In the next 20 minutes, we will take a brief look at ERP, some common perceptions and mis-conceptions, popular ERP applications, why it makes sense to look at Open Source when considering ERP, some common Open Source ERP applications, what to expect when you implement an ERP application, how to evaluate which ERP makes sense for your organization and some case studies. This set of slides are online at http://www.slideshare.com/venkatmangudi/open_source_erp .
Enterprise Resource Planning has its roots in Material Resouces Planning. MRP led to MRP2 which later became ERP extended by Computer Integrated Manufacturing. The term ERP was introduced by Gartner in 1990. ERP is technically an application that integrates the variaous departments in an organization and presents a consistent information to the senior management derived from the business activities. It is an amalgamation or at least two of the various departmental processes, mainly financial accounting, sales and manufacturing. Manufacturing : Engineering, bills of material, scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow Supply chain management : Order to cash, inventory, order entry, purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commission calculation Financials : General ledger, cash management, accounts payable, accounts receivable, fixed assets Project management : Costing, billing, time and expense, performance units, activity management Human resources : Human resources, payroll, training, time and attendance, rostering, benefits Customer relationship management : Sales and marketing, commissions, service, customer contact and call center support Data services : Various &quot;self-service&quot; interfaces for customers, suppliers, and/or employees Access control : Management of user privileges for various processes
A lot of people also think ERP stands for a big, expensive and time consuming project. And with good reason. ERP was a big thing back in the late 1990s and early 2000's. Everyone was implementing one ERP solution or the other. Early in 2000, a bunch of firms conducted surveys about ERP. A majority of them felt that they were not satisfied with their projects. The following examples are typical of the projects that failed from statistics available from The Standish group CHAOS database · The Hershey foods ERP system implementation failure led to massive distribution problems and loss of 27% market · The FoxMeyer drug ERP system implementation failure led to the collapse of the entire company · The IRS project on taxpayer compliance took over a decade to complete and cost the country unanticipated $50 billion · The Oregon Department of Motor Vehicle conversion to new software took eight years to complete and public outcry eventually killed the entire project · State of Florida welfare system was plagued with numerous computational errors and $260 million in overpayments · AMR Corp, Budget Rent A Car, Hiltons Corporation, Marriott “ confirm” project crumbled having spend over $125 million over four years · Snap-On Inc project to convert to a new order-entry costed the tools company $50 million in lost sales for the first half of 1998 · Greyhound Lines Inc. “Trips” reservation and bus-dispatch system” failed having spent $6 million But we have to remember that the software application itself is not the reason for these failures. Due diligence not done Overburdened staff Unrealistic deadlines Lack of change management We'll look at some more reasons in another following slide.
The logos on this slide are probably very familiar to you. These are commercial ERP and CRM applications that are available today. SAP was founded by 5 German IBM engineers in 1972. SAP R/1 was released in 1973. Lawson started building its ERP solution in 1975 JD Edwards, released its first complete business application in 1977, targeted mainly at Small and Medium enterprises. Larry Ellison started Software Development Laboratories (SDL) in 1977. He would later go on to change the entire ERP landscape. In 1978, Jan Baan, a dutch carpenter and business consultant, starts a financial consulting company. Customer pays with an IBM computer so he starts building his solution into software. In 1987, Larry changed the name of his company to Oracle. In the same year, PeopleSoft started selling Human Resource Management application. Later on, they built a comprehensive ERP and CRM solution. The industry is fraught with Mergers and Acquisitions. Quite a few of these companies are not around today. They have either been acquired, and sometimes re-acquired, or they have folded up and left. In India, as later as 1994, when I was working with Ashok Leyland, the most powerful application was the MRP 2, manufacturing resources planning, running on an IBM ES 9000 mainframe.
Open Source ERP has the following advantages over its commercial counterparts. You have the flexibility to change the application as suitable to your organization because you have the source code. It is usually written in one of the popular programming languages which means that you can find programmers to maintain it rather easily. No more expensive SAP and Oracle training needed to maintain and use your ERP. You can be very sure what the software can and will do. There is no hidden code that can cause potential issues. Another important aspect, not the most important one in my opinion, is that the cost of these ERP applications is usually zero. This does not mean you will have an ERP system with no cost. What you will save on are your recurring license costs, additional costs for hardware and software as well as their upgrades. The cost of experimenting with an ERP is lower with Open Source and if it does not work out, you can always go with another solution.
The applications listed here are Open Source ERP and CRM applications that are popular. In no particular order Project Open is an enterprise project management system that rivals SAP Projects, Oracle Project Portfolio Management and MS Project Server in functionality and features. It is built on a very stable platform known as OpenACS that uses timetested technologies to deliver great functionality. OFBiz is an application framework with built in modules for covering most aspects of the ERP. It is probably the oldest of this lot, with its beginnings in early 2001. Opentaps is a fork of OFBiz and has many enhancements including a pleasing interface and Business Intelligence built into it. Compiere is another very old Open Source application. One of the drawbacks of Compiere is that it is a client server application, as opposed to the now ubuquitous Web based software. Openbravo is another very popular Open Source ERP application. It has been acclaimed as the application with the most downloads on Sourceforge. It has a pleasing interface and is quite popular here in India as well. In fact, I am replacing a speaker from Openbravo who had to reschedule his plans suddenly. Adempiere, is a fork of Compiere. When compiere's developers disagreed with some of the policies of the company behind Compiere, they decided to create their own version of the application. OpenERP, used to be known as TinyERP, is another popular Open Source ERP application written in Python.
Whether it is Open Source or not, here is what you need to expect from an ERP implementation. ERP Implementation will modify/refine your business process in many cases. Using an application package means getting to use some business practices that have been deployed worldwide as well as the services of consultants who can guide you. No ERP software can be implemented without configuration. Customization is expensive, configuration is not. You have to understand the difference between the two and investigate how much flexibility is allowed in the application. Over and above the cost of the software license, you will have to pay for hardware, other supporting software, implementation and an annual fee for support/upgrades. In almost all of the projects mentioned earlier (that failed) the following key factors were the cause. Continued investment did not yield the anticipated result Project champions resigned due to inability to meet stakeholders' expectations Sr Management support was critical, it was not available as desired The consultants were expected to deliver the magic bullet that will solve all their problems Change management was not effective, in some case non-existent Consultant did not understand the business fully, dont expect them to finish implementation in 1 week if you want it to work well with your business Multiple vendors will lead to finger pointing and blame game, try to avoid it.
Total Cost of Ownership – rememeber that you also pay for hardware, operating system, firewall, database and other software needed to keep your ERP up and running. You also need to keep in mind that the software is outgrowing hardware rather quickly these days. Customization – How much customization is needed to make the software usable in your organization? How easy is it to customize it? Project Development Activity – Is the project being developed actively? Are the developers listening to the users in adding features/functionalities? Functionality – Fit/Gap - How much of the application fits your needs? If an overwhelming majority are gaps, move on. Open Source Community Support – In the case of Open Source and frequently in the case of commercial software as well, the community is probably going to be make a huge difference in making the ERP a usable system. Production Readiness – Is the software ready to be used in a production system or does it have inherent flaws or weaknesses? Integration capabilities Knowledgeable consultants User Experience Return on Investment Data Migration Speed of Implementation Configurability – Is it configurable, or do you have to resort to customizations Ease of upgrades, especially with customized code