1. Open Source ERP Business Model Framework
David L. Olson, Univ. of Nebraska
Björn Johansson, Lund Univ.
Rogério Atem de Carvalho, Instituto Federal Fluminense
FAIM 2012 the Baltic

2. ERP Integrated BPR efficiency Reduced IS payroll MANY OPTIONS
International differences
SELECTION
PIRCS meta-method
SMART multicriteria selection
FAIM 2012 the Baltic

3. Alternative Supply Chain Software Sources
Method
Advantages
Disadvantages
Develop in-house
Best fits organization
Most difficult to develop
Most expensive
Slowest
Stand-alone APS
Less expenditure
Simpler installation
Harder to integrate
Full vendor ERP
Relatively fast
Less expensive than customization
IT efficiency
Easier to upgrade
Inflexible
Employees change work methods
Selected vendor modules
Less risk
Relatively fast to install
Least expensive vendor approach
Expansion problems in time and cost
Customized vendor ERP
Retain flexibility while gaining vendor expertise
Slower
Usually more expensive
Best-of-breed
Gain best of all systems
Difficult to link (middleware)
Slow
Application service provider
Least risk of ERP change
Least cost
Fastest
At ASP provider’s mercy
No control
Subject to price increase
Open source system
COST (it’s free to install)
Flexible
Greatest risk (after in-house)
Need computer-literate employees

4. Use Strategic Planning (1-7)
GMRG Data Analysis Olson, Chae, Sheu: International Journal of Production Research accepted 2012
Category
Number (736)
Use Strategic Planning (1-7)
Perceived Benefits
(1-7 good)
Perceived Cost Impact
None 42
1.27
4.17***
4.07
Spreadsheet 25
2.76
4.50
4.13
In-house
152
3.77
4.49 best
3.90**
Small
361
2.86
4.66*
3.72***
MSD 8
2.50
4.75
3.88
BOPE 38
3.71
4.37
3.82*
SAP
110
4.08
4.53
4.13 best
CONFENIS 2011 Aalborg

5. Methods Used – Planning & Control 11-manual; 2-desktop software; 3-custom software; 4- commercial software- 5-modified commercial software
Category
MRP
Inventory control
Labor planning
Shop floor control
Cost planning
None
1.87
2.13
1.63
2.00
Spreadsheet
2.33
2.71
2.70
2.63
2.83
In-house
3.02
3.16
2.62
2.67
2.94
Small
3.55
3.41
3.06
3.17
3.28
MSD
4.14
4.00
3.50
BOPE
4.17
3.95
3.18
3.25
3.91
SAP
3.88
3.89
3.07
3.38
3.72
CONFENIS 2011 Aalborg

6. Methods Used to Record Data
Category
Manual
Typed into computer
Bar codes
Automatic data capture
None
0.51
0.39
0.06
0.03
Spreadsheet
0.04
0.83
0.08
In-house
0.67
0.20
0.09
Small
0.65
0.19
0.07
MSD
0.75
0.25
BOPE
0.05
0.62
0.27
SAP
0.02
0.52
0.31
0.15
CONFENIS 2011 Aalborg

7. ERP Selection Criteria Baki & Çaki [2005]
Hecht [1997]
Brewer [2000]
Rao [2000]
Verville & Hallingten [2002]
Kumar et al. [2003]
Mean
Fit with allied organizations *
4.79
Cross module integration
4.72
Compatibility with other systems
4.28
References
4.24
Vision
4.22
Functionality
4.15
System reliability
4.08
Consultancy
4.06
Technical aspects
4.01
Implementation time
3.94
Vendor market position
3.87
Ease of customization
3.84
Software methodology
3.83
Fit with organization
Service & support
3.77
Cost
3.65
Vendor domain knowledge
3.46
FAIM 2012 the Baltic

8. Open Source Software
Operates under license allowing release of source code free of charge for others to use & modify
Free redistribution
Open source code allowing modifications
Modifications to be distributed same as source code

9. Open Source Development
Red Hat [2009]: Can save by:
Enabling use of commodity hardware rather than proprietary machines
Avoids maintenance contracts
Greater functionality, reliability, performance
Faster learning curve, available support tools
Avoid vendor lock-in
Reduce need for security consultants & tools
FAIM 2012 the Baltic

10. Open Source ERP/EIS
Jaisingh et al. [2008]: OSS ERPs can be customized to modify code, gain competitive advantage
Serrano & Sarriegi [2006]: OSS ERP benefits:
Increased adaptability
Decreased reliance on single supplier
Reduced costs
FAIM 2012 the Baltic

11. Open Source ERP Products
Compiere
OpenMFG
Open for Business Project
Tiny ERP
Web ERP
Open Office
OpenBravo
OpenPro
Sourceforge.net listed over 1,000 ERP projects May 2009
FAIM 2012 the Baltic

12. Open Source ERP Benefits
Cost
Blue-Star reengineered, switched to new open platform
Total investment $2.5 to 3 million
Much lower than proprietary would have been
Saved $100,000 to $150,000 per year
Streamlined processes
Updated best practices
Eliminated third-party vendors
Save $25 million in license & maintenance fees

13. Open Source ERP Benefits
Agility & Scale
Can modify, grow
Paypal increased server farm to meet demand
Linux enabled upward scalability
Chicago Mercantile Exchange
Switched to Linux
20% drop in time to process trades
Higher customer satisfaction

14. Open Source ERP Benefits
Quality & Security
Constant testing & improvement
Breaking Vendor Lock-in
High investment in vendor software leads to stickiness
Open source avoids this
Compiere maintains lift of available consulting partners

15. Open Source Risks ADOPTION NOT WIDESPREAD Licensing issues
Often written by software engineers, not lawyers
License-detection agents exist
Competitive worries
Any competitor can obtain the same system
Can customize
Expertise required
Documentation
Support

16. BUSINESS MODELS Cost sharing
Risk spreading (offer software free, share maintenance)
Loss leader
Widget frosting (have hardware vendors add your software)
Give recipe, open restaurant (sell service)
Accessorize (give free, sell associated products)
Free software, sell the present (expiration date)
Free software, sell brand (sell validation tests)
Free software, sell content (fees for complementary products)
FAIM 2012 the Baltic

17. Watson, Boudreau, York, Greiner & Wynn CACM [2008]
Proprietary
Public cannot view source code
Open Communities
SourceForge.net
Corporate Distribution
RedHat, SpikeSource, OpenOSX
Sponsored Open Source
Apache Software Foundation, IBM (Sun)
2nd Generation Open Source
Hybrid - corporate distribution & sponsored OSS
CONFENIS 2011 Aalborg

18. The Metropolis Model Kazman & Chan [2009] CACM
Crowdsourcing
Both for software development, general business
Move to service orientation vs. product
Emphasize:
Crowd management
Separation of kernel content and peripheral components
Less formal requirements process
Focus on architecture
Many eyes testing
FAIM 2012 the Baltic

19. Yochai Benkler The Wealth of Networks [2006]
Proprietary
Public
Intrafirm
Barter/Share
Rights-based exclusion
Strict patent enforcement
Romantic Maximizers
Authors to publishers
Mickey
Disney reuses inventory
RCA
Few companies create patent pools
Nonexclusion-Market
Profit from selling information
Scholarly Lawyers
Write articles to get clients
Know-How
Profit from lowering costs
Learning networks
Profit from early access (engineering societies)
Nonexclusion-Nonmarket
Joe Einstein
Give away information for status
Los Alamos
Share in-house, gain government funding
Limited sharing
Share with few colleagues to gain comments
CONFENIS 2011 Aalborg

20. ERP’s Future SAP, Oracle prospering Microsoft moving into SME market
High end of the market will continue to be strong
Upgrades
Microsoft moving into SME market
Very large potential
International vendors finding niche
Local advantages
Open Source opportunities
Parallel to Linux
Related SOA/SaaS model

21. Conclusion Open source ERP projects are increasing
Not all projects are highly structured
Reluctance to use open source ERP in firm’s core activities
PROVIDES OPTION FOR SME
VENDORS CAN USE TO REFINE THEIR SYSTEMS
Open source an access to free labor

22. Spectrum Major vendors Outsourcing Mid-range vendors Local vendors
SAP, Oracle (BAAN) for large organizations
Outsourcing
Application service providers (EDS, IBM,…)
Mid-range vendors
Microsoft (Sage, Lawson, etc.) for smaller organizations
Local vendors
Country specific vendors (China, Korea, Taiwan)
OPEN SOURCE
Compiere, Nexedi,…
CONFENIS 2011 Aalborg