Open source community has developed an ERP package under GPL to benefit medium size Businesses that don't need expensive ERP packages like SAP, JD Edwards and the like.

There are many benefits of implementing open source ERP packages like Compiere
( http://www.compiere.org/ ).

Businesses should definitely understand and analyze the cost and benefits of using open source software for mission critical business processes.

What is Open Source?

Many groups have developed several different applications under GNU GENERAL PUBLIC LICENSE (GPL) to encourage the software community to share knowledge and benefit from the efforts by others.

Open source software (eg. Linux) could be distributed freely to any body without any license fees. All the enhancements or developments are shared without any commercial contract with the rest of the community under GPL as well.

Why trust open source software?

Open source software packages are the result of efforts put in by experts across the globe. These packages are available at no-cost and are very robust and user-friendly. Continuous development and bug fixing over time by a diverse group of programmers makes these software packages very relevant to a wide variety of applications.

What is ERP?

Enterprise Resource Planning, or ERP, software is commonly used application in manufacturing and other industries to improve business efficiencies by integrating multiple departments across the enterprise.

This integration of information in a single database provides visibility that could be used to improve efficiency and reduce business cost, if used intelligently.

What is the Value of ERP?

A simple example of ERP application in a manufacturing supply chain can illustrate the usefulness of ERP very easily. When a customer buys a product, it's fed into a purchase system, and then this information is supplied to the manufacturing department and shipping department for delivery. The finance department sends the invoice to the customer and receives payment, while inventory system is updated soon after the delivery.

Typically, all this information flows through the enterprise via a paper trail and changes a lot of hands. However, if the enterprise is linked via ERP application, this information is visible to all the departments at all times. Manufacturing could plan for any new orders right away, and finance department could process the order without any delay. Reduction in time spent in information transfer directly impacts the bottom line of the enterprise, if the enterprise has a process in place.

Note that the software alone can't bring any value without the process.

Advantage of offshore companies in open source software - A clear benefit

Offshore companies in the third world countries have acquired expertise in open source technologies because easy availability without any attached licensing fees. Many of these firms favor open source software in order to avoid procuring licenses while maintaining their quest to bring value at low cost.

Offshore companies offer low consulting cost for software customization, and license free open source software adds to the benefit.

Disadvantage of offshore companies in highly business oriented applications such as ERP

Offshore companies without any presence near the business often have limited information about the complexities of business process.

Although, the per-day cost of engaging these consulting companies is slightly low, but the total implementation cost including the cost of communication could become enormous, if not managed effectively.

One should carefully evaluate pros and cons of engaging an offshore vendor for any application.

What's the best solution?

There is no single rule that applies to all the businesses. It is generally beneficial if a consulting company could offer the best of both worlds - business knowledge of a local firm and low cost of an offshore company.

There are some companies that bring in experienced functional consultants for analyzing enterprise processes, rules and requirements, but provide customization using skilled staff at low wage countries like India .

Advantages of engaging an Indian Offshore Partner

Indian outsourcing partners have many advantages to offer -

Conclusion

Open source ERP software could be very cost-effective, however, the cost and benefits of using such packages should be analyzed carefully.

As such ERP software is not a package like Microsoft excel or word that could be installed and used even when you buy it off the shelf.

The role of a matured and experienced consulting partner is very important in the whole process. The installation of such a package often requires a careful study of the business process and systems. A seasoned consultant could guide the business to use some of the well-known business practices and processes as well.

A consulting company with offshore presence or an offshore company with onshore consultants would mitigate all the risks while maximizing the benefits of open source ERP and low cost consulting staff.