Open Source Think Tank 09 - Business Case "Open Source for SMBs"
Image by The Library of Congress via Flickr
This business case was really interesting as it’s involving an actual software user and a critical environment of deployment.
Company “A” is a medium-sized manufacturing company who needs to upgrade their enterprise software to better conduct business with partners, vendors and customers through a more seamless sharing of data and user friendly interface. Company “A” would like to remove a large dependency on a single vendor and is willing to take some risks to lower costs and reduce vendor lock-in, but is not sure how to weigh the risk vs. rewards of a different approach using multiple smaller open source vendors or how to direct/influence their principal integrators or solution providers to support that route. Company “A” wants to keep control of the solution, and therefore has decided to keep the solution in house, not hosted at a remote 3rd party vendor site.
Our group was pretty diverse: two large vendors (open source and proprietary), three small ones (open source) and a "top-CIO", which made the discussion interesting...
First recommendation: don’t start with this! ;-)
It’s pretty tough to start implementing Open Source with your ERP when you’re a manufacturing company. Start with less critical systems to get skilled, refine and assess the process.
But well, the business case is here, so okay… let’s take the challenge. ;-)
A. Can open source change the way enterprise software (especially ERP) is evaluated, deployed and serviced? Suggest one approach company “A” can take to utilize smaller open source technology components instead of purchasing the majority of the software solutions through a single vendor. What are the first 3-5 things to do to support your approach?
Open Source can certainly change how the software is evaluated. Just because it opens new horizons, risks and possibilities. As any other business innovation, basically…
So here is what we think are the must-does:
Get someone skilled on board, be it an external consultant or an internal resources. You need someone to guide this process and avoid the obstacles. He/she needs to be knowledgeable is all aspects of the project: business case, it projects, open source. Or build a team to merge all those skill if the project if big enough.
Get an Open Source Policy and a Common Infrastructure Stack: either you want to start an integration work for your ERP or take an OSS platform, you need an OSS policy (licensing, contribution, etc.) and a “standard stack” (what are the core tech choices: you don’t want a tech mashup instead of a well engineered tech stack) of components to guide the RFPs and/or your tech team in their choices.
Take care of Open Standard and software architecture: if you start integrating components, it’s the right time to make sure you’re building on open standards and on a well-defined and well-engineered software architecture. If you choose a platform, it helps too anyway. [Personal note: it should be the case regardless the open source or proprietary nature of the software. It’s just a good practice for your organization.]
B. Typically, mid-sized companies deploy the technology their SI or solution provider recommends. What are the top three (3) things a mid-sized company could do to incentivize channel partners (SIs, solutions providers) to accelerate development and deployment of enterprise solutions based more on open source components?
Well, money is usually a good incentive… ;-)
Explicitly ask in the RFP to have — at least — an alternative technical platform leveraging open source software
Constraint the budget allowed to license fees. In the worst case you’ll get a better deal on license costs. In the better, you’ll spend less and more wisely: actually adding real value (that actually matters to your business) to the software. And the SI will think it’s good for him because he’ll get more on implementation and support.
Highlight that developing an open source skill in its existing practice will give him a competitive advantage compared to other SI. And other company of your field might also consider this way if your experience is positive.
C. Are the decision factors and priorities (e.g., acquisition costs, vendor lock-in, maintenance costs, risk of software failure running the business, risk of vendor going out of business, etc…) the same when comparing traditional ERP solutions vs. multiple, open-source based software solutions? If different, name the top 2-3 factors that would be prioritized differently.
Well, from a business perspective, it’s alway a balance between cost, gain and risk. From that perspective, it doesn’t change actually. But there is new factor you need to take into account:
Check the community size and the actual software adoption in the world. This give resilience to the open source software. This resilience is a protection from vendor failure (or acquisition) you wouldn’t hope for proprietary actors (small and big). If the main vendor/maintainer fail and there is a market for support and innovation around this software, the market will do its work and players will propose services and maintenance. The community is key here, it gives you a way to be sure of the resilience the software will have, hence drastically reducing the vendor lock-in.
Assess that the SI can actually deliver support for the software. Require he gets the right contract from actual maintainer of the core software. You don’t want to be stuck because the software has a bug and the SI cannot deliver the right skills to fix it. Open Source Vendors exists for a reason. ;-)
Benefit from the speed of innovation you can get from open source: influence the roadmap, ask for generic features to be contributed back on the main code line (hence reducing the specific code you’ll maintain), understand how you can benefit from ongoing work on the software.
D. Is a SaaS model always preferred for an SMB company looking to utilize open source enterprise applications due to the high risk integration costs? Under what circumstance would SaaS NOT be a preferred alternative for an SMB with similar dynamics?
General answer: don't seem to be interesting for the case, but would need to dig into it. And it would require a complete business case only for this.
One key point, though: do not loose the flexibility of the software and the control on your data that the open source approach is giving you.
[Personal note: using SaaS for your core ERP does not make sense to me except if you don't need customization and flexibility and that your completely trust the provider to not loose / keep your data.]
Done! :-)
I tried to represent what was said. If I forgot something, comment. And if you have reactions to those results: same.
Happy implementation!
EB.
Subscribe to Feed
Follow us on Twitter
I'm Éric Barroca, CEO of Nuxeo, a leading open source software vendor, which develops a complete Enterprise Content Management (ECM) software platform to help companies better produce, process, publish, archive, expose and find their information from digital assets to transactional documents.
