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Enterprise Resource Planning (ERP) packages are available both freely distributed forms and commercial forms. The freely distributed ERP packages are known as open source ERP solutions. Under the GNU General Public License (GPL), these packages can be used for individual and commercial purposes totally free of cost.
On the other hand, the custom proprietary ERP packages require the purchase of licensing and they are quite expensive. However, they are far superior to the open source ERP packages in many respects. Let's make a comparative analysis of open source and custom ERP packages.
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Downsides of Custom Commercial ERP Packages
Custom commercial ERP packages are ideal for large corporations. However, these packages are not too flexible. They are finely tuned to certain specifications, and altering them may lead to loads of trouble. Unforeseen bugs could arise on account of these alterations, and vendors like Oracle Corporation refuse to provide support whenever you make any customizations or changes to the standard ERP package provided by them. It is possible to request the vendor to carry out necessary customization, but it is going to cost you extra.
The deployment isn’t easy, and generally the employees need to be trained to help them understand how to use these commercial ERP packages. Such packages are also alleged to come with plenty of hidden costs, including the need for extra licenses for additonal computers.
If the size of organization is too high, bulk licenses can turn out to be a lot cheaper. If you have 100 computers or more, purchasing a bulk license may be double the cost of purchasing a bulk license. However, one of the good things about custom ERP packages is the sheer fact that vendor provides free support for the package.
The level of dependence on the ERP vendor is very high. The largest ERP suite is Oracle e-Business Suite, offered by Oracle Corporation. This package is highly comprehensive including HRMS, Inventory, Sales, Purchase Orders, and everything else that you may need. While it improves the productivity of an organization and helps in easier management, at the same time it is definitely one of the most expensive ERP packages.
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Open Source ERP Pros
Having seen the downsides of custom ERP packages, let's consider the benefits of the open source ERP packages.
Negligible Investment and Maintenance Costs
Of course, this is the biggest advantage of open source ERP packages – you get everything totally free of cost! It hardly matters if you use the package on 10 computers or 1000, you don’t need to spend even a single penny out of your pocket!
There are no hidden costs involved and there’s minimal dependency on the ERP vendor.
Training is Easy
Open source ERP packages are available not just free of cost, but also with complete licenses, comprehensive documentation and user manuals, allowing the users to learn and understand their usage on the fly. You don’t need to spend a whole lot of time and money on training your employees just to use the package, and necessary modifications can be made to the package as per your needs.
This is something that even the best commercial ERP packages lack! Indeed, it is not possible to make even minor changes to the custom ERP packages, while you’re totally free to make changes to the open source ERP packages and fine tune them as per your business requirements.
The implementation can also be carried out separately without disturbing the regular operation of the business. Moreover, the open source ERP packages require considerably shorter implementation time, which is another big positive aspect.
No Dependency on ERP Vendor
As mentioned earlier, the open source ERP packages have minimal vendor dependency and everything is clearly mentioned in documentation and user manuals. So, you don’t need to wait for your ERP vendor to come and fix the issue. A good programmer should be able to get the job done within few hours easily.
The productivity and accuracy is high in the case of open source ERP systems. On the other hand, the failure rates are often discovered to be on the lower side in comparison to commercial ERP packages.
Except a very few (the very best and the most expensive ones), most of the commercial ERP systems are tested to a decent extent, but still are many security flaws, traps, pitfalls and loop holes, which are easily harnessed by the hackers.
On the other hand, the open source ERP packages are thoroughly tested and 99% of the bugs are reported by the open source users in the process of development. Of course, nothing in this world is perfect, but the open source ERP packages are nearly perfect and very hard to break through, in terms of security loop holes.
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Continuing our discussion of Open Source ERP Pros and Cons, it is time to make a comparative analysis and see what open source ERP packages lack and what's the secret behind popularity of custom ERP packages.
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Open Source ERP Cons
Lack of Dedicated Support from a Specific Vendor
Despite all of the benefits of open source ERP packages, there is no dedicated support provided by a particular vendor. This is why many of the folks are still inclined towards the custom ERP packages. They fear the failure of open source ERP package during crucial stages of a project. Just as a guarantee is always good to have on anything, though you may never require it, dedicated support available with the custom ERP package are the driving force compelling folks to shell out big bucks on licensing costs.
Compatibility Issues with Proprietary Packages
Some of the open source ERP packages are incompatible withthe proprietary products of certain corporations like Microsoft, Oracle, or IBM etc (sometime due to variation in platform used for implementation).
Integration Issues with Custom Third Party Apps
Even if the open source ERP packages are compatible with certain other proprietary products, the vendors usually don’t provide support for problems occurring during integration of the open source ERP packages and their custom commercial application. So, custom third party apps can’t be integrated easily with open source ERP packages.
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The Bottom Line
Due to the sheer fact that several unbelievably productive, efficient and highly secure open source ERP packages are not yet well recognized in the market, most of the customers are still prepared to shell out big bucks on custom commercial ERP packages.
In this recession hit economy, open source ERP packages are definitely the way to go for small to midsize companies, and even the large corporations can cut maintenance costs by making use of these brilliant packages.
It is only ignorance, fear of unexpected failure of open source ERP packages during crucial stages of multi-million dollar projects, and lack of recognition of open source ERP packages in the market that is holding them back from dominating the market. But, as the level of awareness increases and the mentality of customers changes, things may turn the other way round soon enough!
However, lack of support from a particular vendor is something that the open source ERP packages badly lack, and compatibilty issues with other custom third party apps are one of their biggest turn-offs.
Here's an insight to some of the popular open source finance packages and ERP solutions.