Open Source ERP Gains Momentum

Companies Mentioned
Posted on May 30, 2006

Accelerating the pace of innovation, open source ERP software provider OpenMFG LLC today released the fourth new upgrade of its manufacturing-centric product and announced plans to double the frequency of its releases. The latest release, version 1.3, adds credit card processing, a new reporting tool, and integration with contract logistics providers such as UPS and Federal Express. Those new features are being added to OpenMFG's existing functionality, which includes MRP, inventory management, master scheduling, order management, capacity planning, accounts payable and receivable, part definition, and costing and general ledger. OpenMFG officials also said that the four-year-old company will double the frequency of new releases, beginning with the next major version of the product -- 2.0 -- this fall. Following that release, OpenMFG plans to issue upgrades of its product twice per year. Until now, OpenMFG has upgraded its software on an annual basis. The faster new-release cycle is made possible in large part by OpenMFG's modified open source development model, said CEO Ned Lilly in an interview with Managing Automation. Under the open source model, the source code of an application -- or another piece of software -- is distributed to users, who are encouraged to modify it and make those modifications available to the community of users of the software. OpenMFG, based in Norfolk, VA, began incorporating upgrades submitted by users and reseller partners with its last release, version 1.2, shipped a year ago. That release included bill-of-material enhancements, created by reseller partners, which provided improved inventory visibility from OpenMFG's order entry module. "We wanted to be careful and be sure we had all the open source development mechanics in place," Lilly said. "But, now that we've done that, we feel the process will be an incredible accelerator for product growth. It also imposes rigor and discipline on the process with everyone seeing the source and being involved in development. Things like bugs get fixed much quicker." OpenMFG's version 2.0 release will include a CRM module as well as master production schedule forecasting and support for multiple currencies, Lilly said. Long term, the company plans to continue to build out the functionality of its core MRP suite while beginning to market its product to larger manufacturing customers, Lilly noted. Currently, OpenMFG sells through channel partners mainly to small manufacturers such as Richart Distributors (Oklahoma City), a 17-employee manufacturer of pumps for the oil and gas industry. Richart last month replaced an aging DOS-based MRP and accounting package from DataModes Inc. (Oklahoma City) with the OpenMFG manufacturing and financials applications. Richart was attracted to OpenMFG's cost of ownership, which is lower than traditionally licensed software, said Brenda Jameson, Richart's office manager. Richart also liked having access to the OpenMFG source code. The company has already made changes to the system's accounts payable module to better reflect how Richart does business, she noted. OpenMFG CEO Lilly predicted that larger manufacturers will eventually become interested in the company's applications, particularly as consolidation among ERP vendors continues. "All the M&A activity creates a lot of uncertainty. Products like ManMan have been bought and sold four times," Lilly said. "The idea of having full access to source code starts to look more appealing, even to larger enterprises. It's seen as an insurance policy for them."

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To date, OpenMFG has about 40 customers, Lilly said. Its developer community numbers about 100. Its name notwithstanding, OpenMFG is, strictly speaking, not a pure open source software provider. For one thing, the company makes its software available under traditional licensing agreements, charging customers directly for those licenses. (Open source ERP competitors such as Compiere Inc. of Portland, OR, use the MPL license created for Netscape's Mozilla open source Web browser.) OpenMFG also restricts redistribution of its source code by customers or partners. "Where we do draw more from the open source model is that everybody has access to the source code and they can change it and send their enhancements back to us for inclusion in the product," Lilly explained. "That way [end-user customers] can get out of the software maintenance business." The OpenMFG application suite is built on top of open source infrastructure pieces such as the PostgreSQL database management system, the Linux operating environment, and the Qt framework for C++ development environment. That means customers do not need to pay to license those tools, Lilly pointed out. OpenMFG offers its own software on either a perpetual license or annual subscription basis. A perpetual license of the ERP package (excluding financials) costs $2,500 per seat plus 10% for maintenance. On an annual subscription basis, a 15-seat license costs $15,000. A license covering 16 to 20 seats costs $20,000. And a license for 21 to 30 seats costs $25,000.

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