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Open source software and Software as a Service (also called "SaaS" or "cloud computing"), are two trends that have recently emerged to help lower software costs for small and mid-sized businesses. Each of these options provide a unique set of benefits, but each has it's own set of issues and it's important to understand these in detail to determine which, if either, is best for your business.
There are numerous benefits of open source software including that it is free to download and use for any purpose, permission is given to freely redistribute copies, and users/developers have unrestricted access to the source code with the freedom to modify and adapt the software for any purpose.
Open source software is infinitely expandable since most open source applications are based on popular open source programming languages for which there is a large pool of available programmers. Many of the larger open source projects also have a large library of available enhancements. For example, there are approximately 800 pre-programmed modules that extend the functionality of SugarCRM open source Customer Relationship Management software.
Customers need to be aware that some open source licensing terms may require that they to distribute to the general public any enhancements made to the application and license terms need to be checked carefully, as there are literally dozens of different open source license agreements.
The primary challenge with open source for small businesses is that it does require some degree of technical skills and infrastructure in order to be able to effectively impement, develop additional function, train users, & support the application.
Software as a Service (SaaS) eliminates many of the technical challenges associated with open source software, since the application is already developed and the infrastructure and support are provided.
That being said, SaaS raises an entirely new set of challenges. First, there is now "vendor-lock-in" that doesn't exist with open source. Because the application is not owned by the customer, the customer is limited as to the development they can perform and are essentially dependent on the service provider for the release of new feature and function.
While many SaaS providers now offer development tools and off-shore programmers to help customers enhance the "off-the-shelf" offering, once the standard offering is modified, support on the customizations, and possibly even support on the entire application, may be impacted as a result.
For very small organizations having low numbers of users, or for short-term deployments, SaaS will typically cost much less than an open source alternative since monthly fees for a single user on a single application/module can be relatively low. However, those fees can amount to significant expense for large or long-term deployments. The cost of renting two applications from a tier-one SaaS provider can easily exceed $200 per user per month. For organizations requiring several applications or having more than 10-20 users, open source may be a much more cost-effective alternative.
When evaluating open source applications, or any other on-site solution, it's also important to consider costs of hardware, any potential licensed software (such as operating system, etc.), and the costs of facilities and support of the application, with the most notable expense being the salaries required for personnel.
One large benefit of open source is that the customer always has control of his data. SaaS providers offer guarantees and service level agreements (SLA's) that customer data is never compromised and is professionally backed up and secured. But those promises are only as good as the company that makes them, and many organizations are not willing to entrust the company's data in the hands of a third party. In a SaaS environment, there are also issues with data migration if the customer ever decides to change service providers or internalize the application. Indeed, there are many horror stories of customers whose data was "held hostage" when they tried to leave their provider.
Some experts predict that a coming shakeout in SaaS will doom some vendors, possibly leaving their customers stuck with a dead-end application or without access to their data. This is always a bigger risk with small providers. The bigger companies are more likely to be acquired and their customers supported or moved to a different platform.
Once we build the application, CYOP offers numerous options as to how the application is supported. For clients with adequate IT staff & facilities, CYOP can implement the application as an on-premises solution. For customers that lack adequate facilites or IT staff, CYOP can implement and support the solution from one of its state-of-the-art data centers, or from the data center of the customer's choice.
Again, because the application is owned by the customer, it can later easily be either internalized or moved to another data center without concerns of having to pay exhorbitant fees to move.
Want more information on open source ERP? Here are some helpful resources: