ERP Licensing perspectives - Confenis 2010


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Paper on ERP licensing, comparing the Free and Proprietary options

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ERP Licensing perspectives - Confenis 2010

  1. 1. ERP Licensing Perspectives on Adoption of ERPs in Small and Medium-sized Enterprises Rogerio de Atem Carvalho, Nucleo de Pesquisa em Sistemas de Informação (NSI), Instituto Federal Fluminense (IFF), Brazil Björn Johansson, Department of Informatics, Lund University, Sweden
  2. 2. Introduction • ERP systems experienced an implementation peak during the pre- and post-Y2K periods • After that period, the ERP market started to saturate and major ERP vendors started to seek for new business opportunities, in special towards SMEs • Increased interest on ERP versions for SMEs, on both the demand and the supply side, creating a recent movement towards simplified versions of P-ERP and FOS-ERP
  3. 3. The research question • It is clear that the merge of P-ERP, FOS-ERPs and SMEs is a multi- faceted topic yet to be more explored. • This article focuses on the licensing terms, which represent the most visible difference between the two kinds of software
  4. 4. A Framework for the exploration • The GERAM (Generalized Enterprise Reference Architecture and Methodology) framework provides a description of all elements recommended in enterprise engineering, providing a template to analyze ERP selection, deployment, and evolution
  5. 5. The GERAM framework
  6. 6. Analyzing FOS-ERP and P-ERP adoption - Concept • Involvement in customization tasks varies depending on the licensing terms – In the case of FOS-ERP, the adopter can contribute to a project, or at least making the necessary customization by itself – For P-ERP, the involvement comes in another shape, since they are often delivered under a partnership model
  7. 7. Analyzing FOS-ERP and P-ERP adoption - Requirements and Preliminary Design • Evaluating P-ERP involves comparing alternatives under the light of functionality, Total Cost of Ownership (TCO), and technological criteria. • In the FOS-ERP case other criteria related to FOSS in general, such as the maturity level of the project, its survivability, and its partner network strength, must be taken into account.
  8. 8. Analyzing FOS-ERP and P-ERP adoption - Requirements and Preliminary Design • In the case of P-ERP, best practices are built on top of many years of experience • FOS-ERP, being younger projects, offer less experimented practices. • In FOS-ERP, an adopter can use the modules based on standardized procedures - such as payroll - as is and for free; and then expend its resources on adapting solutions related to more strategic tasks
  9. 9. Analyzing FOS-ERP and P-ERP adoption - Requirements and Preliminary Design • In FOS-ERP the adopter must decide to behave as a simple consumer, only getting the solution from the vendor, or become a prosumer, by mixing passively purchasing commodity parts of the system with actively developing strategic ones by itself
  10. 10. Analyzing FOS-ERP and P-ERP adoption - Detailed Design and Implementation • In the case of FOS-ERP, if the adopter chooses to assume a more active role, more resources for getting knowledge on the platform and framework, developing and maintaining parts of it, and managing the relationship with the project community will be demanded
  11. 11. Analyzing FOS-ERP and P-ERP adoption - Detailed Design and Implementation • In FOS-ERP adopter can assume different grades of involvement for different parts of the system. For ordinary modules, let the community do the work. • For strategic modules, it can take an active role keeping the competitive advantage. • In P-ERP it is easier to keep parts of the system on secrecy, by properly contracting a P-ERP vendor; however, adopter will become vendor dependent
  12. 12. Analyzing FOS-ERP and P-ERP adoption - Detailed Design and Implementation • In P-ERP if the adopter decides to develop add-ons, it has to consider that it could be problematic in the future when new versions of the core product are released.
  13. 13. Analyzing FOS-ERP and P-ERP adoption - Operation • In the FOS-ERP case, during operation the adopter can decide at any moment, unless specific contractual clauses hinders, to shift to another vendor (of the same system) or to assume the system’s maintenance by itself • Also in FOS-ERP case, historically only commercially sponsored projects have the necessary maturity • In the P-ERP case the adopter exchanges independency on the software vendor for a high grade of support, depending on if the adopter chose to sign a service contract or not
  14. 14. Differences between Free and Proprietary ERP • On the economic side, the most obvious, is that the current lower TCO for both FOS-ERP and P-ERP open new opportunities for SME to become ERP adopters • However, lower costs can also mean that adopters have to deal with lower service levels • Entering the P-ERP partner network can be more expensive than entering the FOS-ERP network. • On the other hand, the P-ERP partner networks rely on more mature consulting processes and experiences
  15. 15. Final Considerations • Size of the company makes a difference. • For small enterprises, the SaaS model seems to be the solution, and the adopter must evaluate, besides the functionalities demanded, service levels and pricing, regardless the licensing model • For medium enterprises, if the company has enough resources and already uses other open source applications, it could consider an FOS-ERP solution, analyzing carefully the maturity of the project. • On the other hand, if the company does not have the resources or do not want to invest on customization by itself, and if it already uses – and is satisfied with a partner, it should definitely consider to stick to P-ERP, considering, again, whether a SaaS model should be adopted • However, an interesting finding is that FOS-ERP and P-ERP development become more and more similar