How Predictable Was Panorama Consulting’s Opinion on Open Source ERP?

Executive Summary

• Panorama Consulting made its position clear on open source ERP.
• The question is, how predictable was this opinion?

Introduction

In an article titled What is Open Source ERP? [Pros & Cons to Consider], Panorama Consulting made its position clear on open source ERP. Not only do we think that Panorama reverse engineering this view from their financial bias, but we were able to predict this position.

See our references for this article and related articles at this link.

In our opinion, open source ERP is a bad choice for most organizations – due to vendor viability concerns, as well as customization costs – but we’ll share an equal number of pros and cons, regardless.

The pros that Panorama Consulting lists are so well known, I won’t bother listing them. Instead, I will begin by listing Panorama Consulting’s con list.

Long Term Stability

Even the most experienced, reputable open source software providers can’t offer the same level of long-term stability that a top-tier commercial provider can.

Often, these providers are working with low profit margins, developing their software on a thin budget. Considering this limitation, there’s always the chance that the provider you select could go out of business, leaving your company stranded. The same could happen if a big ERP vendor acquires your provider.

This uncertainty can make it difficult for companies to secure executive buy-in. Executives are usually suspicious of less-familiar concepts, including open source. They may wonder (rightfully) how secure the system is or how viable it will be years from now.

This has not been apparent in the open-source ERP space. Many providers have been available for years, and their customer bases are growing. I can think of several open-source ERP vendors that are extremely stable and will be around.

The second part of the quote essentially deals with executive knowledge. However, there is no evidence that an open-source ERP system is less secure than a proprietary one. The most secure operating system in the world is Linux, which is an open-source project.

Limited Succcess Rate Information?

When evaluating software vendors, one of the most important questions to ask is: How many implementations have you performed for a company like ours? This is a great way to gauge how successful your project might be.

This could really be used as an argument to purchase from the largest ERP vendors, which have the most customers. However, it would drive a customer to some of the lowest value and highest TCO offerings. Secondly, it is not so easy to really verify success rates. Vendors massage the case studies, and most of them are exaggerated. Also, the bad or failed implementations are left out, so it is effectively impossible to gain any type of percentage of success.

Maintenance and Customizations Can Add Up

Yes, the basic versions of open source ERP software are much less expensive than any type of commercial system you can buy. However, be wary of the strings attached with the tiny price tag. Unless you’re willing to shift your operations to make the basic, free version work, you’ll likely begin shelling out more than you bargained for. In most cases, the free version won’t be enough to meet your needs.

This is a false claim. The biggest problem with being upsold is with commercial vendors, not open source ERP vendors. And I am unfamiliar with this claim around a free versus paid version. Open source ERP is free to use — but you can add on hosting, but it still increases very little. All of the extra options are extremely low priced, and there is really no comparison with the commercial vendors in this regard. This entire point is a concoction designed to trick readers who do not know much about open source.

Change Management

While choosing open source may save you money on the technical aspects of your project, the people aspects of your project can be just as expensive as they would be with proprietary software.

Or, with all the money the company saves, they could just do more custom development and skip the change management. Change management is pushed most aggressively when the system is a poor fit for requirements. It is not clear it is a legitimate concept and has been proposed by those who seek to force generic functionality into customers.

More Knowledgeable IT Staff?

Open source ERP requires a great deal of technical knowledge to fully understand and implement. For this reason, you’ll need a very capable and available IT staff.

Why is this true? Why does open source require more knowledgeable staff? Open source is fully published and transparent to the IT department. It makes the IT department’s job easier, not more difficult. It is fine to say you have a knowledgeable IT staff, but does this imply that if you use proprietary ERP software, you don’t need this?

Don’t Focus on Costs?

We’ve endeavored to answer this question by outlining both the benefits and risks. Ultimately, though, the point we want you to take away from this post is that your number one selection criteria should NOT be cost.

If it is, you might be enticed by the promise of “low-cost software,” only to end up spending a significant amount customizing a system with questionable viability.

This quote makes it sound like open source is a cheap solution, and using open source is cutting corners. This is a complete misexplanation of open source. Actually, under the pro section, Panorama Consulting said the following:

These savings are made possible because open source ERP eliminates conventional licensing costs. You can acquire and customize the software free of charge. In addition, you aren’t required to pay upfront maintenance fees.

In many cases, the total cost of ownership is also less than a proprietary system because ongoing maintenance costs are usually lower with an open source solution.

Yes, so that explains it. Open-source options are less expensive because they do not have a commercial license. This is a way of diminishing open source as lower in quality and higher in risk, and it is extremely deceptive writing. And we will explain the reason for the deception in the conclusion.

Is Open Source “Cheap” Or Simply Under a Different Licensing Model

Open source is not a “cheap” solution. Some of the best databases in the world are open source databases. The value of open source databases versus commercial databases is fantastic.

As for the second part of the quote, why would a customer be lured into open-source only to end up customizing open source, which would lead to higher than anticipated costs? First, open-source software is far easier to customize. One issue is that open source ERP systems have less functionality than commercial ERP software. However, the cost levels are entirely different. Money saved on the ERP system, and it is really enormous sum of money, can in part be allocated to more custom development that results in a better fit with business requirements. Panorama Consulting seems to miss that saving money in one area can allow those resources to be allocated to other items.

Conclusion

We predicted Panorama Consulting’s view of open source because we find it highly unlikely that Panorama Consulting would ever recommend open source ERP. And the reason is that Panorama Consulting has relationships with commercial ERP vendors. There are incestuous financial relationships between the ERP vendors, Gartner and others, software selection vendors, and consulting firms, and this means it is extraordinarily difficult to get independent advice. If Panorama Consulting did not have the relationships, they would be free to recommend open source ERP, which is a good option in many circumstances. However, if they did this, they would alienate the commercial ERP vendors they are connected to somehow. The fact that Panorama Consulting flatly states that open source ERP systems are not a good idea indicates (along with many other observations we have made) that Panorama Consulting is not independent of software vendors.