How to Build A Sustainable ERPNext Business
As the ERPNext community grows, I have had the opportunity to talk with a lot of community members, on how do they build and grow a sustainable business around ERPNext.
Death by Apps
Most of the other eco-systems for business software survive by giving the opportunity to developers to build and market their own apps. Most of these apps are not really open source (there is no source published) and there are obvious problems that we have discussed elsewhere. (To summarize, fragmentation of the ecosystem and bad user experience for someone who wants to use or maintain functionality inside an app). So we have decided not to promote paid extensions or apps within the ERPNext ecosystem.
So how do businesses make money?
$100 Billion Industry
The global ERP + CRM + E-commerce software industry is worth more than a 100 billion dollars. Most of the companies providing products and services are hugely over-priced and a large majority of them have incomplete products make money by selling the sames missing parts over and over again. ERPNext is well positioned to disrupt this industry. As ERPNext vendors, we bring in change and freshness to the industry, but that change must also have a familiar face. This starts by pricing the ERPNext services at par with other products.
If someone is consulting a business on an ERP system, that is willing to spend say $50,000 on a paid ERP system, like MS Dynamics, then the price for ERPNext should not be lower.
Show Strength and Confidence
By pricing ERPNext services at a discount, customers will have a negative perception of the product and the vendor will be written off as “immature” or “folksy”. Any vendor pitching ERPNext must position the advantages of ERPNext (extensible, customizable, on-premise, zero license) and not the fact that is is free or open source (that education can come in the second or third call, at which point the customer must be amazed). A customer willing to pay more than $50,000 is looking for a dependable partner to their growth, and that is the story that needs to be sold. ERPNext vendors must be partners to their customers, not just someone selling a cheap version of another product.
Ultimately we know that all ERPs will be open source, but until that happens, we must position ERPNext as a professional product. Where we win is that with the same ticket size, we can deliver so much more value to the end user. We can offer deeper integration with APIs, Portals, better usability that proprietary ERPs will never be able to fulfill at the price because they are structured that way.
We need to attack the structural weakness of the industry, that is dependent on license fees, out-dated technology, bureaucratic processes, demotivated software developers and over priced sales people.
Price vs Value
A lot of people are attracted to open source only because it is free. If you find that a customer is only talking about pricing then that is not the right customer. In the ERP world, just like the real world, customers must invest before they can reap rewards. A right customer is someone with whom you can partner with and grow along with their company. It is best to leave very small projects to freelancers who are better placed to serve them.
If you are a potential end user, looking for an ERPNext partner, first identify what are the outcomes you expect from your erpnext implementation. Say you expect your sales to grow by 30% and profit by $100,000 by the end of 3 years, then you should be in a position to invest a part of that profit into your ERPNext system. Investing $50,000 with an ERPNext partner will go a long way for you to achieve that growth and maybe more. On top of it, you will see amazing returns and improvement in the quality of your products and services.
If you are an ERPNext partner, the way to start the conversation is to define the outcome. If the customers says, “I just want an ERP system”, that is not an outcome. That is a solution to some unspecified problem. The key is to help the customer identify the pain areas they are looking to fix, and then help them fix it. Talking about pricing before talking without defining outcomes is like putting the cart before the horse. Once the outcomes are identified and quantified, the “value” of the product will be clear and then talking about “price” will be an easy discussion.
Not only that, well defined outcomes will help you steer the implementation process and leave you with a very happy customer.
Be Community Friendly
Ultimately, as a partner, your source of strength will be the ERPNext community. The community is both a source of freelancers you will be able to get work done on demand and also showcase your public profile. The stronger your community profile, the more likely you are the consultant of choice for new customers.
We as Frappé Technologies have chosen the 100% open source path and we see the community as our biggest strength. Our long term ambition is to be a small but high quality producer of open source software. We know that even if we get 1% of the total revenue generated by the ERPNext ecosystem, it will be more than enough for us.
The other 99% is on the table. Are you strong enough to take it?