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Case Study of Open Source ERP Evaluation in a Small Business

David L. Olson Jesse Staley


Department of Management University of Nebraska - Lincoln

CONFENIS 2010 Natal

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

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 didnt get bug fixes or patches

In 18 months head of manufacturing dropped work order system

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Accounting
ERPLite didnt 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


Sage AccPac Epicor Made2Manage E2 Shop System Exact JobBoss Infor Globals 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 didnt 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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