Joel’s Enterprise Management Musings

Should we try to customize a generic open-source application or buy established industry vertical software?

That’s a practical question for businesses looking for software solutions to improve their business flow. The question used to be ‘Build or Buy’, and some of the considerations are the same, with this one important difference: don’t ever build from scratch. Starting from nothing these days would be a real waste of time. Start with a development framework, like ADempiere or Compiere. It starts you with a solid database design, naming conventions, and handles tedious standard functionality like users and roles, and an accounting engine. Why would you ever want to build that from scratch?

But now, back to the question: Am I just better off buying a software package with a proven track record in my industry? This question recently arose in the ADempiere forum on SourceForge in connection with the construction business: http://sourceforge.net/forum/message.php?msg_id=4555002

Due diligence on this matter up front is very important. There are likely some advanced commercial products especially designed for your industry. These can be good choices if your business model is fairly ’standard’ in your vertical. Be sure to separate the issues of what you do, versus old habits about how you do it. For example, if your company builds houses, your software needs are probably very much like other companies that build houses. In this case, a ‘house building’ business software may bring you a lot of benefit, and can make for a much easier implementation. The software can actually teach your office how to do things better. If you can implement this kind of software with minimal training and consultant support, it may be a good choice.

Of course, all the standard risks of closed source software apply. The company can go out of business. Support of the product may be bad. Customizations of any kind may not be possible. They come with a heavy price tag, and are often not that flexible.

It’s a much different story if there is something unique about your business model. You may not be able to find specialized software. You may need to capture accounting facts at various points in your workflow. If you need this kind of customisability, a development framework and open-source ERP like ADempiere is perfect. For a small business, the decision must be made based on getting the power and control to customize in order to enable your business. Small businesses shouldn’t look at open-source ERP’s just to get a cheap accounting system. Ultimately, the overhead of implementing an ERP will be too expensive in such a situation.

On the other hand, larger businesses can save money by adopting an open-source ERP. Commercial packages tend to charge by license seats. Meanwhile, the implementation and customization costs in a large company will be comparable between open-source ERP and proprietary ERP. In this case, the licensing savings can be substantial.

In summary, look at the available pre-built software packages to see how closely their features match to your business needs. Weigh the risks of vendor lock-in. Weigh the costs of licensing versus customizing. Finally, if you decide to go the route of open-source, hire an experienced consultant to spend 3-5 days with you to review your needs and build a plan and budget, then re-evaluate and make your decision.

Needs Change.  After 15 years of helping organizations address custom software needs, I can clearly confirm, needs ALWAYS change.  Most of the companies we work with are wanting to replace existing accounting, CRM, SCM, or ERP applications.  Usually the reasons include: “We’ve outgrown it”,    “It’s not flexible enough”, “The vendor won’t support it any more”, “we want to do more”.

These needs have led Idalica to believe in Open Source solutions for accounting, ERP, CRM, SCM, as well as website and e-commerce solutions.  There are several key reasons:

1. CONTROL:  With Open Source, you own and control the code!  You can move as fast or as slow as your own pace dictates.  If you need functionality now, you can add it.  It’s not necessary to wait for the vendor’s next promised release for something you need now.
2. FREEDOM:  Proprietary software systems hold you hostage.  You have no choice but wait on the supplier for fixes and enhancements.  If their rates go up, or you can’t stand them because of bad service, well, tough luck.  Open Source gives you the option to move on to another service provider.
3. INSURANCE:  Vendors quit, sell out, or lose interest.  In fact, if the company is any good at all, they will constantly move on to new products, or even be bought out.  Good for them… but bad for you.  Open Source guarantees that you can find someone to maintain and support your application.  In fact, if you choose one with a stable, standard platform, like Java, then you can even hire your own employee or an independent consultant to keep your system going.

Come on, there must be downsides?  Sure.  You can definitely choose bad projects (more on avoiding this in a later discussion).  You don’t get much ‘warranty work’- if you find or cause a bug, you usually have to pay for the fix.  Frank Scavo wrote a nice comparison report based on Compiere ERP, the parent project to ADempiere ERP, that succinctly highlights some pros and cons between proprietary and Open Source business software.

The reality is this:  In today’s market, businesses must stay agile.  They have to adjust to changing market trends, advertising trends, and efficiency trends.  It is a universal life rule… grow or die.  In our experience, Open Source business tools are the best answer.

I’ll close with some inspiring words, that I think of often, since reading Wikinomics,  by Don Tapscott and Anthony D.Williams.  Their thoughts capture both the needs of modern corporations and the unique characteristics that make Open Source so valuable:

 ”Twenty years from now we will look back at this period of the early twenty-first century as a critical turning point in economic and social history. We will understand that we entered a new age, one based on new principles, worldviews, and business models where the nature of the game was changed.

“These four principles—openness, peering, sharing, and acting globally—increasingly define how twenty-first century corporations compete. This is very different from the hierarchical, closed, secretive, and insular multi-national that dominated the previous century.

“The difference today is that the organizational values, skills, tools, processes, and architectures of the ebbing command-and-control economy are not simply outdated, they are handicaps on the value creation process. In an age where mass collaboration can reshape an industry overnight, the old hierarchical ways of organizing work and innovation do not afford the level of agility, creativity, and connectivity that companies require to remain competitive in today’s environment.”