BANGALORE, INDIA: An IT application cost consists of two components. There are the licensing fees associated with a product and there are the service costs associated with customisation of the product and installation, training and support costs.

Before proceeding further, let me relate a story. A new marketing head had asked me for help in getting region-wise, product-wise sales. It did not seem to be an issue till we looked into the data. Finance had simplified their task by entering only the summary value of the invoices. The sale value for each customer was known but not what he bought.

Finance department was only concerned with the payments due from a customer and had not bothered to use the application the way it was intended.

I was helpless and the marketing head was furious and very unhappy. IT department was useless as far as he was concerned! Sales order should have been entered into the same system. One should not have to rely upon accounts to enter the details.

The key point is that it is important to have data in place. No amount of money spent on an application is going to give meaningful reports without reliable data. Process is important and that leads to the need for integrated ERP-like applications.

Open Source ERP

Any organisation can save the costs of license fees by using an Open Source solution. The benefit of the saving will be far more dramatic for small and mid-sized firms. Furthermore, the availability of Internet at a reasonable cost with high enough speeds has made it possible for offices or distributors in multiple locations to use a centralised application. An application with a web interface is ideal. However, desktop applications are also possible using a VPN. There are a number of Open Source solutions available, including;

How does one choose? Since the licensing costs are not there, the organisation can evaluate the customisation costs. Ensuring that the application data flow and the organisation's processes tally, may require customisation of the application or a change in the processes of the organisation. Hence, you can evaluate the available solution and choosing the one which best fits the organisation.

You need to keep in mind that the cost of customisation depends on the changes needed to the application and not on the number of people using it. Excessive customisation costs clearly put the mid-sized companies at a major disadvantage compared to larger organisations.

On the other hand, the cost of changing internal processes will clearly be to the advantage of the smaller organizations.
Far too often, there is a tendency to focus on the reports and their formats; whereas, the critical component is whether the required data is available and being captured correctly at the point of origin.

Open Source applications hide nothing. This is a huge advantage. The database models and information about how to create the reports is available. Any missing report can be added, even by an external application accessing the same database. Correct data can be mined for information. No matter how good a mining application is, it can never find information in the absence of correct data.

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