Last week I had the opportunity to attend xTuple’s inaugural user conference. This is a small company that you might not have heard of. Or you might know it by its original name OpenMFG. Founded in 2001, it has always lived at the intersection of Enterprise Resource Planning (ERP) and open source software. The premise behind open source is that it, or at least some version of it, is free. The source code is openly shared and the community is encouraged to contribute to it. Offering a free version necessarily affects the monetization of the software, and this can have a big impact in a space like ERP. There are many players, some very substantial, with deep pockets to fund R&D efforts. Also, ERP isn’t just a “nice-to-have.” It runs your business and therefore must evolve as you evolve. So the real question is this: Can an open source ERP vendor effectively compete in this competitive environment?
There is no single, universal answer to this question. The answer depends largely on two elements: the underlying technology and the community that embraces the solution. The xTuple community has strengthened over the past couple of years thanks to some very specific customer engagement initiatives that maximize the network effect realized by having ever-growing numbers of qualified ERP professionals getting involved with the software. And the latest xTuple version 4 (aka xTuple Mobile Web) puts the company in a much better position to compete. So in terms of competing, xTuple is in a very promising position.
Open Source: An Introduction to xTuple
If you are not familiar with xTuple, then you might also not be aware of the premise behind open source. The first and often most important concept is that it is free. Wikipedia actually has a succinct description: “Free and open-source software (FOSS) is software that can be classified as both free software and open source software. That is, anyone is freely licensed to use, copy, study, and change the software in any way, and the source code is openly shared so that people are encouraged to voluntarily improve the design of the software. This is in contrast to proprietary software, where the software is under restrictive copyright and the source code is hidden from the users, so that the rights holders (the software publishers) can sell binary executables.”
So if the software is free, how does a company (like xTuple) that offers open source software stay in business? How do they make money? Simple: not everything is free.
First of all, users pay for training and implementation services. They can also pay for a premium level of support that goes far beyond the ability to download bug fixes.
xTuple provides a version (the product is called PostBooks), which is completely free for download, but there are also ways to extend the solution that require purchase. Many companies running the free version outgrew something like Peachtree accounting software or QuickBooks, hence the name PostBooks. But there is also a commercial version of PostBooks that is available with an annual or perpetual license. And there are other different “editions” – Standard, Manufacturing and Enterprise – with increasing levels of additional functionality for larger and/or more complex companies. And xTuple announced a new version for wholesale distribution at last week’s event. In addition, there are some “add-on’s” like xT Connect (Email, EDI), xT OpenRPT Report Writer and xT Web Portal (B2B, B2C, Support) which require a license fee.
Open Source ERP: Not Exactly a Crowded Field
While there are numerous open source products on the market today, open source tools and technology (think Apache, Ruby, Java, PostgreSQL, MySQL) far outnumber open source applications. Open source ERP solutions are quite rare. Indeed xTuple’s tag line reads “The World’s #1 Open Source ERP.”
While that is xTuple’s self-assessment, it is hard to argue against it. I don’t know of any other open source ERP that has achieved any kind of global brand awareness and survived and thrived on its own. Compiere is probably second to xTuple in terms of brand awareness, but it hasn’t been all that visible since Aptean acquired it in 2010. Yes, there are others. I even found a list of about 20 on Wikipedia, most of which I had never heard of. Compare that to the list of over 110 proprietary ERP solutions at the same url, although I would argue that some of those listed aren’t really complete ERP solutions. But then, perhaps some of those other open source solutions are really something less than full ERP.
Perhaps the reason I have not heard of most of those solutions is because my focus is on enterprise applications (with ERP at the core). Open source is simply the approach to development and delivery. If the order of business for a solution provider is open source first and ERP second, it would be easy for me to miss. xTuple reverses the order, focusing on delivering an out-of-the-box product, as opposed to what it calls more ‘toolkit’ efforts of other open source projects. It is quite vocal in emphasizing that it is an ERP company first, and that open source is the ‘how,’ rather than the ‘what,’ of its solution.
Potential buyers should definitely look closely at both the depth and breadth of any of these offerings. Mint Jutras defines ERP as an integrated suite of modules that provides the full transactional system of record of your business. So make sure you are looking at a full solution, not just an accounting application or perhaps accounting plus human capital management. Consider how much more than that you might need. This will depend a lot on the kind of business you run. While we define ERP as the system of record, be aware that most real ERP solutions today do much more.
Competing on a Larger Playing Field
For xTuple, this means it isn’t competing against other open source ERP solutions as much as it is competing against ERP solutions in general. Open source ERP is not a particularly hot topic in ERP circles. So xTuple won’t win simply because it is open source, unless perhaps because open source makes it more affordable, a factor which is particularly important for small companies that have outgrown solutions like QuickBooks. While that is a target market for xTuple, it isn’t its only market. As CEO Ned Lilly puts it, “Our customers range from two guys in a garage to U-Haul.” That means it must compete on the same playing field as all ERP contenders, where selection criteria are quite broad.
While fit and functionality topped the list in terms of ERP selection criteria for years, Mint Jutras research finds “ease of use” has pushed features and functions into a very close second position.
Table 1: Relative Importance of Selection Criteria in Choosing ERP
Source: Mint Jutras 2013 ERP Solution Study
Table 1 is the aggregate prioritization of all 2013 ERP Solution Study participants who rated the various selection criteria on a scale of 0 (not a consideration) to 4 (must have/most important).
Influenced largely by the consumerization of IT, users of enterprise applications today demand the same kind of intuitive navigation and visually appealing screens they have become accustomed to in consumer applications. But ease of use means more in terms of ERP. First and foremost is the element of efficiency: minimizing time to complete tasks. This means streamlining business processes as well as supporting a “natural” way of working.
Other selection criteria range from cost issues to support to ability to tailor the software, and many other factors. Selecting an ERP solution has never been a simple process.
But fit and functionality is still a close second, and the footprint of ERP solutions continues to grow, which puts more pressure on xTuple to innovate. As noted above, xTuple’s ability to keep up with the big guys is dependent on the underlying technology and the community.
The xTuple Community: Crowd-Sourcing Innovation
One premise of sharing source code is to encourage the community to improve the code. In fact one of xTuple’s senior developers went so far as to open his presentation at the user conference by saying, “Open source ERP is all about customization and extension.” But leaving development entirely in the hands of the end users and partners is risky business. Yet xTuple doesn’t have the deep pockets of some of the ERP industry giants, so to better direct its own development efforts, it turned to crowd-sourcing.
Last August it introduced a program called xTuple Feature Mob 2. This is the second of these community initiatives. The first was a couple years back resulting in the integration of email into the xTuple Connect product. That was Feature Mob 1. Feature Mob 2 is a social platform that enables micro-sponsorships of features, with levels of investment ranging from $100 (T shirt included) to $10,000, which comes with a 5-user perpetual license to xTuple Enterprise.
All feedback from Feature Mob 2 was entered into the xTuple CRM Issue Tracker, rationalized with existing feature requests and the top 30 most-requested xTuple features were identified. CEO Ned Lilly says, “This is a lot of work – a lot of development, testing, documentation. But, with [our community’s] help, we can incorporate all 30 of these features into the next three major releases of the xTuple software. And we only need a little under 250 individual sponsors to make it happen.
“So, there are some big, exciting features in here, including:
- Integrating xTuple with leading open source business intelligence solutions, payroll solutions;
- Expanded localization of VAT reporting and electronic payments, both issues that are very much top-of-mind for our users in Europe;
- Importing and reconciling electronic banking transactions;
- Better support for credit card purchasing, and
- A supercharged search engine, which we’re calling a Regular Expression Wizard, to unlock the power of xTuple for maybe the less technical among us.”
As a result, xTuple’s development efforts are both directed and funded, allowing the company to compete at a more aggressive level.
Feature Mobs (1 and 2) aren’t the only way xTuple engages with the community however. In 2008 it released its first collection of “greatest hits” followed by volume 2 in 2013. All the features highlighted in the Greatest Hits Volume 1 and Greatest Hits Volume 2 were from individual customers – some of whom paid xTuple or a partner to develop the feature, others of whom contributed the code back directly. The open source concept encourages users (who may or may not be customers; thousands run the free version) and partners to develop their own extensions and customizations, often contributing back to the community.
A good example of a partner-developed extension that was featured at the conference is ShipIt for xTuple, a software extension that streamlines the process of delivering products with leading commercial shipping companies (UPS, FedEx and USPS (Stamps.com) in the United States.) ShipIt was developed by AKA Consulting, an xTuple partner. The extension, along with others, can be found on xChange, the xTuple Marketplace.
All the code that is contributed for embedding is reviewed by xTuple and may be incorporated into the core. The result is a product that continues to grow and evolve at a much faster pace than would be possible with the relatively small number of xTuple employees.
But the pace of innovation is also dependent on the architecture of the solution and the latest version of the product introduced some technology that should make a big impact on xTuple’s future.
xTuple’s Next Generation: Mobile Web
John Rogelstad, xTuple’s VP of Software Development, opened his “xTuple Updates” session with a question asking the audience to guess what he was most excited about in the latest version, xTuple 4 (also referred to as xTuple Mobile Web). The answer: object oriented programming. A clue as to why he finds this so exciting lies in the full title of the session: Mobile Web and the Technology Stack that Legacy Vendors Only Dream About.
As you might have noticed, I have been writing a lot lately about what I call “Next Generation ERP.” In this four part series I acknowledge that the footprint of ERP has been rapidly expanding, but it is not the features and functions of ERP that make it next generation, but the underlying architecture. It is the architecture that supports new and better ways of engaging with ERP. It is the architecture that allows you to configure and tailor ERP without invasive customization. It is the architecture that allows vendors to deliver more innovation, faster and to make it easier to integrate with other applications and also other businesses.
Object oriented programming is a big factor in the architecture that supports next generation ERP. As John Rogelstad explained to his audience, “We needed to switch to object oriented programming at the data level – without it could we simply not deliver certain things. Had we switched earlier, the result would have been slow and clunky. But recent advances (including HTML5), had finally reached a point where we could build a web client that can compete with the [existing] desktop client. We wanted a unified experience whether using web, desktop or device. We also didn’t want to maintain different code for different devices.”
This new architecture is a huge step forward for xTuple. However it is actually a series of smaller steps on the journey to the final frontier of next generation ERP. But as a result of this architecture, a strong partner and user community, and a small, dedicated staff, xTuple is able to continue on its mission to “help companies of all sizes successfully implement powerful and easy-to-use open source ERP software to grow their business profitably.” While xTuple may not be going where no one has gone before, it is certainly leading the way into the final frontier of open source ERP.
About the author: Cindy Jutras is a widely recognized expert in analyzing the impact of enterprise applications on business performance. Utilizing over 35 years of corporate experience and specific expertise in manufacturing, supply chain, customer service and business performance management, Cindy has spent the past 7+ years benchmarking the performance of software solutions in the context of the business benefits of technology. In 2011 Cindy founded Mint Jutras LLC (www.mintjutras.com), specializing in analyzing and communicating the business value enterprise applications bring to the enterprise.