Open source ERP for small business: what it can do

An open source ERP gives a small business one system for quotes, orders, purchasing, stock, production and accounting, under a licence that lets you use, change and share the software without per-user fees. It suits businesses that are growing, that need the software to fit how they work, and that want to keep control of their data and their choice of provider.

It is not free in every sense. The licence costs nothing, but implementation, hosting and maintenance do. This article explains what “open source” actually guarantees, how the best-known systems differ in their licence models, what an open source ERP covers in a small manufacturing business, and how to evaluate one before you commit.

What “open source” actually guarantees

“Open source” has a precise meaning. The Open Source Initiative maintains a definition with ten criteria, and it stresses that open source is more than access to the code. For a business, four of them matter most:

• Free redistribution: the licence may not demand a fee for using or passing on the software.
• Source code: the program comes with its source code, or a well-publicised way to obtain it.
• Derived works: you may modify the software and build your own extensions.
• No discrimination: the licence may not exclude people, groups or fields of business.

In practice, this means you can host the ERP wherever you like, hire whoever you like to adapt it, and keep using it if you part ways with your provider.

ERPNext uses the GNU General Public Licence version 3. Under the GPL, anyone who distributes a modified version to others must do so under the same licence. Changes a business uses only internally are not distributed, so this obligation does not affect day-to-day use.

Open licence does not always mean everything is open

The open source ERPs most often recommended to small businesses follow different licence models. Some publish every feature as open source. Others pair an open source edition with a paid edition that adds features.

ERP	Licence	Model
ERPNext	GNU GPL v3	Presented by the project as 100% open source, no separate paid edition
Odoo Community	GNU LGPL v3	Open source edition
Odoo Enterprise	Odoo Enterprise Edition Licence	Only with a valid subscription for the number of users
Dolibarr	GNU GPL v3 or later	Open source

Neither model is better in itself. What matters is whether the features your business needs sit in the open part or the paid part. If they depend on a per-user subscription, your costs grow with your headcount again, just as with proprietary software.

What an open source ERP covers in a small manufacturer

A full ERP brings together in one database what many small businesses run in spreadsheets and separate tools. We use ERPNext as the example, because it is the system we work with at openBlueprint.

Take a metal workshop that makes custom railings and a few standard brackets:

1. Bill of materials. Each product has a bill of materials listing profiles, plates and fixings with quantities. Sub-assemblies, such as a welded section, can have their own bill of materials, which gives a multi-level structure.
2. Operations and costs. The bill of materials can include operations such as cutting, welding and coating, each with a workstation, a time and an hourly rate. The system calculates the production cost from them.
3. Work orders. When an order is confirmed, a work order tells the shop floor what to make and generates the material requirements from the bill of materials.
4. Actual times. Each operation gets a job card on which the operator starts and completes the job. Actual times flow back to the work order, so planned and actual effort can be compared.
5. Project costing. One-off jobs run as projects. Time logged against activities such as design, workshop or installation is costed with rates you define and adds up on the project.

The value is not in each feature on its own but in the shared data. Sales sees real stock when quoting, the workshop works from the current bill of materials, and accounts receive the invoice without retyping it.

Advantages over per-seat ERP

• No per-user licence fees. Giving the workshop supervisor, the stores or a new office hire access does not raise the licence bill.
• No vendor lock-in. Code, documentation and data model are open. If the relationship with your provider does not work out, another provider or your own team can take over.
• Customisation without breaking updates. Adaptations are built as extensions on top of the standard rather than as changes to its core, so the base system can still be updated.
• You decide where your data lives. On your own servers, in a private cloud or with a hosting provider in your region.

What it costs beyond the licence

An open source ERP moves costs from the licence into other places. Plan for them from the start:

Cost item	What it involves
Implementation	Mapping processes, configuration, data migration, training
Hosting	Server, backups, monitoring, security updates
Updates	Applying new versions and testing your extensions against them
Support	Community forums and documentation, or a contract with response times
Your own time	Staff who define processes, clean data and test with real cases

The last item is the one most often underestimated. No provider can decide for you how a quote turns into a work order, or which item codes you keep.

How to evaluate an open source ERP

Before you commit, check these points for any system on your shortlist:

• Coverage in the open part. Does the open source edition cover the processes you need, or only a paid edition?
• Project activity. Look at the public repository: regular releases, active issue tracking and recent changes show that the project is alive.
• Local requirements. Tax, invoicing formats and reporting differ by country. Ask how the system meets yours and confirm it with your tax adviser.
• Hosting and operation. Who hosts the system, who applies updates and who restores a backup when something goes wrong?
• Exit route. Can you export your data in a usable form, and could another provider take over the system?
• A real test. Run a few of your own orders through a trial system, from quote to invoice, before deciding.

When it is the right choice

Open source ERP is a good fit if several of these apply: more people need access as you grow, you use several tools that do not talk to each other, your processes have particularities such as made-to-order production, and you want control over your data and provider. It is less suitable for a sole trader who only needs to send invoices, or for a business that cannot spare time to define its processes.

You do not have to introduce everything at once. A common path is to start with one area, such as sales or production, and add others later on the same database. That is how we work at openBlueprint: we often start with job costing in 30 days and add further areas when the business is ready.