EVALUATION OF OPEN SOURCE ERP FOR SMALL AND MEDIUM SCALE INDUSTRIES

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1 Volume 3, Issue 10 (October, 2014) Online ISSN Published by: Abhinav Publication Abhinav International Monthly Refereed Journal of Research in EVALUATION OF OPEN SOURCE ERP FOR SMALL AND MEDIUM SCALE INDUSTRIES Raksha Jaiswal Research Scholar, Nagpur university, India rakshadolphin@yahoo.com ABSTRACT Information management is a powerful concept of business performance and balanced administrative growth. Increased globalization has forced firms worldwide to face uncertain levels of competition and operate in a changing business environment. ERP (Enterprise Resource Planning) is a software solution to integrate the data and functions of an organization into one single automated system. ERP main object is to implement all the business data and functions from all departments of the organization simplify it and provide easy access to the data for the smooth work flow of all the departments Small and medium scale industries have lack of financial funds and Human resources and so they cannot invest heavily in ERP Systems and cannot purchase vendor lock or licensed ERP system. So these companies prefer Open Source ERP system. Open source ERP software/application is free software that is easily available on the internet and can be used, customized, and shared (in modified or unmodified form) by anyone on the internet. It s important to bring into knowledge, that the Open Source software is free means the source code is available free. However, the implementation, development, customization, technical support and maintenance cost are borne by the customer. However compared to Vendor lock ERP system Open Source ERP is much reasonable and time saving. There are lots of Open Source ERP software vendors, but which one to select is a difficult task. However one can evaluate them on certain ERP evaluation Criteria, which will help in choosing the best open source ERP system and vendors in the market. Keywords: Traditional ERP System; Open Source; Evaluation; Small and medium Scale Industries INTRODUCTION Today, India is changing into IT hub and all major business organizations in the field are working constantly towards expanding their business market. In this context Enterprise Resource Planning (ERP) not only playing a vital role in big enterprises but also contributing to small and medium scale industries in India.(3) Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, human resources and services. ERP software integrates all operations, including product planning, development, manufacturing, sales and marketing. ERP System, which is implemented on client premises or organization, is called Traditional or On- Premises ERP. The ERP Software application including, hardware and servers are installed on client s facility or premises. The organization owns the software, hardware and servers and has complete control over them. Installing software application, hardware and servers involves a huge cost in a Available online on 7

2 traditional or On Premises ERP. In this system the software is installed for a long term basis and license. In Traditional ERP System the organization should have trained and experienced IT staff. It involves a huge cost and a lot of time to train the staff in the organization. OBJECTIVES 1. To find out the vendors of ERP system in the market and a comparison study of the available ERP systems. 2. To evaluate the best Opens Source ERP system for Small and medium scale industries. 3. To find out the overall impact of implementation of open source ERP system in Small and medium scale industries and how the ERP system will benefit these industries. 4. To find out the overall benefit of ERP system in the society. Open Source ERP System What is open source? Open source software/application is free software that is easily available on the internet and can be used, customized, and shared (in modified or unmodified form) by anyone on the internet. In Open source software the code is developed by many software developers around the globe and is distributed on the internet for free under licenses that abide with the Open Source. Open Source is free and so it can be very cost effective for the emerging small and medium scale industries who cannot invest heavily in IT infrastructure, IT staff, software and hardware. Small and medium scale industries cannot invest heavily in the available vendor Lock ERP. Vendor Lock ERP is very expensive and need to own the license which again a huge cost. In such a case the emerging small and medium scale industries can adopt Open Source ERP which is free and easily scalable and upgradable. Most of the companies who have implemented Vendor lock ERP have failed to upgrade due to its huge cost and other complexity in upgrading it. However compared to Vendor lock ERP system Open Source ERP is much reasonable and time saving. There are lots of Open Source ERP software vendors, but which one to select is a difficult task. However one can evaluate them on certain ERP evaluation Criteria and organisation needs, which will help in choosing the best open source ERP system and vendors in the market. Some of the examples of open source applications are: Apache, Mozilla, MySQL, Open Office, Perl, PHP, Tomcat, Linux, Java, Open Office, OpenSolaris, Open ERP. Characteristic of Open Source: Flexibility: In Open Source, the source code is available free on the internet and it can be easily integrated with any system. It can be easily scalable and modified according to the company s requirement. The documentations for integrating the applications are easily available, which makes it an easy task while implementing it with the existing system. Quality: The quality of the open source is a superior quality. Adaptability: Open Source ERP system offers the possibility to the client to adapt the system to its environment and business practices. The open source development model allows software to adapt quickly to changing times. Infrastructure: There in is no infrastructure cost are in Open Source applications. They are freely available on the internet. VOL. 3, ISSUE 10 (October 2014) 8

3 No hidden costs: The Open Source application can be easily scalable and up graded as it is freely available on the internet. There is no hidden cost in Open Source Applications. Scalable: The Open Source applications can be easily scalable and the new versions are freely available in the internet. There is no up gradation cost. Knowing Organisation Needs For Evaluating and Selecting opens source ERP, We first need to know the Organisation Needs. After knowing the organisation s need, we then search for open source ERP software Vendors. Note: Open source software is considered as free software by any layman, which is totally wrong. It s important to bring into knowledge, that the Open Source software is free means the source code is available free. However, the implementation, development, customization, technical support and maintenance cost are borne by the customer. After we have the list of Open Source ERP software vendors, we evaluate them on certain ERP evaluation Criteria like Business function needs of Large Scale Companies Flexibility and business process improvement is the most important need that and ERP software can bring in the large scale companies. International standard of the ERP Software is necessary for both customer and supplier. Scalability and ongoing improvement with newer version of ERP is needed. Knowing the current market position and history of the vendor with regards to technical and customer support is an important need for the large scale companies. Stability and improvement in the functionality of the ERP Application is needed. Continuous innovation power. Short implementation time Prompt Technical and implementation support from the vendor. Business Function Need in Small Scale Companies Lower costs of Implementation Low cost of development Low cost of technical support Lower maintenance charges Scalability and flexibility of the Open ERP software. Up gradation and implementation of latest technologies and functions. short implementation time adopt the current business procedures User-friendliness of the system Basic Criteria for Evaluating Open Source ERP The financing and the sponsoring company should be stable with the open source company. Open source should be registered under particular license. VOL. 3, ISSUE 10 (October 2014) 9

4 Year of establishment of the open source ERP in the market. Know the Latest version of the Open Source ERP application. Comparison of the features with all the versions of the Open Source ERP. Comparison of the paid and community (free) versions. Technology, architect and platform, the open ERP application is based on. Open ERP software should be compatible with all devices like laptop, desktop, mobiles and tabs? Reviews of the open source ERP application on Linked in (LinkedIn is a business-oriented social networking) or any other forums to evaluate and compare the applications. Basic Criteria for Evaluating Vendors of Open Source ERP The cost strategy the vendors adopts for the implementation of ERP, development, customization and maintenance. ( On hourly, monthly and yearly basis) It necessary to know the vendor s information, history, vendors company background, the number of other software products vendor is selling out in the market. It is necessary to know if the Vendor is partnering with the Open source firm. At the same time it is also necessary to know the level of partnership they have with the opens source firm. Number of Open Source ERP implementation done by the vendor or the number clients the vendor has. Cross verification with the other clients of the vendor. The ERP implementation process and phases adopted by the vendor. The Model for Evaluating Open ERP Systems The Dimensions and the Features are the two keys on which the Open Source ERP systems will be evaluated. For evaluating the Open Source ERP the following dimension will be used: The Dimensions Cost Dimensions Vision Dimension Support Dimension Customization Dimension Scalability Dimension Reliability and maturity Dimension Ergonomics and user friendly Cost Dimension The cost dimension is usually one of the most important criteria for small and medium scale industries when buying or implementing the ERP system as they cannot afford the heavy investment in IT Infrastructure and maintenance. The cost criteria can be development cost, implementation cost, customization cost, training cost, maintenance cost, hardware or servers, license, integration, support, upgrading functions and newer version. Support Availability Dimension- (Hecht (1997)) The prompt service and the technical support during and after implementation are of utmost importance while considering choosing open source ERP system. VOL. 3, ISSUE 10 (October 2014) 10

5 (Themistocleous et al., 2001) A lot of complication arises during and after the implementation of ERP system like, up gradation with existing systems, customization and security. During the support the knowledge is transferred to the company and thus it save a lot of time involved in the implementation. (Herzog, 2006).The support for the Open Source ERP system can be on-site that is on the premises of the company or it can be given online via s, chats, community website, forums and blogs. Training is another important component of support. The Open Source ERP system should provide regular and quality training to the users and developers of the open source ERP system. ERP Documentation should also be available for both users and developers. Vision Dimension- A company should think about the future while implementing an opens source ERP system as this will be implemented for long years. Vendor s vision is of utmost important while selecting the open source ERP system. Vendor s history and company background should also be taken into consideration. It is necessary to know if the Vendor is partnering with the Open source firm. At the same time it is also necessary to know the level of partnership they have with them. Number of Open Source ERP implementation done by the vendor or the number clients the vendor has. Cross verification with the other clients of the vendor. Reliability and Maturity Dimension- Kumar et al. (2003) The ERP system reliability is the most important criteria for the selection of the open source ERP system. It is necessary to know, since how long these vendors are in the core ERP business. The background history and the reviews of the vendors can be found in internet forums by their other clients. (Herzog, 2006)Maturity of the ERP system is about how well the ERP system is implemented without any errors and application bugs. Customization: Customization is another important dimension while selecting an Open source ERP system. Every company has a different business process and functions, so they look for an ERP system which best suits their business flow. They look for an ERY system which will fulfill their specific needs. (Avshalom, 2000) ERP vendor should provide user friendly tools to the organisation, so that their IT professional can customize the ERP system according to the organization requirements. High level customization through the tools- In this type of customization the company IT professional can themselves customize the EPR system according to the company s need. They do need to understand, change or write the written code of the application. They do not need the programming knowledge too. This saves a lot of time while implementing and customizing the ERP system. The company has the freedom to customize the software anytime and therefore speed up the implementation process and adapt the system to the business process and requirements. Low level customization- In this type of customization the developers can change and edit the code of the application, thus more flexibility and customized. Scalability Dimension- Open ERP application should support the scalability along with company growth. Scalability refers to the adoptability of the system to function well when the company size increases in volume. When the company expects its growth in volume along with the users of the system and transaction, in such a case, the system scalability is important so as to adopt the growth of the company. With the huge investment in the ERP system, the company ensures that the ERP system can be expanded along with the company s expansion. A company cannot invest for the complete ERP system initially, so they would like to invest in the modules and functions of the system, as and when the company and the users grow. (Herzog, 2006) A scalable ERP system can be downscaled as easily as it can be up-scaled. Scalability of the open source ERP system is very much dependent on the architecture, system server and database technology used Ergonomics and User Friendly- When developing any type of ERP system, end user should always be taken into consideration. If the ERP system is difficult to use, the user will be reluctant to use the VOL. 3, ISSUE 10 (October 2014) 11

6 software system, resulting in termination of the project. Usability is another important criteria that measure the user s perception of how easy the ERP System is to use. The ERP system should have easy navigations so that the user is at ease and enjoy using the ERP systems. (Herzog,2006).The ergonomics of the ERP system means the navigation between application screens, menus and models, keyboard shortcuts, auto-completion of the forms and fields, personal customization, and internationalization (supports all languages) of the ERP system. Internationalization means the ERP system can support multiple languages, supports translation for multiple accounting and costing rules by legal national requirement, supports multiple sites and multiple currencies. International users increases, if the ERP system supports multiple languages and thus reduces the risk of project failure. The Features of ERP System Features is another key for evaluating ERP systems Accounting and financial management Project management Sales management Business intelligence Production management Warehouse management Procurement management Asset management Budget management Document management system HR contract management HR employee holidays and absence management complex entity structures automated updates of new tax regulations Multiple currency support and ability to define own Currency currency conversion rates automated currency conversion rates updates Automated alerts Ajax Web interface with multiple custom workflows Supports the creation of custom form fields on the fly through the interface Accepts substitute products Ability to define flexible product types Capability to define custom invoice schedule for different customers Capability to define custom volume discounts for each customer VOL. 3, ISSUE 10 (October 2014) 12

7 Capability to define custom Units of Measures (UOM) Ability to import products/customers/partners/employees/accounts from xml Employee expenses tracking and reporting Tax payments management List of the Available Open Source ERPs in Market There are many Open Source ERP systems available on the internet. A study had been carried out to find the leading Open Source ERP system. While studying the reviews of the clients, it was found that the below Open source ERP are the best. Open ERP Open Bravo ERP5 Adempiere Web ERP With the WEBERP reviews found on the internet, we found that it had no license for Software-as-aservice and was not mature as it did not have HR management module. So this open source ERP was cancelled for the implementation and research purpose. The available ERP5 system, the documentation available was not satisfactory, so even this system was cancelled. Out of these five available Open source system, Open ERP Adempiere and Open Bravo were considered the best. The above three Open Source ERP system will be evaluated against the features and dimensions stated earlier. The evaluation will be carried out on Yes or no basis to keep the research work more objective and to the point. Evaluating the Open Source ERP Systems To make the research purpose objective, only few of the features comparison which stands positive for Open ERP is listed below Features Open ERP Adempiere Open Bravo Accounts and Finance management Yes Yes Yes Project management Yes Yes Yes Procurement management Yes Yes Yes Sales Management Yes Yes Yes Production management Yes Yes Yes Warehouse management Yes Yes Yes Business intelligence Yes Yes Yes Multiple currency enabled and customized own currency Yes Yes Yes custom form fields creation Yes No No Ability to import products/ customers/ partners/employees/accounts from xml Yes Yes No Time and Task management Yes No No HR employee holidays and absence management Yes No No Customize department structures and management structures Yes No No VOL. 3, ISSUE 10 (October 2014) 13

8 Features Open ERP Adempiere Open Bravo Ability to define custom views to show system Yes No No data Document management Yes No No Define custom payment terms for each Yes No Yes customer Define custom salary category for each Yes no Yes employee SaaS Services Yes No No The Dimension of Selected Open ERP Cost- The cost dimensions of Open ERP are, licenses cost, customization cost, and maintenance cost. In Open ERP licenses, all modules and features are OSI compliant and absolutely free. The cost of customization is very less as the modules are almost ready to use. The maintenance cost is fixed, including error and bugs fixing, migrations, and a 4 year compatibility guarantee. Support Availability- support and user s forums on the official website of Open ERP are available, where the users can request help with regards to installation, functions, configuration etc. A developers forum is also available where the developers can ask for technical support or bug resolutions. Documentations are made available online and also available inside the Open ERP system so that the users and developers can access it with ease. There are different manuals available in An Open ERP book that explains, administrations, configuration and implementation of the system It gives a detailed theory on how to manage all the enterprise business processes functions like : finance, accounts, cost, manufacturing, operations, stock, sales and purchasing etc. There are three manual documentations included in Open ERP Installation manuals, guides the users and developers with the installation process. Developer manual, guides the developer and programmers to develop their own modules and functions. Community manuals give guidelines to the community members, about how they can contribute their code to the community and the rules regarding the same. Vision- Open ERP s main vision is to develop the best and fully functional enterprise resource planning software. Stability and Maturity- As studied earlier, the ERP stability and maturity can be measured by looking at the vendor s background history and current market position, the number of clients they have, the success stories and testimonials on their websites. Open ERP has been implemented in a wide range of small and medium scale industries including manufacturing and service sectors. Open ERP is implemented in more than 45 countries and have 100 documented success stories which can be found on the Open ERP official website. Customization- Opens ERP dynamic architecture is very is the biggest advantage. The customization of the system is very easy and can be done very quickly. Today, the companies are emerging and growing fast and also their business requirements keeps changing constantly. In this context, Open EPR adapts and develops fast, according to the company s needs. Scalability- The scalability Of the Open ERP system is its ability to grow with the growth of the business along with the number or users or increased number of transactions per second. The Open ERP can be downscaled and up scaled according to the requirement of the company. VOL. 3, ISSUE 10 (October 2014) 14

9 Ergonomics and User Interface- The user interface (front end of the system) of Open ERP is very user friendly and sophisticated designed. It has drag and drop menu facility, flexible screens, content management system, lots of templates and resources like graph, calendar, tree, Gantt chart, tree, forms, menus etc. A customized template design facility is also available and thus the system adopts a corporate look. Integration of Open Office and Webmail is also possible in this system, which improves the productivity of the users. Information visibility made with very easy views. Internationalization of Open ERP is made available in multiple languages and hence can be used by many countries worldwide. Finalizing with Open ERP Based on the features and dimension comparison, Open ERP was found to be the best open source ERP system for small and medium scale enterprise. CONCLUSION Open Source ERP system if implemented small and medium scale enterprises will reduce the implementation time; reduce the cost of technical support and other fewer operational expenses. The client will pay according to the ERP models required in his business which is very easily upgradable scalable. This will reduce the expenses, increase the profit and overall growth of small and medium scale industries. It is necessary to introduce Open Source ERP System in the small and medium scale industries which will increase their profit, maximize their efficiency and thereby increase the overall growth and economy of the country. ACKNOWLEDGMENT Sincere Thanks to Dr. Asha Thakur for sharing her knowledge and giving guidance throughout the writing of this paper. REFERENCES 1. Hecht, Choose the Right ERP Software,Datamation, Vol. 43, No. 3, 1997, pp Herzog T.,A Comparison of Open Source ERP Systems, master s thesis, Vienna University of Technology, 2006, Vienna, Austria M. 3. Themistocleous, Z. Irani & R. M. O'Keefe, ERP and Application Integration Exploratory Survey, Business Process Management Journal, Vol. 7, No. 3, 2001, pp VOL. 3, ISSUE 10 (October 2014) 15