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Open source gaining traction in ERP market

The cost benefits and usability of Linux have driven ERP vendors like Oracle Corp., SAP AG and Sage Software to support the open source operating system in recent years, according to experts.

A growing number of companies are looking into the possibility of deploying mission-critical Enterprise Resource Planning (ERP) applications on top of the open source Linux operating system, according to technology professionals and industry analysts.

This is a very end user driven phenomenon ... They have pushed the enterprise software vendors to support Linux as a platform.
Joshua Greenbaum,
principal analystEnterprise Applications Consulting

While ERP on Linux is still far from the norm, industry watchers say it is on the radar screen of technology decision makers eager to avoid vendor lock-in and reduce the overall cost of historically expensive ERP implementations.

AMR Research reports that deployments of ERP on Linux grew about 9% from 2003 to 2004. As a whole, ERP on Linux makes up about 1% of the ERP market today, said Bob Locke, a senior research analyst with Boston-based AMR. But that number is expected to gradually grow.

"It's not mainstream yet, but we know that it's growing," Locke said. "All the major ERP vendors offer [Linux] as a platform. But we see that there is still some reluctance from buyers to invest [in Linux for] their core business applications."

Open source ERP applications vendors, such as Compiere Inc., are also gradually gaining traction, according to experts. Framingham, Mass.-based IDC estimates that overall market for non-proprietary ERP applications will hit about $36 billion by 2008.

Industry watchers say the increasing acceptance of ERP on Linux and open source ERP is symptomatic of the natural evolution of open source technology, which for years has been chipping away at proprietary vendors' market share in the areas of "edge" applications like e-mail and Web servers, and is now readying for the world of big time business applications.

Experts say that Linux may have a tough time gaining acceptance as the underlying platform for ERP at big companies because most of them already have significant and ongoing investments in proprietary ERP deployments. They say that new companies, small companies, government bodies and midmarket companies interested in new ERP deployments are most likely to deploy ERP on Linux and open source ERP in the coming years.

Linux seen as viable platform for ERP

Experts say the cost benefits and usability of Linux have driven ERP vendors like Oracle Corp., SAP AG and Sage Software to support the open source operating system in recent years.

"This is a very end user driven phenomenon," said Joshua Greenbaum, principal analyst at Enterprise Applications Consulting in Berkeley, Calif. "They have pushed the enterprise software vendors to support Linux as a platform."

Technology professionals interviewed agree that Linux has come of age and is ready for the world of big league ERP applications.

"There isn't anything that Linux can't do, not because it's inherently better but due to the openness factor," said IT industry veteran Joe Klemmer. "It wasn't so long ago that people said Linux was never going to be a database platform. Hell, before that there were people saying it would never be a firewall or file server. As it is today, Linux can be a fine platform for ERP. It might not be the perfect one but that is just a matter of time."

But while the viability of Linux as an underlying platform for ERP does not seem to be at issue, some question whether open source ERP applications will be highly successful in a market where success is judged based on knowledge of individual industry verticals.

"We've proven that infrastructure and platform can be delivered in an open source model. The market has yet to prove that complex enterprise applications can be developed and delivered in the same way," Greenbaum said. "It's just hard to find the open source developers that can support a highly functional value-added application that has deep vertical expertise."

Some closing advice

Experts say that companies mulling the possibility of ERP on Linux will need to make the usual open source considerations. For one, companies will want to have the in-house expertise to support open source deployments. Barring that, companies may want to look for outside support from consultants and vendors.

"Make sure your vendor spells out exactly what can be run on Linux and open source and what can't," Greenbaum suggested. "And understand what sacrifices you might be making by insisting on Linux and open source when that's not necessarily the preferred platform of the vendor."

This story originally appeared at, part of the TechTarget network.

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