This is the first article we have written on how to plan and launch a highly successful Open Source ERP (Enterprise Resource Planning) project.
Open Source Enterprise Resource Planning (ERP) applications are the cash cows of the technology sector. The ERP sector mainly consists of large businesses who have spent decades charging handsome license fees that have made these vendors extremely valuable companies. Then there is an army of vendor partners and external consultants who also charge not insignificant fees to customise and implement these ERP applications.
We are talking £ billions in revenue from a huge number of projects around the world. Despite the fact that a reported 60% (Analyst firm Gartner estimates that 55% to 75% of all ERP projects fail to meet their objectives) of ERP projects fail to meet their objectives or expectations, and a large number of ERP projects that simply fail to finish at all. Too many ERP projects end up in litigation, with yet more consultants and advisors and solicitors reaping in their own hefty fees, many of which could have been avoided.
We are not trying to say that all ERP vendors are sharks, far from it. There are many ERP solutions that are worth the money being asked just as there are a large number of experienced, knowledgeable and reasonably priced ERP consultants who are only too willing to help.
We have highlighted the above points only to highlight the fact that proper planning and a level of caution is needed when starting any ERP project.
What is Open Source ERP (Enterprise Resource Planning)?
Take all of the core processes that exist in your business: marketing, sales, order processing, procurement, supply chain, stock and inventory management, production planning, human resources (HR), finance, customer services, support, and many others depending on what type of business you are in. The basic understanding of ERP is that it is a solution that will manage all of your business processes within a single fully integrated system. This will provide everyone within the different parts of your business to have access to information in real-time, data is entered once and it is then available as and where needed.
Some of the best known open source ERP systems in the market include:
- Dolibarr ERP
- Apache Ofbiz
Many open source ERP solutions started out as manufacturing ERP solutions, however, they now cater to almost every kind of business.
There are also different types of open source ERP solutions such as:
Open Source Discrete Manufacturing ERP – Typically used in manufacturing and is based on BoM’s (Bills of Materials) and quantities that makeup products/goods.
Open Source Process Manufacturing ERP – Typically used in the food, drinks, chemicals, etc industries where the model is based more on recipes and formulas and volumes.
How can you tell when you need an open source ERP solution?
At Accellier we are regularly approached by MD’s, CEO’s, FD’s, OD’s of small to mid-market businesses asking for help with open source ERP projects. For many (circa 60%) it is their first open source ERP implementation, whilst for others, they need support to turnaround a failed open source ERP project or underperforming ERP solution that has been in place for some time.
Either way, the clues are mostly the same:
- Manual processes
- Too many lists in Excel
- Employees frustrated because they don’t have efficient processes/systems
- Customer expectations not being met, you are letting them down
- Customer expectations not being met, your competitors are delivering a superior service
- Siloed systems, you have people rekeying data between systems
- Reports don’t match/tie-up between departments
- Reporting is too time-consuming difficult and slow
- You can’t segment data to support new marketing campaigns
- You don’t have access to real-time dashboards/reports
- It is difficult to comply with the Data Protection Act, EU GDPR Regulations, etc
- Data Security is a concern and difficult
If any of the above challenges feels familiar then you will likely benefit from implementing an ERP solution or re-launching a failed or underperforming solution.
One point that many small to mid-market businesses often miss or underestimate the impact of is workarounds that have become normalised. We frequently see long winded, over complex processes and inefficient practices have taken hold. All too often we find that a small number of key people (or several pools of key people in different teams) are spending a large percentage of their time trying to manage workarounds for long periods of time, as opposed to fixing them, has become their full-time job.
Often simple businesses become complicated over time. Getting to the bottom of issues and inefficiencies is time-consuming and difficult. In many businesses, there are often personality clashes, ineffective processes or old outdated technology (or worse manual processes & lists in Excel) or siloed applications and all of this needs to be dealt with.
One of the challenges in small to mid-market businesses is that often the people who are aware of the issues and who really understand the challenges are the people who are immersed in them, and rarely do these people have the authority or budget authority to make any significant changes.
Also From a management perspective, very few employees will suggest ways will put forward suggestions that would significantly reduce or eliminate their own job.
What can Open Source ERP do for your business?
Open Source ERP solutions allow small to mid-market businesses to merge or unify previously disparate systems and processes.
Real process and data integration can deliver significant benefits:
Open Source ERP can streamline and simplify your business, reducing operational costs and improving morale across the business. An open source ERP project is an opportunity to create a lean, simplified business by improving and reorganising processes and systems. Doing this will reduce friction and errors that can arise between departments and it frequently raises morale.
Consider the potential benefits for small to mid-market businesses of removing the need for workarounds. We regularly see experienced people, often managers who are stuck fighting with manual workarounds to broken processes such as finance teams spending hours (regularly days!) in Excel to create monthly reports. Imagine the benefit when reporting is automated, these key individuals are suddenly free to spend time analysing the data to help the business make further improvements and grow.
ERP systems can help improve integration with customers and suppliers and other partners. Finding enough budget challenge for most small to mid-market businesses, but it is rarely the only criterion. In a B2C (Business-2-Consumer) space service and a flexible returns policy are often far more important to customers than price. In B2B (Business-2-Business), if you can connect your business more directly into your customers and remove their admin headaches, fitting your processes to their needs you can create long term, secure relationships that are far less dependent on price.
ERP is able to create such a level of intimacy between you and your customers that leads to serious competitive advantage.
Open Source ERP solutions are able to create a solid platform for innovative digital initiatives and marketing. Both kinds of innovation are necessary for growth. And both kinds of innovation rely on the availability of good data and your ability to integrate new technology. Thus, your business may benefit from a simple, modern ERP software application that (i) provides clean, accurate and up-to-date data and (b) can be easily integrated with other products using API’s or middleware.
Put simply the front end of your business will only ever be as good as your back-end.
Open Source ERP solutions liberate decision makers with better internal reporting. We come across many businesses where the basic limitation to growth on their growth is that executives are so deeply involved in operational issues every day, every day. There is simply no time to pursue new initiatives and, even if there were, they do not have the energy or information they need to make them happen.
In these situations, the right real-time dashboards and/or reports allow Directors to delegate authority within pre-defined limits. Executives are then freed up to see the bigger picture. They can monitor the performance of their managers, but they can focus more of their time on direction.
These are genuine opportunities. ERP projects can be difficult, but they can take a small to mid-market business to entirely new levels when done right.
Accellier’s Top Strategies for Getting Open Source ERP Right
So, you’ve decided that you do need a new ERP project. Before you jump in and begin to start researching systems or scheduling vendor presentations, you first need to get complete your strategy.
Depending on the size of the business the MD/CEO may or may not be leading the project (in many smaller businesses they may well be, in larger SME’s and mid-market businesses it will likely be a project manager or internal consultant), however the executive team do need to be involved in the strategy and in making key decisions to lay the foundation for a successful project.
In our experience, there are five key strategies to work through:
- Have clear and specific business objectives. Many open source ERP projects derail because the company has never worked out their key priorities. When the inevitable glitches come up, they don’t know how and where to compromise. So, your very first step has to be an open and honest discussion about your business objectives. What are the outcomes you are looking for? Some examples:
- Redeploy four FTE (Full Time Employees) by avoiding any rekeying between open source ERP solution and our website.
- Eliminate orders from customers on credit stop by eliminating the lag between finance and order processing.
- Integrate with a new customer’s ordering systems within about two weeks of contract signing.
Of course, your own needs will likely differ, just notice that the objectives above are (i) measurable and (ii) can be readily assigned a monetary value.
An open source ERP project typically has 10-20 key objectives, and it is crucial that the board has a consensus on each of them. Because then there will be far less room for argument or subjectivity when the road gets bumpy. And later you’ll be able to point back to your requirements document and show it was all there in black and white from the start – clarity on your business objectives will avoid disputes internally and with suppliers.
2. Assign clear ownership to the project. Too often open source ERP projects are run by an informal team of people with vague roles. The MD/CEO must appoint a suitable expert with the necessary consulting and technical know-how, business experience, people skills, and leadership qualities to run a complex ERP project.
The MD/CEO and lead consultant must be clear on who is accountable for which aspects of the project.