Major ERP vendors battle Salesforce.com for SaaS mindshare

eWeek has a good overview of the ongoing battle between the major traditional vendors of enterprise applications and Salesforce.com for the hearts and minds of enterprise system buyers.

Salesforce.com, of course, has put all its eggs in the software-as-a-service (SaaS) basket, going so far as to proclaim "the end of software." While Oracle defends the value of its on-premise offerings, it continues to build up its on-demand offerings, which range from simple hosting of its E-Business Suite to the multi-tenant CRM on-demand offering that it inherited from Siebel.

"You'll see us ramp up quite a bit—more advertising, more marketing, more sales," [Juergen Rottler, Oracle's executive vice president of Oracle On Demand and Oracle Support Services]. said. "We've incorporated Siebel CRM OnDemand and [developed] three new releases. We've rearchitected our entire underlying architecture to scale the business a lot faster. We've made core investments … that require a pretty heavy investment in R&D and services that a lot of niche players can't really make."

This leads, of course, to the argument over who has more customers and users:

On the heels of Salesforce.com's announcement of its $500,000 revenue mark in November, Oracle released a statement that it has surpassed a milestone of more than 1.7 million on-demand users, representing more than 2,200 customers buying Oracle's subscription-based solutions, managed applications or software managed services (compared with Salesforce.com's 27,100 customers and 556,000 users).

Another battleground is over ease of integration. Major vendors such as Oracle and SAP contend that on-demand offerings do not easily integrate with on-premise applications, such as ERP. It's still a strong argument in favor of on-premise software, but Salesforce.com is firing back with its ApexConnect offering, a set of tools that allow interfaces to be built with third-party applications, including pre-built interfaces for Oracle and SAP.

As with many trends in information technology, there is no one right answer to the on-demand vs. on-premise argument. Organizations will need to evaluate their needs along with the advantages and drawbacks of each approach. My own view is that the economics of the on-demand model are too strong for it not to succeed. It may not be suitable for many applications within many organizations today, but the barriers -- such as the integration challenge -- are slowly breaking down. Although on-demand applications are unlikely to completely replace on-premise offerings, over time they will increase their share of the enterprise applications market. The only question is how much.

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Microsoft threatens Linux users

It didn't take long for Microsoft to make clear its intention in forming an alliance with Novell to support Linux earlier this month: legal intimidation of Linux users.

Microsoft CEO Steve Ballmer said yesterday that Microsoft signed the deal with Novell because, in Microsoft's opinion, Linux infringes on Microsoft's intellectual property rights and Microsoft wanted to "get the appropriate economic return for our shareholders from our innovation."

According to Computerworld,

A key element of the agreement now appears to be Novell's $40 million payment to Microsoft in exchange for the latter company's pledge not to sue SUSE Linux users over possible patent violations. Also protected are individuals and noncommercial open-source developers who create code and contribute to the SUSE Linux distribution, as well as developers who are paid to create code that goes into the distribution.

It also quotes Ballmer, threatening,

"Novell pays us some money for the right to tell customers that anybody who uses SUSE Linux is appropriately covered," Ballmer said. This "is important to us, because [otherwise] we believe every Linux customer basically has an undisclosed balance-sheet liability."

Continuing the sabre-rattling,

"Only customers that use SUSE have paid properly for intellectual property from Microsoft," he said. "We are willing to do a deal with Red Hat and other Linux distributors." The deal with SUSE Linux "is not exclusive," Ballmer added.

With SCO's lawsuit going nowhere against IBM and other Linux providers, Microsoft apparently thinks it needs to do more to discourage organizations from adopting Linux. Or, as an alternative, only deal with Microsoft-approved distributions.

Ballmer, of course, provided no substantiation that Linux infringes on Microsoft patents. SCO has tried and has so far failed to prove similar allegations relative to Linux infringement on Unix IP rights.

Our research shows that in corporate data centers, Linux's share of workload processing is tiny compared to Microsoft's. Ballmer's disclosure shows, however, that Microsoft considers Linux a major threat. In forming its alliance with Novell, Microsoft is on the one hand embracing Linux, and on the other hand attempting to instill fear in corporate decision makers concerning Linux.

Update, Nov. 18: Jason Matusow, Microsoft's Director of Corporate Standards, posted to his blog asking for feedback from the open source community on the Microsoft/Novell patent covenant "not to sue." Read Matusow's post with all the comments to understand that the majority of open source developers do not trust Microsoft's intentions here.

Update, Nov. 18: The Seattle Intelligencer has a full transcript of Ballmer's original remarks. He says much more than the original Computerworld article quoted. And there are a ton of good comments attached to the article as well.

Update, Nov. 21: Now Novell is publicly distancing itself from Ballmer's remarks. In an open letter published on Novell's website, Novell's CEO Ron Hovsepian says,

We disagree with the recent statements made by Microsoft on the topic of Linux and patents. Importantly, our agreement with Microsoft is in no way an acknowledgment that Linux infringes upon any Microsoft intellectual property. When we entered the patent cooperation agreement with Microsoft, Novell did not agree or admit that Linux or any other Novell offering violates Microsoft patents.

In related news, Dave Kaefer, Microsoft's GM for IP licensing, says that Microsoft will not identify what Microsoft patents are being misappropriated in Linux. Quoted in Computerworld, Kaefer says,

"Patents are hard to understand. You have to have a certain level of expertise to understand the scope. And there are legitimate questions about patent quality," he said. "The reality is that you'd have to look at thousands of patents and thousands of products. To focus on every single one would be prohibitive."

Busted.

Update, Nov. 29. Via Computerworld, Novell CEO Ron Hovsepian gives a behind-the-scenes look at what triggered the original deal with Microsoft. Most interesting are the things that the two parties discussed but did not agree to, such as allowing Linux to run as a guest OS under Windows but not Windows under Linux, and allowing Microsoft Office and Visual Studios to run under Linux.

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Dave Duffield debuts new on-demand ERP

It's been almost two years since David Duffield resigned from PeopleSoft, the firm he founded, in the middle of its hostile takeover by Oracle. Since that time, in addition to building a home bigger than the White House, Duffield has been working with a small startup, Workday, more or less in stealth mode. The buzz was that it had something to do with HR, and something to do with on-demand and open source thrown in the mix.

Well, the firm has finally announced its product line: Workday Enterprise Business Services, which it calls an on-demand ERP solution, although its roadmap falls far short of comprehensive ERP functionality. The first offering is Workday Human Capital Management, which is now in general availability, after successful implementation at Biosite, a medical device firm, and Kana Software, a software development firm. Future offerings will include Financial Management, Resource Management and Revenue Management, scheduled for release beginning in 2007.

Workday's press release points out the technical architecture of its on-demand services, which includes a multi-tenant architecture, built-in auditing to comply with increasing government regulations, and web services integration. According to Computerworld, the product makes heavy use of Asynchronous JavaScript and XML (AJAX), a web development approach for creating interactive web applications.

There are competitors to Workday, such as NetSuite, that come closer to offering complete ERP functionality. But with Duffield's involvement, the 65-employee Workday is getting a lot more publicity right now. Major technology product and service providers, such as Accenture and ADP, have already formed partnerships with Workday, and Microsoft is working with Workday to provide integration with Microsoft's Outlook, SharePoint Server and Exchange Server products.

So, will Workday be a serious competitor in the enterprise systems marketplace? If it is, Duffield says it will be because of Oracle's hostile takeover of PeopleSoft. According to Computerworld,

Toward the end of the 18-month hostile takeover bid that Oracle waged to acquire PeopleSoft, Duffield came out of retirement to rejoin PeopleSoft. "We worked like crazy for several months to keep PeopleSoft from the clutches of Oracle," he said. "When Oracle prevailed, it inadvertently opened a door for us." Duffield and former PeopleSoft colleague Aneel Bhusri founded Workday in March 2005.

Duffield gets a lot of sympathetic press because of the people-friendly culture he built at PeopleSoft and his charitable activities, such as his fund to help unemployed PeopleSoft workers after the Oracle takeover and his pet rescue foundation.

Everyone wants to see Dave succeed. Whether that translates into market share for Workday remains to be seen.

Computerworld has more on Workday's debut.

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Strange bedfellows: Microsoft and Novell in Linux deal

It continues to amaze me how technology vendors can be competitors and partners at the same time. The latest example is Microsoft and Novell, which have announced a deal to promote interoperation of Microsoft Windows and Linux and -- the strange part -- promote each other's products.

According to CNET, the deal has many components--let me try to itemize them:

1. The parties will work to make Windows and Linux interoperate more effectively.
2. Microsoft will promote Novell's SuSE Linux and Novell will promote Windows.
   
3. Microsoft and Novell will provide each other's customers with patent coverage for each other's products, and Microsoft will not take patent enforcement action against individual non-commercial Linux developers.
4. Microsoft and Novell will create a joint research facility to develop new products for virtualization, web services for server management, and MS Office/OpenOffice compatibility.
5. Microsoft will optimize its virtualization technology for Novell's SuSE Linux, and Novell will do the same with its virtualization technology for Windows.
   
6. Microsoft will recommend SuSE Linux in cases where Microsoft customers want to run Linux and will promote Novell's maintenance and support offerings.
   
7. Microsoft and Novell will share help desk resources for each other's products.

It's not hard to imagine why Novell might want this deal, but why would Microsoft want to do anything to make it easier for data centers to run Linux? Based on our most recent technology trends survey at Computer Economics, we estimate that Linux averages just 5-7% of the processing workload in North American data centers. Microsoft, on the other hand, averages over 50% of the workload.

Once again, Slashdot has interesting insights (if you can get past the one-liners such as "Hell called, they want their ice back"). Here are some of the more plausible theories by Slashdot contributors on why Microsoft did this deal:

• Open source applications, such as SugarCRM, are gaining ground, and they tend to run better on Linux than Windows. Microsoft wants to have an opportunity to get those apps running on Windows.
  
  
• Microsoft is concerned about anti-trust actions and wants to appear more open to competing operating systems. The recent trouble with the EU over Vista is a case in point.
  
  
• Microsoft needs a low-cost OS offering for overseas markets (where it can't charge its usual price for Windows), so that it can gain ground in those markets and sell its applications.
  
  
• Microsoft wants access to and influence over Mono, Novell's project to develop an open-source .NET-compliant set of tools. (.NET is Microsoft's framework for web services.) Promotion of Mono is promotion of Microsoft's .NET framework, which is a platform for Microsoft's applications.
  
  
• Microsoft is trying to force consolidation of the Linux distribution market so that it has one larger competitor to deal with instead of a fragmented, decentralized enemy.
  

But the most interesting insight is this one, where the writer ties the deal to Microsoft's need to be able to control digital rights management (DRM) as it plans to do in the next generation of Windows:

Remember the recent MSoft/Xen collaboration? MS is making a version of Windows that can serve as the hypervisor that other OS's run on top of. Microsoft's interest here is to make sure Windows is at the bottom layer so they can enforce DRM, "trusted computing" and ultimate control of the box, and collect fees when everyone is using virtual Linux etc. What they want to prevent is a future where free software is at the bottom of the stack and virtual Windows instances are brought up when needed.

All these theories are plausible, and Microsoft is no doubt pursuing multiple objectives in this deal. But ultimately, I think it's all about control. For example, both Microsoft and Linux have virtualization technologies--but which will be the host and which will be the guest? Microsoft realizes that although Linux's share in the data center is small, it is growing. If Linux is not going away, then it's better for Microsoft to be the host than the guest. And where it must be the guest, Microsoft wants to ensure that it's a business partner (Novell) that is the host, not someone else.

Furthermore, Microsoft recognizes that Linux is threatening to make the bottom layer of the software stack a commodity, just as Intel has made the hardware layer a commodity. Although much of Microsoft's profitability in the past has come from Windows, Microsoft is positioning itself to derive even more value from its Office products and other applications, especially in overseas markets where Linux adoption is taking place even faster than in the U.S.

As I mentioned earlier, Microsoft already averages over half of the workload processing in data centers. Microsoft really doesn't need to increase that share, but it does need to maintain it. By interoperating with Linux it ensures that it maintains its position in the data center.

Update: The ink is barely dry on the Novell deal and now Microsoft CEO Steve Ballmer is suggesting that other Linux distributors form similar patent deals with Microsoft. Strange. Why all the talk suddenly about patent infringement? Is this a threat or an attempt to spread fear, uncertainty, and doubt? eWeek has the story.

Steven J. Vaughan-Nichols, writing for Linux Watch has good insights:

I used to think that Microsoft wouldn't dare use its patents against the Linux companies. My logic was that if Microsoft started really throwing its patent weight around, IBM or Novell could retaliate in kind. Thus, if any one company tried to smash Linux with an overly aggressive patent enforcement, they would be blasted by the pro-Linux companies with large patent portfolios. It was the old geopolitical idea of MAD (Mutually Assured Destruction) . brought into the PC age.

Well, now Novell and Microsoft have a non-aggression treaty. Yes, the Novell/Microsoft deal also frees individual, non-profit open-source developers, and programmers who work on openSUSE, from any Microsoft patent danger. But what about programmers who work on, say, Red Hat Linux?

I hope I'm wrong. I hope that in the next few weeks, I'm not writing about Microsoft suing Red Hat. That Linux company has had more than enough trouble recently with Oracle. Or, maybe it won't be Red Hat. Maybe Ubuntu would be the target.

Why do I fear Microsoft might try this? I fear it because Microsoft's proxy war on Linux via SCO is finally coming to its endgame. And no one, probably not even in SCO's own offices, believes that SCO will win.

So, what can Microsoft do? It can bend, ever so slowly, to the simple fact that Linux is here to stay -- but at the same time, it can free itself to attack individual Linux companies in the court room.

Cynical? Yes. But after covering Microsoft for almost two-decades, I trust Microsoft the least when it looks like they're co-operating with others the most.

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Oracle plays hardball with Linux support

Oracle just threw a monkey-wrench into the Linux machine shop. It announced last week at its user conference that it will take Red Hat's distribution of Linux, remove Red Hat's trademarks, and begin maintaining the product under a support agreement for about half the price of what Red Hat charges.

Oracle is touting its new offering, dubbed Unbreakable Linux, as a way to increase the enterprise-class status of Linux. "Oracle's Unbreakable Linux program is available to all Linux users for as low as $99 per system per year," said Oracle co-President Charles Phillips in Oracle's press release. "You do not have to be a user of Oracle software to qualify. This is all about broadening the success of Linux. To get Oracle support for Red Hat Linux all you have to do is point your Red Hat server to the Oracle network. The switch takes less than a minute."

What's striking in Oracle's press release is how many other parties are quoted as positive about Oracle's move. Oracle got Dell, Intel, HP, IBM, Accenture, AMD, Bearing Point, EMC, BMC, and NetApp all to say good things about Oracle's decision. Some of them that have their own Linux support services, such as HP and IBM, are caught between maintaining their relationship with Oracle and building their own Linux businesses.

Red Hat is in a really tough position, with its stock plunging 24% on the news. It responded on its website, with a FAQ entitled "Unfakeable Linux," in which it points out deficiencies and incompatibilities in Oracle's offering, specifically Oracle's lack of support for Red Hat and JBoss applications, as well has potential hardware, software, and other incompatibilities between Oracle and Red Hat Linux. (Red Hat's website is extremely slow today, probably because of all the hits it is getting from the Linux community on this FAQ.)

As usual, the most insightful commentary is on Slashdot, if you can find it. For example, "Korgan" writes...

Actually, the whole reason they're doing this is because they're pissed off with Red Hat for buying JBoss when Oracle wanted it.

I kid you not. Search Google for comments from Larry just after Red Hat made the purchase and you'll see why.

This is just continuing that. Oracle at the time said they were considering their own Linux distro in an attempt to compete with Redhat. To paraphrase Ellison...

If Redhat are going to step on our toes, we'll stomp on theirs

This isn't going to make any real difference to Redhat in the long term. Oracle would be smart to position their distro as the best possible platform for their own primary products (such as the databases, ERP software and so on.) However, the chances of that are pretty slim.

Given Oracle just recently released a mammoth patch for their 9i and 11i products that, while containing more than 100 bug fixes, didn't manage to fix all known bugs, I seriously doubt they're in any way prepared to take on the responsibility of a full fledged Enterprise ready Operating System. This is going to kick them hard.

Although I think this may overstate Oracle's motives, I don't think it is far off. It wouldn't surprise me at all, now, if Oracle's intention is to drive down Red Hat's stock price and ultimately be able to buy Red Hat along with its recent JBoss acquisition.

That would allow Oracle to own the entire technology stack, from operating system through database and middleware, all the way to enterprise applications.

TomorrowNow a threat to Oracle's maintenance business?

I conducted a phone interview last week with Andrew Nelson, founder and CEO of TomorrowNow, a third-party maintenance support provider for Oracle's PeopleSoft, J.D. Edwards, and Siebel products. I've mentioned TomorrowNow in the past, but I was interested in how its business has been progressing in the year and a half since it was acquired by SAP.

TomorrowNow has not yet announced its third-quarter results, but Nelson indicated a major increase in new customers: over 200 today, with 60% running PeopleSoft, 30% on JDE, and 10% with Siebel (its newest support offering). The firm plans to offer support for Baan (now Infor's ERP LN) beginning in January 2007, and has already signed up some customers for this offering. Over the past year, TomorrowNow has built out its worldwide support organization to Europe, Asia, and Australasia, in addition to its base in the U.S.

Target Market
Although TomorrowNow markets its services for all users of PeopleSoft, JDE, and Siebel, in my view there are a few key segments where the firm's offerings are most attractive. Nelson confirmed that one sweet spot is companies that are running SAP globally but still have instances of PeopleSoft, JDE, or Siebel. These firms, which may be looking to standardize on SAP, have little reason to stay on Oracle support contracts, and they welcome a lower-cost option that is backed by a major player such as SAP.

Another sweet spot is companies that have many modifications and do not intend to upgrade Oracle's Fusion product. In Nelson's view, such customers are paying maintenance fees to Oracle (at 22% of their license cost) to "prefund Fusion," even though they have no intention to upgrade to Fusion. Why shouldn't they save 50% or more on maintenance fees by going with TomorrowNow?

Furthermore, TomorrowNow actually supports the customer's modifications to source code as part of the support contract. Oracle's support agreements, in contrast, only provide support for original source code.

A Threat to Oracle?
The short answer is no, and yes. On the one hand, even with TomorrowNow's apparently prosperous third quarter, the firm's scale is still small. Its 200 customers are a drop in the bucket in terms of Oracle's installed base. Its 200 or so employees are a small workforce compared to the thousands in Oracle's support organization. The bulk of Oracle's customers are fearful of cutting off maintenance support from Oracle. As discussed earlier, TomorrowNow's greatest appeal is to customers that are either planning to migrate away from Oracle's products or have so highly modified their systems that they have no plans to upgrade.

On the other hand, third-party support providers play an important role in tipping the balance of power a little bit back toward the customer. It's no secret that the major software vendors derive a healthy part--sometimes even the bulk--of their revenue from maintenance agreements. It's something of a captive relationship. Once a customer has implemented a major enterprise system, it's not an easy matter to change systems. If the software vendor is the only source of support, the vendor can almost name its price and the customer has little choice except to "go naked" (drop support).

But the existence of third-party support organizations such as TomorrowNow gives customers a much-needed choice, which pulls the balance of power back toward the customer, even if the customer does not choose to go with the third party.

As the enterprise software market continues consolidation, there are many good packages that are being lost in the portfolios of the remaining vendors. Infor's collection of 50-plus systems is an extreme example. Vendors enjoy a continual revenue stream of maintenance dollars from the installed base of each of these systems. But if they get greedy, it's likely that we'll see many more providers such as TomorrowNow stepping in to deliver more value at a lower price.

Related posts
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Trends in IT security threats

Over at Computer Economics we're running a new survey on the current and expected severity of various IT security threats. If you have responsibility for IT security in your organization, please take the 10 minute survey now.

Respondents who complete the survey will receive a free summary of the results, which will be useful in assessing the relative priority of IT security measures to counter these threats.

The pointlessness of user security training

Stefan Gorling, speaking at the Virus Bulletin Conference in Sweden this week, thinks that most user training on IT security is a waste of time.

From a CNET report on the conference:

"Might it be so that we use the term and concept of user education as a way to cover up our failure?" he asked a crowd of security professionals. "Is it not somewhat telling them to do our job? To make them be a part of the IT organization and do the things that we are bound to do as a specialized organization?"

In Gorling's view, the answer to those questions is yes. In corporations in particular the security task belongs with IT departments, not users, he argued. Just as accounting departments deal with financial statements and expense reports, IT departments deal with computer security, he said. Users should worry about their jobs, not security, he said.

On the one hand, Gorling does have a point. Filtering out email attachments containing malicious code is a far better approach than exhorting users not to click on attachments from unknown senders. Similarly, new browser technology to flag counterfeit websites is a more effective solution than trying to train users to discern a phishing attempt.

On the other hand, I don't think user security training is pointless. The primary focus, however, should be to educate and remind users of the organization's security policies, such as acceptable use of computing resources, such as use of e-mail, instant messaging, backup procedures, encryption, and wireless access.

By the way, at Computer Economics we've just launched a new online survey regarding IT security threat trends. The survey takes about 15 minutes, and if you respond we'll send you a free copy of the resulting report. Take the survey now.

Salesforce.com to allow customization of its hosted service

Salesforce.com, the hosted CRM provider, is introducing a Java-like programming language called Apex to its services. Apex, which is currently in beta-testing, will allow users of Salesforce.com to customize the service or add new features. General availability is expected by the end of the second quarter of 2007.

CEO Marc Benioff announced Apex in his firm's Dreamforce conference in San Francisco yesterday.

The new capability allow users to go beyond mere customization of the user interface. It allows customers to add entire chunks of new business logic to the application. According to a presentation on Salesforce.com's website, Apex operates in a fashion similar to triggers and stored procedures.

What's really interesting about Apex, however, is that Salesforce.com is built on a multi-tenant architecture, which means that Apex code for each customer is being segregated from the code from every other customer, even though each customer is running on the same instance of Salesforce.com.

If Salesforce.com is successful with this capability, it removes one more objection to software-as-a-service (SaaS), the inability of individual customers to customize it. It is consistent with the firm's related work on its AppExchange platform, which allows customers to build, share, and sell entire applications running within Salesforce.com's hosted environment.

CNet has a brief article on Benioff's keynote. The Salesforce.com website has quite a bit of information on Apex and how it works.

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Compiere's open source ERP business model and growth plans

Late last week, I interviewed Jorg Janke, founder and CEO of ComPiere Inc., an open source ERP/CRM developer. In June, the firm announced it had received $6 million in venture capital to expand its business, and I wanted to find out what it planned to do with the money. I had also gotten word of a plan by a few members of Compiere's open source developer community to "fork" Compiere's source code into a separate version, and I wanted to get Janke's view on that.

Through the rest of this post, "Compiere" refers to the open source product, and "ComPiere Inc." refers to Janke's corporation, which manages the development of Compiere.

Business Model
Like most attempts to make money with open source, ComPiere Inc.'s business model requires some explanation. Janke along with co-founder Kathy Pink began Compiere development in 1999. They released it under an open source license that mimics the Mozilla Public License. Basically, this means tha anyone can download the software, play with it, implement it, use it, and enhance it--all at no charge. You can even redistribute it and create derivative works from it as long as such derivatives are distributed under the same open source license.

ComPiere Inc. makes money by offering services to its worldwide network of consultants, many of whom pay a fee to ComPiere Inc. to become "Partners," in exchange for sales and marketing support, second level technical support, and training services.

The Partners, which currently include about 100 organizations employing a total of 300-400 individuals, make money by providing traditional implementation and consulting services. Some of the Partners also develop complementary products or extensions to Compiere, which they are free to sell as proprietary products, as long as they do incorporate Compiere's source code. (ComPiere Inc. itself makes money from sales of proprietary products, such as migration tools that facilitate upgrade between versions of Compiere.) Partners also form the bulk of Compiere's open source development community, as they submit bug fixes and enhancements to Compiere Inc. for incorporation into the product.

In addition, Janke estimates that there are another ten to fifteen "freelancers"--independent consultants who are not Partners but provide implementation consulting services for Compiere. These freelancers also participate in Compiere's development community.

Business Volume
Since there are no sales transactions recorded for open source software, it is difficult to make head-to-head comparisons between Compiere and commercial software vendors such as SAP or Oracle. Open source projects like to use "number of downloads" as a substitute for sales figures, but although these numbers may run into the hundreds of thousands or even millions, they do not represent actual use of the product.

I was able to determine from Janke, however, that there are about 250 companies paying for support from ComPiere Inc. or its Partners, which is a pretty good indication of Compiere's installed base. There are, no doubt, some companies that have downloaded Compiere's source code and have managed to run it in production without any knowledge of ComPiere Inc. or its Partners. According to Janke, some of these companies eventually reach out to Partners for support, especially when they get in over their heads. But the total number of such organizations is difficult to determine.

Problems in the Development Community
As indicated earlier, there have been grumblings among Compiere's development community that have evolved to the point that a few of the non-Partner developers (freelancers) have forked development of Compiere into a separate open source project, dubbed Adempiere.

A public discussion on the decision to fork Compiere's source code is available, and it provides interesting insights into the dynamics of an open source development community.

The motivation to fork Compiere's source code seems to be centered around several issues:

1. The speed at which ComPiere Inc. processes fixes and enhancements submitted by contributors and the refusal, in some cases, to even accept them.
   
   
2. The refusal of ComPiere Inc. to provide Compiere version migration tools except in the sale of a support agreement.
   
   
3. Rumors that ComPiere Inc. is planning to limit the functionality of its open source offering, to better position some future proprietary offering.

I asked Janke about each of these issues. In the case of the first, Janke admits that resources at ComPiere Inc. have been limited: basically, all product development at ComPiere Inc and contributions from the community are funneled through Janke and Pink. One of the reasons that ComPiere Inc sought venture capital was to be able to hire more developers to support contributor efforts to enhance Compiere.

In the case of the second issue, Janke indicated that licensing of migration tools is one of the services from which ComPiere receives revenue, which it needs in order to fund its services to the development community.

As for the third issue, Janke denied any plans to restrict functionality of Compiere in order to make a separate closed-source offering more attractive. I would also add that if a closed source offering made any use of Compiere's source code, it would by definition need to be an open source product. After our discussion, Janke wrote an even stronger rebuttal of this point:

There is certainly no plan to cripple the product or discontinue or "privatize" functionality - the very opposite is the case. We will continue to develop substantial new functionality Open Source, and hope to increase Open Source contributions from the community. It's disconcerting to see people spreading unsubstantiated false rumors in this regard.

Janke said that he hopes the addition of new developers at ComPiere Inc. will enable new enhancements and fixes submitted by the development community to be incorporated more quickly, and that the developers who have forked the source code will want to return to the original Compiere project. It takes a lot of work to maintain an open source project, and certainly one combined effort will be more productive than two.

While I was writing this post, Janke wrote a Compiere status update that addresses the issues I have outlined above, and more. It is worth reading for a more complete view of what ComPiere Inc. is doing with the venture funding.

The future of open source ERP
Compiere is just one attempt to build a complete ERP system under the open source model. Open For Business (OFBiz) is another. ERP5 and Tiny ERP are still others. OpenMFG might be considered as well, although its license is not truly open source. In addition, there are several open source CRM projects, most notably SugarCRM, which offers an open source version as well as a "professional" or commercial version.

Although open source ERP has been gaining some ground, none of these projects match the scale of open source efforts such as Linux, Apache, mySQL, or JBoss. It appears that the higher one moves up the technology stack, the more specialized the requirements and the narrower the development community. ERP applications, at the top of the stack, would appear to be the most difficult market in which to sustain an open source development effort.

If this be the case, then it would appear that the primary success factor is a critical mass of developers. ComPiere's greatest asset, in my opinion, is not Janke's knowledge and experience as a developer--it is the 100 Partner organizations that are committed to extend, enhance, and support Compiere. Janke is right to devote a good chunk of his venture funding to hire new developers (he indicated four new programmers added in the past few weeks, and a total goal of about 20 a year from now). His development staff's top priority should be the rapid evaluation and incorporation of changes submitted by the Partner network. In addition, the freelance contributors should be treated the same as the Partners--if they have fixes or enhancements, they should be evaluated on the quality of their contributions and not given lower priority just because they don't pay a Partner fee. The freelancers--especially those in developing countries--have more time than money, and ComPiere Inc. should take advantage of that fact. The development community--whether Partner or freelance--is the competitive advantage for open source, and organizations such as ComPiere Inc. should take every opportunity to serve and grow that community.

Other open source projects, such as Linux and the others mentioned earlier, demonstrate that open source products can be as good or better than their commercial equivalents and that they can even claim a dominant market share, as in the case of Apache for web servers. Open source ERP may not reach this level of market share, but it can certainly gain more than it has today--as long as it fosters a robust and thriving development community.

Compiere may be on the road to doing so, and I hope it is successful.

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