November 12, 2002

OpenMFG brings ERP to small manufacturers

- by Robin Miller -
According to their Web site, OpenMFG is "...leveraging all the work on robust open source building blocks such as the Linux operating system, the PostgreSQL database, and the Qt programming language." Their software does not meet the OSI standard for "Open Source," and they make no apologies about this fact. Read this (lightly edited) transcript of an IRC interview with OpenMFG CEO Ned Lilly and decide for yourself whether this company has managed to find a workable middle ground between the open source and proprietary software worlds.

Before we dive into the interview, you might want to take a look at The OpenMFG License -- and you may also want to consider that this company's people actively contribute to Open Source projects, and are using Open Source tools to build a software business for users (small manufacturers) who have never had access to any decent software that allows them to compete with "the big boys" on an even footing, and for whom there is currently no mature, well-supported, "enterprise-ready" free or open source product available.

NewsForge: What makes you think you can compete with SAP, Peoplesoft, and the other big names in this field?

Lilly: We're addressing a completely different market from them - small manufacturers, with sales under $50 million. The big guys aren't capable of selling to them effectively.

NewsForge: But aren't they trying to attack that market more?

Lilly: Everyone seems to define "small" differently... for SAP, "small" means under $500 million. It's very very rare that they'd even look at someone under $100mm for lots of reasons - the product is overly complex for small manufacturers, the cost of sales is too high for a large organization, and of course, if they start becoming even remotely price-competitive with someone like us, they're going to have a lot of very unhappy customers who paid full freight.

NewsForge: Can your small/new company afford a price war? What if a SAP decides to come up with SESAP (Small Enterprise SAP)?

Lilly: We wish them luck - but it's a COMPLETELY different market from what they're used to, in every way. I've had about a dozen current and former SAP people tell me as much.

For starters, there's rarely an IT person to sell to. ;-) We're selling to the owner, the CFO/Controller, and the head of manufacturing.

Back to your question of whether we can afford a price war - let's look at the numbers...for companies with up to 15 users, we offer a flat annual site license for $15,000/year - which includes business hours support (typically through their local VAR), and minor AND major upgrades. For larger firms, or those who prefer traditional perpetual licenses, we have a $2,000/seat price point, plus 18% annual maintenance (support and minor upgrades), so that's a completely different universe - even the cheapest midrange competitors typically come in more than twice our cost.

NewsForge: We keep hearing that American manufacturing is a shrinking business. Is it a wise business on which to stake your future? Or do you have plans to offer products geared for other business sectors?

Lilly: it may be shrinking, but there are still 300,000 manufacturers in the US alone with sales under $50mm - they outnumber the bigger mfrs more than 10:1 - and very few of those smaller firms have ANY meaningful ERP. We think it's a huge market opportunity, for years and years, and that of course says nothing of outside the US, where demand could be even greater.

We deliberately chose manufacturing because a) it's hard, and not many people do it well, period, and b) the small market doesn't have any good, affordable choices

NewsForge: Is this sort of like that old economy "Find a niche and fill it" thing? :)

Lilly: it's a big niche, believe me!

NewsForge: Licensing: Do you expect any flak from the GPL purists?

Lilly: I don't see why anyone would have any objections to what we're doing - this is 400,000+ lines of code that we wrote ourselves - it's not as if we're forking an existing open source project. We're making the source available to both customers and partners, and actively encouraging code contributions by both, particularly our business partners, who have been in the business of implementing and customizing ERP systems for 10-15 years. We think they're hungry for a licensing approach like this - and the response so far has been pretty incredible.

One of the main reasons we're able to come to market with a product as sophisticated as we have, priced as aggressively as it is, is that we're built on top of open source components... Linux, PostgreSQL, and Qt - which is really a fantastic toolkit. We've been active in all three communities, particularly Postgres and Qt

NewsForge: OpenMFG is a new company with a new product. Do you have any actual customers using your product yet?

Lilly: We have four customers, one of whom we quote in the rollout release, another of whom we just turned on this week. A third is slated to start later this month. They're in four different industries - water purification systems, dental supplies/bonding materials, concretes, and refrigerators.

NewsForge: It says on your site that your product interfaces with "any number" of accounting packages. Some examples?

Lilly: Today we have a defined interface with a legacy system called Real World - an old COBOL/DOS product acquired by Great Plains several years ago. They had a pretty good presence in the small manufacturing space, and there were a couple of tiny vendors who built MRP/ERP functionality on top of Real World. We bought one of them, Shopman Inc., earlier this year. We worked for some time to get a migration toolkit built to extract and map the data from the Real World formats into OpenMFG. That's done, and installations are now taking 3-4 weeks.

The API for the accounting link is very well-defined, and we're looking to customer demand to decide where to go next. Quickbooks is the most likely possibility. It's relatively minor engineering work - customers have also asked for Peachtree, Great Plains, and some others. We've had a number of SQL-Ledger users express interest as well, although I think the core group there would prefer an OSI-certified manufacturing solution.

NewsForge: Here's a question I'm sure some of our readers would like to ask: "Are you hiring?"

Lilly: Any company in our position is always looking for talented people, In our case, the relevant skills are first, solid ERP/manufacturing experience. Qt/C++ is easy to pick up for any good programmer - but understanding of the industry is key. SQL experience is nice, as is accounting software experience - as we roll out our Deluxe package early next year, I expect we'll see a lot of interest outside of our core manufacturing focus (to kind of get back to an earlier question you posed). Pure distributors, for example.

NewsForge: What about channel/consultant opportunities? (I think we're going to see a whole new wave of Linux-based small entrepreneurs very soon.)

Lilly: I couldn't agree more. That's the biggest opportunity, frankly. We've heard from a lot of people with deep experience in the ERP industry who want to hang out their own shingle working with OpenMFG. They see the same opportunity, to build their own mini-consultancy/VAR.

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