Open Architecture Opportunity: Open-source software components are fueling a new reseller's market, customized enterprise software for smaller companies - Enterprise Applications - Industry Overview

Computer Technology Review, Feb, 2003 by Ned Lilly

VARs have been missing opportunities to sell into the small manufacturing space for years, and they know it. The potential market is huge (around 350,000 strong in the US alone) and what it needs is fairly straightforward--an upgrading of decades-old technology into the 21st century. But while they desperately need an infusion of modern technology to compete in today's world of ecommerce and integrated supply chains, most small entrepreneurial manufacturers (SEMs) with sales under $50 million have small budgets and quirky technology environments. Worse, traditional software licensing schemes leave little room to meet the unique needs of the SEM customer without blowing the budget. Into this environment, a new breed of application has entered under the banner of "open architecture," the cornerstone of an emerging reseller's market for customizable software built on an "open stack" of open-source software components, such as Linux, the PostgreSQL database, and the Qt programming framework for C++.

The open architecture approach goes beyond application programming interfaces (APIs), scripting layers, and plug-ins, and gives VARs the full source code access under generous licensing terms. VARs can modify code to meet special customer requirements (or even design whole new applications) from inside the comfortable buffer of a lower total cost that keeps projects under budget and provides additional opportunities for service revenue. With a dramatically lower total cost of ownership than proprietary enterprise resource planning (ERP) systems from the familiar crop of legacy vendors, these more open products also deliver far more functionality than the low-end systems that until now have been the SEMs' only option.

Under this new type of licensing, which combines aspects of both open source and traditional software licensing, the open architecture vendors manage the VARs' software changes and contributions and decide what goes in the main release. This gives the subset of VARs that want to be involved in software development a powerful tool--a new class of standards-based technology that offers the same features and performance of high-end solutions at a fraction of the cost. This brings the benefits of sophisticated ERP software to smaller manufacturing companies who haven't been able to afford such a system, and opens up huge new markets for VARs looking to decrease their reliance on legacy vendors. One characteristic of VARs who have worked with ERP software is a deep and abiding frustration with incumbent software vendors--even their most "preferred partners." The smallest customization or adaptation of an ERP package can be an ordeal, and the software vendor will frequently flat-out refuse to modify anything or all ow the VAR to customize it to meet a customer need.

That leaves SEMs--and their VARs--with very little to choose from. Much of the existing low-end market consists of legacy character-based systems and limited manufacturing modules conceived as add-ons to basic accounting functionality. Development tools are either extremely limited (e.g. the Microsoft Access desktop database) or obscure (proprietary languages like ProvideX), making it difficult to find qualified development engineers. Just above these Tier 3 offerings are mid-range systems, almost all of which depend on Microsoft component technology and require additional license fees for other software such as the underlying database, operating system and tools. These extra costs run up the price of the software, putting these packages out of reach of many small companies. There's also some well-founded skepticism about Microsoft plans to push its customers and partners to the ill-defined (and, to SEMs, slightly scary) ".NET" strategy.

The Open Road

The freedom to modify source code opens new business opportunities for customized, highly functional, yet far more affordable enterprise application packages. These packages are built on powerful, freely available software components. They leverage the work of the thousands of talented programmers who have contributed to open source software suitable for any number of vertical applications or business uses.

With licensing that makes source code freely available and encourages contributions, software built on top of this open stack offers solution providers the ability to configure and ship ERP applications to meet their customers' needs quickly, and even develop new functionality within the architecture. The open-architecture and development platforms clear the way for these applications to operate on a wide range of platforms, as the contributors to the underlying code themselves work on multiple operating systems, databases and hardware. Likewise, many of these applications are collaboratively developed across the world--and the products are often fully international-ready, both in the handling and storage of data and in the client-side presentation. Conversion to a localized version of the product in a particular country is a minor linguistic effort, and requires no programming changes, since all the relevant data (character sets, words and phrases to be translated, units of measure, etc.) is readily availabl e and distinct from the business logic. Local solution providers who are experts in the particular requirements of the region (including business processes, accounting and tax questions) can then concentrate on the client's business needs.