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ERP Guide : Implementation strategy

Tutorial by:Gitika Pandey      Date: 2016-05-18 04:58:23

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Two important differences exist between proprietary and open source ERP systems: the relationship with the ERP supplier and the use of the source code.

In case of a proprietary ERP system the organization that wants to use ERP starts a long-term relationship with an ERP supplier. The organization agrees a license contract with this supplier, which grants the right to use a clearly demarcated use of the software. The demarcation can be described in terms of users or modules. Moreover, the organization normally agrees a maintenance contract with the supplier: in return of an annual maintenance fee, the supplier makes sure the ERP system is adapted to match requirements of new legislation, is extended with new functionality and is upgraded for new technological developments. In case of an open source system, there is no obvious party with which a license contract and a maintenance contract can be agreed. The advantage is that no party can limit the use of the system; the disadvantage is that support and maintenance of the ERP system are not taken care of by itself.

In case of a proprietary ERP system the organization that implements ERP does not normally have access to the source code of the ERP system, while unlimited access to the source code is the main characteristic of an open source ERP system. Open source software is not necessarily free of charge, but the use of the software and the associated source code may never be restricted. The advantage of this is that the functioning of the system is fully transparent: the source code can be studied line by line if necessary, and it can be adapted to meet the requirements of the business and management processes of the organization that uses the system. Adapting the software also has its downsides of course: the use of best practices can be neglected, and software maintenance is a labour-intensive activity.

Often, cost savings are indicated as an advantage of open source software: the licenses may not always be free of charge, but they are often considerably cheaper than licenses for proprietary software. However, in the case of ERP it is not realistic to expect a substantial cost saving through the use of open source software. The license costs may be lower, but in an ERP implementation, these costs constitute only a small portion of around ten percent of the total costs of the ERP implementation. It is also possible that the license costs are lower, but that the maintenance costs are higher. In a proprietary situation, annual maintenance costs of ten two twenty percent of the initial license fee should be taken into account. In an open source setting these costs are replaced by software development and maintenance that can easily be more expensive. When measured over the total ERP life cycle, the costs of an open source ERP system will not necessarily be lower than those of a proprietary ERP system.

 Comparison of open source implementation strategies

Organizations can choose one of two strategies when using open source ERP as an alternative for proprietary ERP. The first strategy is to implement the open source system as if it were a proprietary system, by selecting a commercial party that offers to deliver the software as a package and maintains the source code. The second strategy is to actively use the differences between open source software and proprietary software by maintaining the software in the organization itself. Both strategies have consequences for the implementation of the system. he most important consequences are presented in above Table , which is based on the phases distinguished in the ERP life cycle that were described latter in this site.

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