Introducing ERPNext: An Open Source ERP
ERPNext is one of the fastest growing ERP systems in the marketplace, and I want to talk here today about the pros and cons of this up-and-coming ERP technology.
My name is Eric Kimberling, I'm the CEO of Third Stage Consulting. We're an independent consulting firm that helps clients through their digital transformation journeys. And ERPNext is one of the fastest growing ERP systems in the marketplace. In fact, I've received multiple requests to do a review of the software, so I thought I'd oblige and provide an overview of the pros and cons of this up and coming technology.
Now, ERPNext is an open source technology, meaning that they provide the code to people that implement the software, so you can basically do whatever you want with the software. So, unlike traditional commercial off-the-shelf software where the code is proprietary and you can't really change the code without very deep technical expertise, open source, on the other hand, allows organizations to change and modify the technology however they need to.
Now, ERPNext positions themselves and markets themselves as an open source alternative to SAP. I don't know that I agree with that, because SAP and ERPNext target very different audiences and companies that use the two systems usually are very different. But there definitely is a place in the market for ERPNext, and what I want to do today is talk about what some of those pros and cons are.
Pro: Broad and Unique Capabilities
ERPNext has a broad set of capabilities, a number of different functions, modules, and business processes and workflows that it can accommodate. And it can accommodate your traditional ERP capabilities like finance and accounting, even CRM (customer relationship management) and sales order management. It can also handle manufacturing, distribution, warehouse management, and those sorts of things.
But what makes ERPNext different and unique in the marketplace is its ability to handle some pretty unique capabilities that not all organizations need, but if you are an organization that needs some of these capabilities, it can be hard to find in an ERP system, especially if you're looking at open source technologies. For example, ERPNext has project management capabilities. So there's a module that allows you to manage projects, handle the costing and all the back-end processes that go along with project management. So if you're an organization that does complex project management, if you're aerospace and defense for example, or you're making big products or services, then that project management capability can be very helpful.
In addition, the technology allows you to build a front-end website with e-commerce that ties into the technology, which is pretty unique and that's something that can be hard to find and it can be something that can be hard to integrate with other third parties. So having that as part of your core ERP system can be very powerful.
It can also handle asset management. So companies that have fixed assets and have high capital costs and investments in assets that they need to manage, ERPNext allows you to service those capabilities and those processes.
And then finally, another unique capability of ERPNext is its help desk capabilities. So if you're a company that wants to track either internal IT service type help desks, or if you want to be able to track customer complaints or customer tickets, it has the capability to be able to do that. And again, that's another very unique aspect of the technology that a lot of systems out there don't have.
So while there is a number of other strengths and capabilities and solid workflows within the system, these are just a few of the differentiators that make ERPNext different from some of their competitors.
Pro: Flexibility and Development Ecosystem
Another strength of ERPNext is the flexibility of the software. And by the nature of open source, it's going to have a certain amount of flexibility, but there's some unique components of ERPNext that is unique even for open source technologies. And first and foremost, the product is developed on GitHub. If you're not familiar with GitHub, it's a Microsoft platform where development code and documentation can be stored and managed. And so companies that use ERPNext have access to this platform to be able to further their development and find the best fit of different capabilities for their business.
In addition, the product ERPNext is developed by an Indian-based company called Frappe that develops a number of different types of technologies, most of them open source, and there's a number of different applications and things that can be integrated to ERPNext or bolted on to ERPNext to provide additional capabilities outside of the core system. So these added bolt-ons and unique features and functions can be built to support whatever types of business processes and workflows that you need.
And then as I mentioned before, the product also allows you to build a website on the front end that then ties back to the ERPNext back office software. And that's a unique way to build ecommerce capabilities either within your own website or the product can also integrate well with Shopify and other types of e-commerce platforms.
So there's a great amount of flexibility in the product, not just in the fact that it's open source, but also in the platforms that it uses and the third-party bolt-on applications that can be used to add on to the core capabilities of ERPNext.
Consideration: Resource Availability
Now one thing to consider when evaluating ERPNext, which could be a good thing or a bad thing depending on where you fall on the continuum here, is the availability of resources, both internal and external.
So let's start with internal resources. When we look at your IT organization and your technical competencies in-house, it's important to recognize that if you deploy a system like ERPNext, you're going to want to make sure that you have the internal competencies and capabilities to be able to manage and develop the software. It's not like deploying a cloud-based commercial off-the-shelf system that can be deployed by non-technical types. Open source technology is going to by definition require more technical competencies, which may be okay if you have a robust IT department. But if you don't have an IT department yet or if you don't have a lot of depth in that area, it might be taxing on your ability to manage and implement that type of technology.
Now when we look at external resources and the sorts of external help that you might require to deploy the software, it's important to recognize that while ERPNext is a high growth company and they are growing in terms of the number of clients using the technology, it's still not as widely adopted as some of the bigger ERP systems out there. And therefore, it can be harder to find resources that know the product very well and have experience implementing and maintaining the software. So that's very important to recognize is that the external resources available may not be as robust as what you might find with other systems.
Now another consideration as it relates to resources is recognizing that this company is based in India. A lot of the competencies that are familiar with the product are based in India and if you're in that region or that part of the world, that's probably not a problem, but if you're in other parts of the world on different time zones or with different cultures, that may not integrate well with that environment. So that's something to be aware of as you think about the right cultural fit and the right geographic and time zone fit for the type of support you might need for your ERP implementation.
Consideration: Scalability for Growth
Now a lot of organizations that deploy ERPNext are higher growth companies. They're typically small, maybe mid-size organizations that are either deploying their first ERP system or maybe this is their second step in their journey towards a newer ERP system. And a lot of the questions that come up for organizations considering this product is can the product scale for my needs and will it allow me to grow to the next level of my growth plans? And the answer is yes, but it depends.
If your definition of scalability is ease of use and flexibility and the ability to grow and allow the software to grow with you, then absolutely the product is scalable. But if you're a very complex organization and you grow very quickly and you become very big, it might be that you outgrow the capabilities of the system and it becomes too much maintenance and headache to be able to adapt the software to fit your more complex needs. So it's scalable to a point, but the larger you get, the more complex and diverse you get, the more complex the technology itself is going to get and the harder it's going to be to maintain longer term.
And what we see at times with open source ERP systems in general is that as companies grow and become bigger, they change the software so much that it no longer resembles the original intent of the software and you pretty much end up with a custom system. So it's important to recognize that wherever you are in the life cycle, you want to recognize and assess whether or not this technology has the capabilities to support your longer term growth plans.
Consideration: Total Cost of Ownership (TCO)
Total cost of ownership is a key consideration for most organizations and one of the advantages of ERPNext is the relatively low total cost of ownership. Now this is especially true when we talk about implementation. Implementing the product itself can be lower cost than what it might cost to deploy a larger off-the-shelf system, not only in terms of the software license cost, but also in terms of the implementation costs themselves.
And part of that is because the open source pricing model is generally lower priced than bigger ERP systems and deploying it and being able to use your own resources and not having to hire necessarily very expensive resources to deploy the technology can drive the cost of your implementation down. However, longer term the cost can actually increase, can escalate to the point where it may not make sense in the long term as you grow and as you invest more time and money in changing the technology.
So it's important to look at not only your short term implementation costs, but what are the longer term implications and costs of managing that technology and ensuring that the technology keeps up with your business growth longer term.
Conclusion: Is ERPNext a Good Fit for You?
So is ERPNext a good fit for your organization? Should you include it on your short list of evaluation considerations? It depends. If you're looking for something that's flexible and cost effective or you're looking for some of those functional strengths that we talked about earlier in the video, then yes, it can be a great fit for you.
However, if you're an organization that would prefer not to have to deal with a headache of dealing with open source and managing the technical implications of that, or if you're a big, diverse, complex organization that maybe is too big or can't be supported by a product like that, then it may not be a good fit.
But if you're looking for an open source alternative and you want to look at something that could be an upgrade from a real basic ERP system, ERPNext could be a great fit for you. I'd love to hear your feedback or provide any input I can in your evaluation process. So feel free to reach out if you have questions or you'd like to brainstorm whether or not this might be a right fit for you, or if there's other options in the marketplace that might be better fits for your organization. Feel free to reach out, I've included my contact information below. And I also encourage you to download our 2021 digital transformation report which contains top 10 rankings of different types of ERP systems and digital transformation technologies in the marketplace. It's our independent ranking and analysis of the market. I encourage you to download that white paper via the links below. And I hope you found this information useful and have a great day.
