A Guide to Free and Open Source ERP Software

by:
on August 29, 2019

For many organizations, enterprise resource planning (ERP) software has become an indispensable tool. It helps them integrate their resource distribution processes from every operational silo, including purchasing, inventory, manufacturing, distribution, accounting, and human capital management.

As a result, ERP software has become an expansive market comprising several paid, proprietary tools. Each product’s capabilities vary, with each standing out in one area. Many of these are used across industries and are backed by strong after-sales support.

But, in some cases, your needs may not be complex or numerous enough to justify paying for a proprietary ERP tool. Or, your business might need an ERP tool with a level of customization that’s hard to apply on a proprietary product.

In this article, we’ll take a look at free and open source ERP solutions to help you decide if a free or open source tool is right for you.

When are free or open source ERP tools the right choice?

The most basic reason for choosing a free ERP tool is that you’re a first-time user, and you want to evaluate the value ERP software provides you before committing to a paid option. As you go about identifying its value contribution, you’ll also get to see how ERP tools work in general and how to implement one into your ecosystem.

The next use case is simple economics combined with basic prudence: Does your budget permit you to go with a paid tool? Will you use all the features you’re investing in?

If you have the budget but your needs are met by a free ERP tool … you can guess what we’d recommend!

Let’s understand general scenarios when these software would be best to consider:

When to consider a free ERP tool: On an average, an ERP project costs about $7,200 per user over a five-year period. Identify how many users in your organization would use the ERP tool, and then calculate the total cost (number of users multiplied by $7,200) you’ll have to shell out for a paid ERP tool. Does the figure justify the business value it’ll generate? If not, then you might want to consider a free ERP tool, at least to start.

When to consider an open source ERP tool: Open source doesn’t necessarily mean free, but these tools are appealing to many buyers due to the high level of customization they offer. If you’re unable to find an ERP tool that the vendor can customize to suit your exact business needs, consider trying an open source option.

Let’s look at an example: Why did a manufacturing control supplier replace SAP Business One (paid ERP tool) with Odoo (open source ERP tool)?

case study odoo implementation

Client: U.S. based manufacturing control supplier (one-third of an industrial component sales and service organization), with two integrated sister companies.

ERP integration partner: Open Source Integrators

The challenge: The organization had earlier implemented a paid ERP tool, SAP Business One, but still struggled to support its overall business operations.

  • The organization wasn’t succeeding with the tool’s black-box design and its lack of customizations to effectively support key business functions, which included ecommerce, operations management, inventory, CRM, sales, and fulfillment.
  • It wanted a flexible and open source ERP tool that could be customized to enhance its competitive advantage.

The solution: After a detailed investigation of various open source ERP tools, the client:

  • Decided on Odoo ERP, an open source option.
  • Engaged the services of Open Source Integrators to help with the implementation.

The results:

  • Open Source Integrators helped the client migrate successfully from SAP Business One to Odoo in fewer than seven months.
  • The organization is now successfully using Odoo ERP for accounting, sales, CRM, inventory management, shipping, purchasing, and geospatial sales analysis.

At this point it must be pointed out that any software’s suitability to a business is a subjective aspect. Many businesses find the benefits of paid ERP software to be worth the investment, and you’d be closing the door on hundreds of vendors and their extensive support and expertise if you disregard paid ERP tools right off the bat.

Understand free, open source, and paid ERP tools

Here’s some insight to better understand free, open source, and paid ERP tools:

FREE ERP TOOLS

Details: These are commercially free ERP solutions. Often, they are trimmed-down versions of paid/enterprise editions. They offer the basic features required to accomplish tasks such as generating reports or visualizing small data sets. You may have to pay for customer support.

Suitable for: Small and midsize businesses.

Major pros: No procurement costs.

Major cons: All features not necessarily available. In addition, most free tools cap the number of users and there may be third-party integration limitations.

OPEN SOURCE ERP TOOLS

Details: These are solutions whose source code is available for download, and can be tailored to meet specific user requirements.

Suitable for: Businesses with access to software developers.

Major pros: Open source communities of such tools constantly work to improve them and share the results.

Major cons: The technical know-how required to set up and maintain these tools can be intimidating for the average business. You may end up hiring software developers for customization, implementation, and training.

PAID ERP TOOLS

Details: These are the tools for which you need to purchase the license (on-premise) or subscribe to a monthly or annual plan (cloud-based).

Suitable for: Midsize and large businesses.

Major pros: More robust functionalities than free ERP with plug-and-play usability as opposed to open source tools.

Major cons: If you end up disliking your paid ERP tool, you may be stuck with it until your software license expires or your contract ends.

Examples of free and open source ERP tools

If you’re interested in free and open source ERP tools, it’s just a matter of evaluating your options. To help you, we’ve profiled some of them available on our website (find out how we chose these products to feature here).

xTuple

Type: Free and open source.

Functionalities: Accounting, sales management, supplier management, inventory management, and distribution.

What users like: Reviewers describe xTuple as flexible and customizable. They appreciate the structured workflow that connects all the modules together in a coherent fashion.

What users would like to see: Some reviewers mention they’d like an updated interface design and better customer support.

xTuple inventory management

Inventory management in xTuple (Source)

Read reviews of xTuple


Odoo

Type: Open source.

Functionalities: Recruitment, inventory tracking, project management, timesheet maintenance, and marketing automation.

What users like: Reviewers praise Odoo’s customization, the ease of uploading data through Excel, intuitiveness, and integrations.

What users would like to see: Some reviewers would like the customer support to respond more quickly to technical tickets, as well as a shorter learning curve.

Odoo project management

Project management in Odoo (Source)

Read reviews of Odoo


ERPNext

Type: Free and open source.

Functionalities: Financial accounting, project management, human resources, sales management, and inventory management.

What users like: Reviewers describe ERPNext as easy to set up and customizable. They appreciate its intuitive user interface, and growing and active community forum.

What users would like to see: Some reviewers would like it to remain up and running at all times, since it slows down quite usually. They’d also appreciate quicker offline synchronization.

ERPNext sales management

Sales management in ERPNext (Source)

Read reviews of ERPNext


Dolibarr

Type: Free and open source.

Functionalities: Sales management, human resource management, product and stock management, financial management, billing, marketing management, and reporting.

What users like: Reviewers praise Dolibarr’s ease of use, frequent updates, easy implementation, and customizability.

What users would like to see: Some reviewers would like a dedicated customer support for faster resolution of queries, instead of asking at the community forum. They’d also appreciate an updated user interface.

Dolibarr product management

Product management in Dolibarr (Source)

Read reviews of Dolibarr


Follow these steps to pick an ERP vendor

Regardless of whether you’re going with a free, open source, or paid ERP tool, there are a few steps you should always take before picking a vendor:

  1. Determine which functionalities are important to you. Separate the “must-have” functionalities from the “nice-to-haves” early on, so you don’t spend time considering solutions that don’t fit your needs.
  2. Consider your workflows. The implementation process will be much smoother if you take into consideration your business’s incumbent workflows and focus on solutions that align with them. This is especially important if you decide to go for open source ERP tools, as these tools allow for more customization, but require more technical skills to set up.
  3. Shortlist the products you like. Visit our ERP software directory to compare from a long list of products; you can talk to an ERP software advisor at (855) 998-8505 to get free and personalized advice for narrowing down the options.
  4. Check product demos and reviews. Learn everything you can about the options on your shortlist so you can ask vendors well-informed questions (for example, “I read that some of your users would like more frequent product updates—how often do you currently release updates?”).
  5. Meet with vendors and pick a product. Set up a phone or in-person meeting with the shortlisted vendors to receive first-hand experience before you make the final decision.


How we chose the products featured here:

To be chosen, ERP tools had to:

  1. Offer a free, stand-alone version of the software (not a trial version of the software that requires you to use the product for a limited amount of time).
  2. Meet our ERP market definition: ERP software helps organizations track information across all departments and business functions, from accounting to human resources to sales and beyond, and leverages a shared database to provide a single “source of truth” across modules.

We determined the most popular tools to feature by choosing those ranked highest in Google search results—that also have a profile and reviews on our website—during the week of July 15, 2019.

Notes:

If you’ve decided on open source software, there may not be a vendor account manager to meet with. Instead, speak with whoever is helping you implement the system and set milestones for when it will be ready for use.

The applications selected in this article are examples to show a feature in context and are not intended as endorsements or recommendations. They have been obtained from sources believed to be reliable at the time of publication.

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