Average rating: 3.5 (from 180 votes) By Open Source Is a Benefit, Not a Reason to Choose an ERP Solution Open source software delivers the tools that dominate the Web and run much of everything we call the cloud. But despite ubiquitous acceptance of open source databases, operating systems and development tools, are business and technology leaders ready for open source ERP applications? This is a question where the answer lies in a steady transition and market movement that is clearly picking up steam. Business and technology leaders are evolving their acceptance and even preference for open source software in a steady progression up the technology stack from operating systems, to databases, to programming tools, to reporting tools and now to business software applications. For example, has become an extremely popular CRM software solution, counting more than 1 million users in over 80 countries, 170,000 paid subscriptions, 30,000 registered developers, 1000 projects on SugarForge and 400 VARs on five continents. The company has even acquired some of the biggest customers in the technology industry, such as IBM who displaced Siebel in favor of SugarCRM for its 80,000+ sales and marketing staff. But in the ERP software industry, there is no open source ERP market leader recognized by buyers, or even a popular Go-To ERP vendor that is seen as equivalent or competitive with commercial ERP systems such as the Microsoft Dynamics products or Sage ERP products.

But this is beginning to change. Has been delivering ERP software since 2001, when it originated as OpenMFG and delivered a manufacturing software solution designed for small businesses. In 2007, the company changed its name to xTuple, expanded its application design to the broader ERP industry and delivered its first freely downloadable open source ERP software, called PostBooks. It’s a company that doesn’t get much visibility among ERP buyers, but should as it offers a very viable option particularly for inventory carrying SMBs. I’ve followed this company for several years, recently spoke with some xTuple customers and today had a meeting with Ned Lilly, the company’s President and CEO. From this briefing and customer conversations, I learned some new stuff, and in typical fashion will share much of the most salient information in a summary list of benefits and limitations.

XTuple Benefits. Target Market—This solution generally meets the business objectives, software requirements and budget constraints of the small and midsize business (SMB) market. The ERP application supports inventory-carrying organizations particularly well, and in many use case scenarios is superior to even the leading commercial ERP vendors in the same market space. Feature Rich—when reviewing the xTuple software, I was impressed to find such as strong combination of broad and deep feature sets. The scope of the three commercial applications (Standard, Manufacturing and Enterprise) delivers progressive levels of functionality for various needs. The UI is a bit dated (more on that below), but the overall capabilities are impressive, making the application more of a work horse than a show pony.

Strong Flexibility—The combination of a highly configurable ERP application and an open source foundation deliver robust flexibility. The company clearly pursues a ‘do it your way’ approach. This is a welcome offering in an industry that often has no reservation in telling its customers to change their business processes to accommodate their ERP software. Simplicity—There’s generally an inverse relationship between ERP functionality and ease of use. However, in this case, xTuple was easy to install, straight-forward to configure (particularly if you’ve deployed ERP software before) and very easy to use. Lowest TCO—When using the ERP software as intended (i.e.

Within its constructs and without software customization), xTuple offers the lowest acquisition cost, a comparatively low implementation cost and overall lowest Total Cost of Ownership (TCO) in the ERP industry. Solid Technology—The company uses the PostgreSQL database, Linux operating system, Qt framework for application development and standard HTML5/javascript at the presentation layer. It’s a cross-platform, server-centric, thin-client solution that shares a common code base across the different editions, and for both the commercial and open source versions. Because the code base is the same for each product (the products just turn on or turn off different levels of functionality) upgrading from the open source solution to the commercial product is a simple process.

It’s also important to note that the freely available PostBooks open source product is a legitimate ERP solution for small businesses, not a ridiculously scaled down solution intended to force the commercial products (aka crippleware). Customer Choice—The ERP software offers choice in delivery (cloud or on-premise) and purchase (subscription, annual license or perpetual license).

Cloud Portability—Taking customer choice a step further, xTuple supports cloud ubiquity and portability. The company uses Amazon for its own customer hosting, but customers are not locked in to a single cloud, and in fact, may choose among multiple cloud providers based on the delivery services most important to them (i.e.

Data center proximity, information security, data privacy, Service Level Agreement (SLA), hosting price or third party certifications such as ISO 27001 or SAS70/SSAE 16). Being able to change cloud providers on demand also lowers the cost of exit and better achieves investment protection. For example, customers that have extended their ERP software investment with custom programming, mash-ups or proprietary firmware are able to take and reuse those investments to the cloud of their choice.

Transparency—ERP buyers are making long-term commitments, and clearly desire long-term partnerships. To that end, ERP buyers prefer suppliers that are transparent. XTuple shows transparency in its community forums, blogs and even ERP pricing published on its website. It’s a welcome change in an industry known more for sales gamesmanship and less for transparent business practices. Open Source ERP Market Mover—With the downfall of Compiere many questioned the viability of open source ERP software solutions. Fortunately, xTuple has reassured the market that open source ERP systems are indeed viable and in many cases superior to commercial ERP products. Growing Channel—The business partner channel is small by open source standards, but application vendors generally attract lower volume but more serious business partners.

The xTuple channel is still in need of growth, but includes some impressive partners and is clearly making steady progress. XTuple Limitations. UX/UI—The user interface (UI) is straight-forward and intuitive, but also born from the 1990s. The application has yet to leverage consumer technologies or create a presentation layer that delivers a rewarding user experience (UX).

Lack of Market Visibility—Despite an impressive product and a good story to tell, few mainstream ERP buyers ever come across xTuple. Instead the product is largely found by open source or technology enthusiasts, which make for great customers, but represent a very small slice of ERP buyers. Not so Strong CRM and social CRM—As is the case with many SMB ERP software makers, the CRM software is more of a contact management system than a robust CRM application.

The CRM software also lacks social CRM capabilities. SaaS Architecture Limitation—While the xTuple underlying technology is strong, the one factor which may pose limitations is the lack of a multi-tenant database architecture. This is more of a limitation for cloud ERP customers as single tenant hosted apps tend to struggle more in releasing upgrades, fixing bugs or performing software maintenance, optimization and the like. Whether the increased provisioning and maintenance challenges will become a hindrance as xTuple acquires more cloud customers remains to be seen. Weak ERP Cloud—xTuple is available as a solution replete with subscription pricing and hosting from Amazon or one of the other data centers used by the company. However, cloud services are minimal and key cloud components such as a Service Level Agreement (SLA), online status site (aka Trust site), hosting certifications (i.e. SSAE16 or ISO 27001) and robust ecosystem of integrated third party cloud products are all absent.

The company’s cloud delivery is less of a focus and more of an add-on option. ERP buyers seeking more assurance in cloud delivery have the option to procure the software and host it in the third party cloud of their choice, thereby achieving delivery goals but also bearing some of the software hosting maintenance that remotely hosted SaaS solutions otherwise relieve.

Disruptive Technologies Laggard—ERP is mature market and many ERP buyers believe a commoditized market. Innovation in ERP software is less about new functionality, and more about leveraging disruptive technologies such as cloud, mobile, social, big data or Customer Experience (CX). While open source itself is a disruptive technology that xTuple is clearly harnessing, the company is much more of a laggard than a leader when it comes to others. In fairness, xTuple does offer an HTML5 mobile solution but its late to market and not of the same caliber as many commercial ERP system competitors. Lacking Leadership Motivation—xTuple is content in its role as an underdog and lacks the will to achieve a market share leadership position. While its growth is impressive, it’s not advancing in a way that will ever approach the market share leaders.

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And while it is arguably the open source ERP leader, that designation and $4.25 will get you a latte at Starbucks, but won’t grow the business in and of itself. Open source is a compelling attribute of ERP software, but not a reason buyers choose an ERP system. The ERP application must be able to accomplish the buyers business objectives first and foremost, and only then does open source factor into subsequent decision making.

Those few buyers that are looking for open source as the primary factor in their ERP selection, are really just looking for free software. A slow growth, non-venture funded, far from Silicon Valley company will both appeal to some ERP buyers and be shunned by others. Ned Lilly tracks ERP vendors of days gone by and shares his musings at. I’ve also watched ERP publishers rise and fall for 25 years, and interestingly it hasn’t been difficult to predict the winners and losers. There’s a lot to consider in evaluating ERP makers, but at a high level it comes down three things—People, Product and Promotion.

And you need a combination of all three to survive, and an optimal combination to thrive. Customer comments and industry peers lead me to believe xTuple has some very smart people on board, in fact I suspect they’re much smarter than most. The product is feature rich, flexible and well designed for its target market. In a product shoot-out, xTuple will hold its own with just about any commercial ERP application in the same market space. Promotion is a different story. The company lacks a brand recognition, which means even when it’s found by an ERP buyer, the lack of brand confidence creates an apprehension or caution which doesn’t bode well for the company. More so, in my monthly tracking of the top 20 ERP systems, xTuple has only recently made the list, which is great, except that when those ERP buyers were questioned about why they’re considering xTuple, there was no singular or even common response given, suggesting that messaging in terms of value proposition, competitive advantages, and differentiation is not yet resonating.

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I believe this company is on the cusp, literally at a tipping point where they can rise to be viewed favorably with the commercial ERP systems, or relegated to a lifestyle company supporting an ERP product found because of its low price entry point. Competing on price in the business software industry is a no win proposition and unsustainable.

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While I don’t think Ned will be updating his ERPgraveyard website with his own company any time soon, if ever, without a serious step up in promotion, the company does run the risk of flying under the radar during a time when competitors are growing their businesses and increasing market share.