Huynh and Pinto Sat, Nov 7, 2:00 - 2:25, Ballroom B

Open Source ERP Applications: A Reality Check for Their Possible Adoption and Use in Teaching Business Process Integration

Minh Huynh Southeastern Louisiana University [email protected]

Ivan Pinto Southeastern Louisiana University [email protected]

Abstract

For years, there has been a need for teaching students about business process integration. The use of ERP systems has been proposed as a mechanism to meet this need. Yet, in the midst of the economic crisis, it is difficult to find funding for the acquisition and implementation of an ERP system for teaching purpose. While it is recognized that the use of ERP systems might provide a variety of benefits in a business school curriculum, how could business schools overcome the limited resources in order to bring in and integrate ERP systems into their business core classes? This paper explores the potentials of open source software with a focus on open source ERP applications. It describes the development of the open source movement, the emergence of open source ERP software, and the selection and evaluation of two specific ERP applications. Although one of the major incentives for adopting open source software is the absence of license fees, this paper, however, cautions that there are other costs to be considered in the adoption of an open source ERP software and in its implementation process.

Keywords: ERP, Openbravo, xTuple, enterprise system, business process integration, open source, open source ERP applications

1. INTRODUCTION disciplinary silos and achieving a higher level of integration. (Johnson, et al., 2004) Over two decades ago, business educators recognized the need for a curriculum change One of the promising ideas is the proposed that would allow graduates to gain an use of ERP systems as a mechanism for integrated understanding of business business curriculum integration. It is processes. (Porter and McKibbin, 1988) observed that the implementation and use of Accustomed to the traditional view of seeing ERP software force firms to become procurement, manufacturing, and integrated enterprises. This, in turn, distribution as distinctive functions, students demands that these firms have strong often have trouble in understanding how all understanding of key business processes. different processes from various functions (Hammer, 1999) For years, companies have are interconnected into an integrated recognized the importance of enterprise- enterprise system. In response to this need, wide information systems, because a number of curriculum redesign ideas were enterprise systems are the main enabler for proposed, all aimed at removing the companies to integrate information across operations on a company-wide basis. As

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Huynh and Pinto Sat, Nov 7, 2:00 - 2:25, Ballroom B expected, enterprise systems are deployed growth. The next two sections respectively by businesses for the purpose of improving describe an emergence of open source ERP efficiency, data sharing, and decision- solutions and explore two specific open making process. The effectiveness of ERP source ERP solutions currently available in systems as an integrating mechanism in the market. In the fifth section is the business suggests that the use of ERP sharing of the authors’ experience in the trial software in teaching core business courses implementation of two specific open source might help students to achieve a strong ERP applications. The paper is concluded understanding of key business processes with the author’s final thoughts along with and the practice of the cross-functional practical implications for those interested in integration. In an educational context, it is adopting and using open source ERP for use observed that students often struggle to in teaching. understand how all different components and processes of an integrated system fit 2. OPEN SOURCE SOFTWARE together. In this respect, the use of ERP DEVELOPMENT AND GROWTH software might provide a missing link that could be used as an integrating mechanism Open-source software as defined by in business college curricula. (Johnson, et Wikipedia refers to computer software al., 2004) available with its source code and under an open source license. Such a license permits In the midst of the global economic crisis, anyone to study, change, and improve the like any other organization, business schools software, and to distribute the unmodified or around the country are facing greater modified software. The idea of open source demands from various needs and yet the software can be traced back to the early resources to meet those needs are development of computers during the early increasingly dwindling. The funding for 1950s. At this time, because the focus was academic enhancement projects is drying up more on making hardware saleable, quickly. While it is recognized that the use computer manufacturers such as IBM would of ERP systems might provide a variety of give away their software in both source and benefits in a business school curriculum, objective code form virtually for free. how could business schools overcome the (Campbell-Kelly, 2008) The idea was to limited resources in order to bring in and allow these hardware buyers to use the integrate ERP systems into their business software code to develop their own core classes? More specifically, the applications. To develop software challenges to those who want to use ERP as applications, these hardware buyers needed a mechanism for business curriculum either a team of in-house programmers or integration are (1) what ERP applications to outside companies with specialization in choose from, (2) how to get them up and programming. The development of software running, and (3) what to do to integrate applications was capital intensive, because their use in core business classes under a writing software code required tremendous severe budget constraint. amount of investment in terms of time, skill resource, and money. (Campbell-Kelly, Could open source ERP software provide a 2008) Soon, software-product companies solution to these challenges? Exploring the were formed and they quickly realized that viable answer to this question is one of the they could not just give away their software. motivations for this paper. Our main goal is Because software was relatively easy to to help inform those who want to learn duplication, these software-product about open source software in general and companies began to formulate ways to those who are interested in open source ERP safeguard their intellectual asset and to solutions in particular with useful facts from protect against software duplication. our research and personal experiences from Consequently, the license terms to restrict our hands-on trial with two specific ERP certain usage and duplicate were introduced applications. and later on the copyright laws was implemented. This paper is organized into six sections. The introduction is followed by an overview By the mid-1980s, source code disclosure of open source software development and had almost completely ceased. The success

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Huynh and Pinto Sat, Nov 7, 2:00 - 2:25, Ballroom B of the personal computer revolution and the coined by Christine Peterson of the Foresight Microsoft led to a Institute and the Open Source Initiative misleading perception that proprietary organization (OSI) was established in 1998. source software should be the norm. Although the term “Open Source” does not (Conlon and Hulick, 2006). Not until the express explicitly the user’s freedom to do mid-1990s did the movement of free whatever they wish with the software, it software emerge again. The ideal of open does promote a platform on which users can source software are deeply rooted in the participate, contribute, adopt, and use the Hacker ethic. Back in 1961, MIT’s AI Lab software at the same time corporations can and Bell Labs were among the first software also buy into this concept. (Almarzoug, et sharing community in which programmers al., 2005) explored various projects, worked together to fulfill the project goals, and were bonded Perhaps the strongest attraction of open- together by their intense creative and source software is its absence of license intellectual interests (Johnson, 2001). They fees. In the midst of the severe economic promoted the development and use of free downturn, funding for information software. The case in point was the technology is drying up. Open-source development and distribution of the UNIX software offers an attractive alternative. operating system, which recently celebrated (Roberts, 2009) As more open-source its 40 th year anniversary. Another important software are developed by communities of catalyst for the growth of open source users around the world and are adopted and movement is the development of ARPAnet. used by increasing number of businesses, This network provided an environment universities, as well as home users, its where people at different universities, importance is hard to ignore. The impact of research labs, and governmental agencies open-source software as described by could exchange idea and collaborate. The Freidman (2005) is one of the 10 results were the rise of networked groups contributing factors led to the Globalization and eventually the growth of distributed 3.0, in which the world has been shrunk software development. (Raymond, 1999) It from a small to a tiny size at an was from these networked groups that later unprecedented pace. gave rise to the synthesis of “community”, a very important component in the structure 3. AN EMERGENCE OF OPEN SOURCE and development of the open source ERP SOLUTIONS movement. In recent years, open source software has With the reduced costs and increased been increasingly recognized and eagerly performance of PCs together with the embraced by businesses and organizations widespread availability of the Web, the open who are interested in an alternative to source movement began to take shape. The . The widely adoption online development communities took root has been in part fueled by the availability of and started to grow. Projects such as system software such as Linux, OpenBSD, and Apache were developed and widely Ubuntu, etc., popular application software adopted. These projects became successful such as Firefox web browser, OpenOfice models for further development of open office suite, etc., KDE and Gnome desktop source software. (Almarzoug, et al., 2005) environment, database management systems such as MySQL, PostgreSQL, etc, At the core of the open source movement is and most importantly, the web server the ideal of “free” software development, software Apache. (Conlon and Hulick, 2006; distribution, and usage. Yet, to ensure its Conlon 2007) These applications are among long term sustainability, the movement the examples of successful open-source needs the support of Fortune 500 software. Although more and more companies. Since these companies are for applications have been developed based on profit oriented, a compromise was eventually open-source platform, the area of enterprise reached so that software can be developed systems remains relatively untouched by for free and at the same time these “free” open source. Specifically, the market of ERP software still fit well in the business world. is still dominated by SAP and Oracle, two of As a result, the term “Open Source” was the major proprietary ERP software

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Huynh and Pinto Sat, Nov 7, 2:00 - 2:25, Ballroom B developers. Their revenues are in billions of websites of these open-source ERP venders dollars as compared to a few hundred boast significant breakthrough in the thousand dollars of the revenues from all the number of their adopters, including even open source ERP vendors combined. large companies, the accurate data on (Lemos, 2008) adoption rates are unavailable.

Although the open source ERP is still in its 4. A CLOSE LOOK AT TWO infancy, its emergence and potential growth SPECIFIC OPEN SOURCE ERP are quite promising. First of all, the open SOLUTIONS: OPENBRAVO AND source ERP vendors bring competition to the XTUPLE market where price is often not negotiable. Secondly, under the severe economic 4.1 OpenBravo downturn, many companies are increasingly Openbravo is a company that specializes in under the pressure to cut cost in order to open-source ERP. It started as an university survive. As they reexamine the high cost of management project during the mid-1990, the proprietary ERP in terms of license, but later turned into a company known as support, implementation, and maintenance, Tecnicia in 2001, and today known as it is natural that they are attracted to open Openbravo. In 2006, Openbravo received source ERP because of its absence of license $6.4 million in venture capital funding. In fees. 2008, it received an additional $12.5 million investment fund. With the infusion of Popularized by the growth of open source, money, the company has aggressively open-source ERP was developed with the expanded its reach to the potential ERP open-source spirit. Unlike the proprietary buyers around the world. It estimates a ERP software, the open source ERP solutions significant increase in revenues as more allow anyone to view, audit, change, and users purchase and adopt its software. The distribute the source code freely. This is a size of the company has grown from 70 significant breakthrough in the market that employees in 2008 to 100+ employees and is dominated by mainly the proprietary management team today. software from two main sources SAP and Oracle. As often reported, the commercial Figure 1. Illustration of all the modules ERP are costly because buyers have only two available in Openbravo ERP. choices. The buyers of this software have little leverage in controlling their overall costs. The overall costs do not include just the initial purchase of license and set-up. Even after the system rollouts are done, companies find themselves locked into costly support and maintenance agreements. In the market of proprietary ERP software, there is limited choice and limited price leverage for the buyers. (Lemos, 2008)

Since ERP systems require a great deal of customization, having an open-source ERP seems like a good fit. (Lemos, 2008) At the present time, there are only a handful of open source ERP vendors. Among the best Openbravo provides a web-based, open known are Openbravo, xTuple, and source ERP solution for businesses. Through . Because of the limited resources its ERP software, clients can gain an and time constraint, we will examine closely integrated view of their business operation the two leading open source ERP including many aspects such as production, applications from Openbravo and xTuple. At inventory, customer information, order, a number of conferences, there are purchase, and workflow, etc. The application workshops and presentations of these also supports report generating in PDF and software. Increasingly, they are recognized Microsoft Excel. According to the claim on by growing number of users. Although the the company’s website, its web-based ERP

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Huynh and Pinto Sat, Nov 7, 2:00 - 2:25, Ballroom B and Point of Sale solutions have been downloaded more than a million times and Another source of revenue for Openbravo is are used in over 50 countries. through providing maintenance. Through subscription, Openbravo offers users with Openbravo ERP is designed with a various support plans at different levels of comprehensive set of modules. As shown in technical support, product support, Figure 1 above, among the major modules availability (24x7x365 vs. 5x8), contact are Financial Management & Accounting, means (phone, chat, support portal). The Procurement, Warehouse, Production, Sales, price for subscription is ranging from 3000 Project & Service, Customer Relationship. EUR ($4232 US) to 35000 EUR ($50,000 All of them are integrated to support all the US). core activities as well as support activities of an organization. Openbravo ‘s business model targets not just end customers but also business 4.2 Pricing of Openbravo partners. While end customers refer to Openbravo’s business model is to offer the those who adopt Openbravo ERP, implement software free. There is no license fee. and use it, business partners refer to those Instead, users can subscribe for support, who integrate Openbravo ERP, customize, services, and product enhancements via an and add value to their customized services. annual support subscription. Here is the Business partners include three categories: pricing information based on the information (1) system integrators who deliver from Openbravo website. implementation and integration services to larger companies, (2) independent software For Professional subscription pricing as of vendors who embed their own solution into August 2009, the package, and (3) value added resellers who provide implementation and Annual Per customization services to SMEs (small Subscription Concurrent medium enterprises), distribute their own Fee User modules, etc. Among the services that SMB 1500 EUR 400 EUR Openbravo offers to its business partners Edition ($2110 US) ($563 US) are: specialized training, certification nd Enterprise 750 EUR 400 EUR (through exams), 2 level support, Edition ($1055 US) ($563 US) specialized consulting, and outsourcing.

*These costs include licenses, support, and 4.3 xTuple extended bug fixing guarantees for all the xTuple formerly OpenMFG began with the stacks. development of OpenMFG in 2000. The company specializes in developing ERP In addition, Openbravo offers other services applications for small business of all kinds. for end customers. For instance, the Among the features that it offers are implementation consulting service is financial, CRM, sales and purchasing, designed to help users with the reporting, inventory, manufacturing and implementation of the software and to train distribution. users. This implementation consulting service helps users to set the application and Its business focus is to offer a lower cost get it up and running. Getting the software open-source ERP solution to small medium downloaded is one part of the enterprises (SME), in particular the market implementation. Other parts include niche of those in the area of manufacture. installation and setting up. As shown on the Its flagship product is xTuple ERP website, the implementation may involve the Manufacturing Edition, a fully-integrated following major steps: project preparation end-to-end software system to support core (installation of software and initial training), activities from manufacture to sale to definition (requirements definition, inventory. Another commercially licensed functional design, migration strategy), ERP solution from xTuple is the Standard prototype development, final preparation Edition. The Standard Edition is the (integrated testing, data migration, and final midrange commercial offering, which adds user training), and go live. advanced inventory control, warehousing,

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Huynh and Pinto Sat, Nov 7, 2:00 - 2:25, Ballroom B and other features to the core package but Since its introduction of open source ERP does not have features such as discrete and solutions, xTuple has been quite successful. batch process production, make to order, Successful cases include a frozen food maker make to stock, or mixed-mode, job shops Cedarlane who used xTuple. xTuple ERP and engineer-to-order present in the help Cedarlane saved a couple of hundred Manufacturing Edition. These two products thousands dollars, saw an increase of are developed and sold based on the revenue from $40 to $600 million, and while “community code” model, where the code the business has gone up, the paperwork was not made publicly available but was has reduced, and the operation becomes accessible only to those customers who more efficient. purchase or subscribe to licenses. 4.4 Pricing of xTuple In July 2007, xTuple became the official Similar to Openbravo, xTuple’s company’s name. It was also during this Edit is an open source ERP application. time xTuple launched the PostBooks Edition. There is no license fee or subscription option Unlike the Manufacturing and Standard because it is freely available and distributed Edition, the PostBooks Edition of xTuple ERP without any support. Hence, the pricing of is the free and open source software xTuple provided here is applied mainly to application available for download from Standard and Manufacturing Editions. The SourceForge. PostBooks is developed from software subscription for the Standard the same code base as the other two Edition ranging from $280/user for 200+ commercially licensed editions. As described users to $800/user for 5-19+ users and on the website $350/user and $1000/user respectively for http://www.xtuple.com/postbooks , the Manufacturing Edition. In term of PostBooks was built from the open source services, like Openbravo, xTuple offers an technology including PostgreSQL database, implementation consulting package that and the open source framework for C++. includes an initial site visit, project plan, and It is a full-featured, fully-integrated thirteen total days of implementation accounting, ERP, and CRM system. Its assistance to get the system up and capabilities include the following modules: running. The 13 days total costs $18,000. Accounting (general ledger, accounts In addition to implementation consulting, receivable and payable, bank reconciliation, xTuple also provides other network services financial reporting), Sales (quotes, order including automatic upgrade, data cleanup, entry, sales reporting, shipping), CRM offsite backup, and database optimization at (universal address book, incident the price ranging from $2000/year for basic management, opportunity management, to- to $7500/year for full service. do lists, project management), Purchasing (purchase orders, receiving, vendor 5. OPENBRAVO’S VMWARE VS. XTUPLE’S reporting), Product Definition (items, MANUFACTURING EDITION: PERSONAL infinite-level bills of material), Inventory and EXPERIENCE Distribution (multiple locations, other advanced warehouse features), Light With the arrival of a supply chain Manufacturing (work orders, strong support management as a new major at our school, for make-to-order), OpenRPT open source we are in search of an ERP application for report writer. use in the support of our supply chain management curriculum. The cost of SAP is Like all xTuple products, PostBooks runs beyond our department’s budget. Under the equally well on Windows, Linux, and Mac - pressure of recent budget cut, we have no and is fully internationalized (multi-currency, choice but look for open source ERP support for multiple tax structures, and application as an alternative to the multilingual translation packs maintained by proprietary ERP. Our task is to explore, find, our global community). PostBooks is and evaluate a possible ERP application that licensed under CPAL, the OSI-certified could be adopted for use in teaching supply Common Public Attribution License. chain management related courses. (website http://www.xtuple.com/postbooks) 5.1 Our Experience with Openbravo’s VMware Implementation:

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A colleague told us about Openbravo. This One of the reasons that we were attracted to was where we started with our exploration xTuple was the readily available demo and of open source ERP. We first filled out the very detailed documentation. When we form on Openbravo’s website. Then, we got visited xTuple website: www.xtuple.com , a phone call from a representative. This the link took us immediately to the free person asked us about our needs and then demo of xTuple ERP page. Here, we assigned us to a partner. A representative registered for a free hosted demo and from Openbravo partner called us. He gave followed the given instruction. To register, a us some instruction to obtain the software valid email address was needed. Shortly and provided us some tips to set up a demo after we filled out the application online, we version of Openbravo. All we needed to do received an email message from is to follow the process of running [email protected] that provided us with the Openbravo ERP on a virtual appliance. This username and password along with a link to included download and install VMware Player log in at http://www.xtuple.com/user . Here, and then download the latest version of the we logged in to verify the information that Openbravo VMware image and unpack the we provided. After this initial verification, it files. After the installation, we were able to took a day or two for xTuple to evaluate and get it up and running. approve the demo request.

This community appliance is a minimally Once, our request was approved. We preinstalled application and operating received a message from [email protected] . system. The appliance is designed to run It provided us with further detailed under VMware. After Openbravo was instruction on what to do next. Once the installed and was running, we encountered installation was completed, we launched the another challenge. We did bring Openbravo application by clicking an icon xTuple ERP up, get into the application, and access to appeared on the desktop. A log in screen different modules, but we did not know what shown up and we tried to log in with the to do and where to start. Although information given in the message from Openbravo provided a sample database [email protected] . client called BigBazaar, we could not find much documentation or guide in how to use Figure 2. The log in screen of xTuple ERP it. Furthermore, the ERP application consists free hosted demo of many modules and they are linked to one another. One needs to have knowledge of the entire business cycle in order to set up and use ERP.

Below are what we realized after a trial implementation of the Openbravo VMware. _ The installation procedure was not intuitive. _ The documentation was vague and difficult to follow. _ There was little help available online. _ The only source of reliable assistance and technical information came mainly from the Openbravo partner. _ Without a proper training and help from the vendor, it seems difficult to set up and implement the Openbravo ERP application. _ Even after successful installation, it comes At this point, we were able to test use of the another major hurdle in figuring how to use application. One of the distinctive features the sample database BigBazaar. that we observed and experienced with xTuple is the company’s openness. It did 5.2 Our Experience with xTuple not withhold any information unnecessarily Manufacturing Edition Implementation: or tried to make it difficult for users to access its applications. We found that the

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Huynh and Pinto Sat, Nov 7, 2:00 - 2:25, Ballroom B documentation and online guide from xTuple can be integrated easily and effectively for were very helpful. To use the demo and to teaching about enterprise systems in core learn about ERP as well as the business business classes. process adapted for ERP, we followed the online companion to the xTuple ERP demo The use ERP systems can provide a variety (http://www.xtuple.org/DemoGuide ). The of benefits in teaching core business classes. xTuple guide provided us with an easy to Among the most important benefits is the follow information not only to access the ability of ERP applications to serve as a application but also to run a scenario to mechanism to integrate knowledge across make sense of the example. While we were functional areas. The proprietary ERP in xTuple Manufacturing Edition application, solutions are costly and at the present are we also discovered a wealth of supports that beyond the reach of many business schools. was accessible right from the menu. By Open source ERP applications offer an clicking “Community” on the menu, we could attractive alternative. Although one of the reach xTuple.org, online customer support major incentives for adopting open source (only for authorized users and paid software is the absence of license fees, the customers), and other non-paid support discussion of Openbravo and xTuple does options. We did check the discussion forum. raise an important fact about other costs The information was quite well organized. such as support, training, implementation, In addition to the discussion forum, there and maintenance costs that should be taken was a FAQ page to cover support type into consideration. topics. Those who might be interested in open Based on our evaluation of xTuple source ERP face several issues. Because Manufacturing, we observed the following: open source ERP applications are still at the _ The installation procedure for the demo early development stage, there are only few was not very straightforward. products available to choose from. For most _ The documentation was comprehensive, ERP vendors, their main clients are informative, well-organized, and easy to businesses not educational institutions. follow. Hence, few open source ERP vendors and _ There was a lot of resources available distributors have a clear model when dealing online. with educational institutions. Should the _ It was relatively easy to obtain help online educational institutions be end user clients via the discussion forum, FAQ page, and or partners? The use of ERP applications at documentations. educational institutions is for teaching and _ The example available in the demo was learning purposes not for revenue very informative. It helped to showcase generating as in the case of businesses. what an ERP is and how it can be used to Hence, the existing pricings are out of reach integrate different processes in a business. for many schools. Other issues to consider _ The application was easy to use, well- are there are only few developers, few designed, and very appropriate for small and resources available, and unknown costs medium sized enterprises. when dealing with open source software.

6. CONCLUSION AND Therefore, deciding to adopt open source PRACTICAL IMPLICATIONS ERP software should not be based mainly on the license cost. Although it is free to From the result of our trials as described download the software, there are many above, we determined that Openbravo while other costs including: training, maintenance, it appears to be a good and solid ERP roll-out costs, and the potential costs of risk. application turned out to be more difficult to All of these add up and may offset the install, implement, and use for the purpose license savings. One needs to evaluate of teaching. For the evaluation and teaching open-source ERP software the same way as purpose, we would recommend xTuple any other commercial software applications. because of its ease of use, complete It is important to know what the needs are documentation, rich resources, and good and how they are met. A scripted scenario example. From our experience, it is a very could be useful to test functional fit. promising open source ERP application that Furthermore, it is important to take a careful

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