to mid-sized businesses, because the business model surrounding it has changed, according to Rick Mortensen, CEO of MarvelIt, an open source BI software developer.

“Small- and medium-sized businesses typically ignored ERP and BI implementations because of the high costs,” Mortensen told LinuxInsider. “Now, because of lowered software and support costs, SMBs can afford enterprise type functionality.”

Other philosophical and practical reasons to employ open source ERP and BI products include the ability to modify source code and community-based maintenance and support, he said.

Open ERP’s Obstacles

Open source is suited to any domain where there is a baseline of generic functionality that applies to a broad range of industries, along with a community of technology experts willing to participate in the open source process, said Joshua Greenbaum, principal analyst at Enterprise Applications Consulting.

“ERP is not generic. There are vastly different implementations that are closely configured for individual companies, and, more importantly, the number of domain experts out there who could be tapped to build open source ERP is limited,” Greenbaum said.

There is a tremendous amount of money in the ERP world today as well. Consultants and programmers are well paid and have little incentive to jump on the open source bandwagon, Greenbaum said.

ERP Maintenance and Support

What’s more, open source products may lack the feature set of a comparable commercial software product, or the level of vertical integration that other commercial software products may tout, Mortensen admitted.

“Open source software [packages] may be difficult to run and support as they may lack the popular support of system integrators and professionals that traditionally cater to commercial vendor software products and services,” he said.

That means the cost of maintenance and support could supercede licensing costs over time if the in-house IT staff does not have the expertise to run the software.

The Growth of Open Source ERP

Even without scads of developers contributing to open source ERP projects, AMR Research reports that deployments of ERP on Linux grew about 9 percent from 2003 to 2004. As a whole, ERP on Linux makes up about 1 percent of the ERP market today, the firm estimated, but that number is expected togradually grow. IDC estimates that overall market for non-proprietary ERP applications will hit about US$36 billion by 2008.

“When the industry leverages XML standards more extensively, it will spread support issues out over a larger set of technology vendors and the initial investment will be kept to a minimum,” Pang said. “That will have a bigger impact on the market than just one project trying to deliver an open sourceERP system that may or may not address the need of millions of customers.”

In other words, open source ERP has a long way to go. Still, there are plenty of players attempting to take it there, including Compiere, ERP 5, OpenMFG and Fisterra.

“All three projects have a lot of potential and a wide range of features, but they probably need to spend some more time in making the tool user-friendly and appealing,” Geert Claes, a business consultant with Information Technology staffing and solutions firm CTG, told LinuxInsider.

Open BI: A Different Story

BI is a slightly different animal than ERP because there is a certain base level of functionality: to extract data from databases and offer an analytical report. There are plenty of developers and implementers who have shown themselves willing to participate in the open source process.

“If you want to build BI tools specific to the pharmaceutical or oil and gas industry, then you are back to the ERP scenario where not many experts are available,” Greenbaum said. “But the basic reporting tool works very well in the open source model.”

Commercial BI software and related consultancy services are high-dollar propositions, so upfront cost-savings are quickly realized, Claes added.

Open source BI projects from Red Hat and JBoss do away with the licensing fee, but still generate revenue from consulting, support and training to customize the software for a company’s specific requirements. Once again, that means that obviously open source is not necessarily a free lunch.

Targeting Small Businesses

“[Open source] BI software is not mature enough yet to be widely adopted by large corporations. Small- and medium-sized businesses that can afford to enter the BI space are early adopters. As the open source BI projects get more and more mature, it will start to put pressure on the big boys like Cognos and Hyperion,” Claes predicted.

Pentaho is one of the highest profile open source BI projects, and one that analysts suggest keeping a close eye on. The core team at Pentaho is made up of technology experts with experience creating successful BI products for top-tier commercial vendors, like Business Objects, Cognos, Hyperion, IBM, Oracle and SAS.

Greenplum, JasperSoft and Kinetic Networks released the core of a complete open source BI stack in August 2005 available through the Bizgres Project. JasperSoft also offers an application called JasperReports, which has been downloaded more than 1 million times.

“Products like JasperReports allow organizations committed to open source to extend that commitment to business intelligence,” said Eric Rogge, vice president and research director for Ventana Research. MarvelIT and Actuate are also gaining attention in the open source BI space.

The Test of Time

Willing community of experts or no, open source ERP and BI applications are not poised for greater market penetration someday in the near future. While these applications may be revving up to generate a buzz today, there are yet too many uncertainties and instabilities for larger corporations to adopt them, IDC’s Pang said.

“Open source ERP and BI applications have not stood the test of time. These are fairly new products that may or may not meet industry specific requirements,” Pang said. “It may make sense to experiment with open source if your legacy system maintenance fees just keep rising. But you have to lookat all of these factors before you take the plunge into open source.”

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