ERPNext is one of the fastest-growing European systems in the marketplace. We have received multiple requests to do a review of this software. So… I thought I’d oblige and provide an overview of the pros and cons of this up-and-coming technology.
What is ERPNext?
ERPNext is an open-source technology, meaning that they provide the code to people that implement the software, basically, you can do whatever you want with the software. Unlike traditional commercial off-the-shelf software where the code is proprietary, you can’t really change the code without very deep technical expertise. Open-source, allows organizations to change and modify the technology however they need to. Now, ERPNext positions and markets their product as an open-source alternative to SAP. I don’t know that I agree with that because SAP and ERPNext, target very different audiences. Companies that use the two systems usually are distinctive, but there is a place in the market for ERPNext. This system has a broad set of capabilities, a number of different functions, modules, and business processes, and workflows that they can accommodate. It can incorporate traditional ERP capabilities like finance, and accounting, even CRM, customer relationship management, and sales order management. It can also handle manufacturing, distribution, warehouse management, and those sorts of things.
What makes ERPNext different and unique in the marketplace is its ability to handle some pretty unique capabilities that not all organizations need. If you are an organization that requires some of these capabilities, it can be hard to find it in an ERP system, especially if you’re looking at open-source technologies. For example, ERPNext has project management capabilities. So, there’s a module that allows you to manage projects, handle the costing, and all the back-end processes that go along with project management. If your organization does complex project management, if you’re aerospace and defense, for example, or you’re making big products or services, then that project management capability can be very helpful. In addition to this technology, ERPNext allows you to build a front-end website with eCommerce that ties into the technology, which is pretty unique. In the end, that’s something that can be hard to find. It can also be something that can be hard to integrate with other third parties. Having that as part of your core ERP system can be very powerful while handling asset management.
Companies that have fixed assets, high capital costs, and investments in assets that they need to manage ERPNext allow you to service those capabilities in those processes. Finally, another unique capability of ERPNext is its Helpdesk capability. If you’re a company that wants to track either internal IT service type helpdesk, if you want to be able to track customer complaints or customer tickets, it has the capability to be able to do that. Again, that’s another very unique aspect of the technology that a lot of systems out there don’t have. While there is a number of other strengths, capabilities, and solid workflows within the system, these are just a few of the differentiators that make ERPNext different from some of their competitors. Another strength of the ERPNext is the flexibility of the software. By the nature of the open-source, it’s going to have a certain amount of flexibility. But there are some unique components of ERPNext that is unique even for open-source technologies.
Unique Functions / Integrations
First and foremost, the product is developed on GitHub and if you’re not familiar with GitHub, it’s a Microsoft platform where development code and documentation can be stored and managed. Companies that use the ERPNext, have access to this platform to be able to further their development and find the best fit of different capabilities for their business. In addition, the product ERPNext is developed by an Indian-based company called Frappe. They have developed a number of different types of technologies, most of them open-source and there’s a number of different applications and things that can be integrated to ERPNext or bolted on to ERPNext to provide additional capabilities outside of the core system. So, these added bolt-ons and unique features and functions can be built to support whatever types of business processes and workflows that you need.
As I mentioned before, the product allows you to build a website on the front end, which then ties back to the ERP next back-office software. This is a unique way to build eCommerce capabilities either within your own website, or the product can also integrate well with Shopify and other types of eCommerce platforms. There’s a great amount of flexibility in the product, not just in the fact that it’s open-source, but also in the platforms that it uses. Basically, the third-party bolt-on applications can be used to add to the core capabilities of ERPNext.
One important aspect to consider when evaluating ERPNext, which could be a good thing, or a bad thing, depending on where you fall on the continuum here is the availability of resources, both internal and external.
Let’s start with internal resources. When looking at your IT organization or your technical competencies in-house, it’s imperative to recognize that if you deploy a system like ERPNext, you’re going to want to make sure that you have the internal competencies and capabilities to be able to manage and develop the software. It’s not like deploying a cloud-based commercial off-the-shelf system that can be deployed by non-technical types. Open-source technology is going to by definition, require more technical competencies, which may be okay if you have a robust IT department. But if you don’t have an IT department yet, or if you don’t have a lot of depth in that area, it might be taxing on your ability to manage and implement that type of technology.
Now, when we look at external resources, and the sorts of external help that you might require to deploy the software, it’s important to recognize that while ERPNext is a high growth company, and they are growing in terms of the number of clients using the technology, it’s still not as widely adopted as some of the bigger ERPNext systems out there. Therefore, it can be harder to find resources that know the product very well and have experience implementing and maintaining the software. It pivotal to recognize is that the external resources available may not be as robust as what you might find with other systems.
Another consideration as it relates to resources is recognizing that this company is based in India, a lot of the competencies that are familiar with a product are based in India. If you’re in that region, or that part of the world, that’s probably not a problem. However, if you’re in other parts of the world, in different time zones, or with different cultures, then that may not integrate well with that environment. This is something to be aware of as you think about the right cultural fit, geographic relations, and time zones for the type of support you might need for your European implementation.
Many of the organizations that deploy ERPNext, or higher growth companies, they’re typically small, maybe midsize organizations that are either deploying their first ERP system or maybe this is their second step in their journey towards a newer ERP system. A lot of the questions that come up for organizations considering this product are: 1) can the product scale for my needs? 2) Will it allow me to expand to the next level of my growth plans? The answers are yes BUT – it depends. If your definition of scalability is ease of use and flexibility, plus the ability to grow while the software evolves with you, then absolutely – the product is scalable. However, if you’re a very complex organization, if you grow very quickly, you run the risk of outgrowing the capabilities of the system, and it becomes too much maintenance and headache to be able to adapt the software to fit your more complex needs.
So, it’s scalable to a point but the larger you get, the more complex and diverse you get, the more complex the technology itself is going to get, and the harder it’s going to be to maintain long term. What we see at times with open-source ERP systems in general, is that as companies grow and become bigger, they change the software so much that it no longer resembles the original intent, so you pretty much end up with a custom system. Again, it’s important to recognize that wherever you are in the lifecycle, you want to assess whether or not this technology has the capabilities to support your longer-term growth plans.
The total cost of ownership is a key consideration for most organizations. In the end, one of the advantages of ERPNext is the relatively low total cost of ownership. This is especially true when we talk about ERP implementation. Implementing the product itself can be lower cost than what it might cost to deploy a larger off-the-shelf system. Not only in terms of the software license cost but also the implementation costs themselves. Open-source systems’ pricing model is generally lower priced than bigger ERP systems and being able to use your own resources, meaning not having to hire necessarily very expensive resources to deploy the technology can drive the cost of your implementation down. However, longer-term, the cost can actually increase and escalate to the point where it may not make sense in the long term as you grow and as you invest more time and money in changing the technology. Be sure you look at not only your short-term implementation costs but what are the longer-term implications and cost of managing that technology and ensuring that the technology keeps up with your business growth longer term.
So, is ERPNext a good fit for your organization? Should you include it on your shortlist of evaluation considerations? It depends if you’re looking for something that’s flexible, and cost-effective, or you’re looking for some of those functional strengths that we talked about earlier in this article, then yes, it can be a great fit for you. However, if you’re an organization that would prefer not to have to deal with the headache of dealing with open source and managing the technical implications of that then maybe it is not a good fit. If you’re a big, diverse, complex organization that is too big or can’t be supported by a product like that, then it may not be a good fit as well. If you’re looking for an open-source alternative, and you want to look at something that could be an upgrade from a real basic ERP system, ERPNext could be a great fit for you.
I’d love to hear your feedback or provide any input I can in your evaluation process. Please feel free to reach out if you have questions or you’d like to brainstorm whether or ERPNext might be the right fit for you. I also encourage you to download our 2021 Digital Transformation Report which contains the top 10 rankings of different types of ERP systems and digital transformation technologies in the marketplace.