Pros and Cons of Open Source Accounting Software
By Richard Oppenheim, CPA.CITP
When did you enjoy your last free lunch? Did you ever have a free lunch? Open source applications are an important part of the computer landscape and need a proper evaluation when making computer decisions. While open source licensing has no cost, open source computing is not “free.” The focus of this article is to consider whether open source is a viable platform for accounting applications.
There are lots of applications built on an open source platform, such as the operating system from Linux and the Internet browsers from Firefox and Mozilla. Typically, open source software starts with a small company developing the foundation application code. Other software developing companies, individuals and small groups test and determine the code’s usefulness and whether they have any interest in enhancing the code. This public participation creates the opportunity for a major collaboration among the original developers and a wide range of other developers.
Some believe that open source is the domain of the geek who does nothing but play with code. With easy access to an open source application, the techie can wreak havoc and make error-filled changes. However, this does not happen.
While the software code can be obtained for free and used by anyone with full and unrestricted access to the source code, there is a management process over the open source application. All users and developers must agree to a license, which usually includes the ability to run the program, have the source code, change the source code and distribute it. The license also has a common set of standards and guidelines identified by the open source initiative.
Recent History
A survey about open source acceptance was identified in the Mar. 15, 2003 issue of CIO Magazine:
“In a November 2002 CIO survey of 375 information executives, 54 percent said that within five years open source would be their dominant server platform. Today, major enterprises are running mission-critical functions on open source, big vendors have lined up to support it, and reliable applications have emerged.”
In a 2005 report from Gartner: “OSS will not destroy industry giants, such as IBM and Microsoft, but it will revolutionize software markets by moving revenue streams from license fees to services and support. By 2008, 95 percent of Global 2000 organizations will have formal open-source acquisition and management strategies; and, OSS applications will directly compete with closed-source products in every software infrastructure market. By 2010, IT organizations in Global 2000 companies will consider open-source products in 80 percent of their infrastructure-focused software investments and 25 percent of their business software investments.”
Software Development
Building a software application with open source software requires technical collaboration. This is how errors and problems with the software are detected and corrected. Bugs can be fixed, new features added and the software gets better when many people look at and use the software.
Most of us purchase software prepared and packaged by companies like Microsoft, Intuit, Symantec and many more. When commercial software is purchased, there is no source code and the user cannot make any changes or enhancements to the product. If Intuit were to cease operation, users of QuickBooks and Quicken would have to seek other resources for maintenance and upgrades for new regulatory changes and other factors that would affect the end result. On the other hand, we understand that there are millions of people using these products; consequently, there are unlimited opportunities for bugs and other errors to be reported back to the vendor for fixes and upgrades.
There is legitimate concern about support and accountability when using open-source software. For example:
- The companies that create and maintain the product may cease operations.
- Problems cannot be found and fixed quickly.
- Training and support is not available.
Supporters of open source negate each of the stated concerns by providing a long list of support resources for training, error correction and stability of companies that develop the code. Typically, open source resources have a lower cost of operations than the major software developers.
Accounting Applications
The volume of accounting applications on an open source platform is clearly growing. While it is hard to find estimates and statistics, the use of open source code is being fueled by the success of Linux and expanding support from IBM and Microsoft. This growing support translates to expansion of product offerings.
Assessing open source accounting application has the usual basic requirements:
- A common feature set that supports all accounting system requirements.
- Commercially available technical support and maintenance.
- Professional documentation for the user and for program maintenance.
- Training materials and classes either in workshops or online.
- New releases and updates available on a continuing basis.
- Active user’s groups to share and exchange problem solving and new ideas.
One open source accounting solution is from Compiere. The program was developed in the late 1990s and is targeted at the small- to medium-size business. Compiere's functionality goes from general accounting and retail-inventory management to sales and purchase orders.
Application support comes from vendors such as Global Era. This company builds and installs accounting applications based on the Compiere open source code.
According to James Garand of Global Era, the company generates its revenue from the overall requirements of their customers for the installation of accounting applications. This includes system design, installation and implementation, training, support, future upgrades and enhancements. While some of Global Era customers take on technical support, there are more than 450 pages of documentation, and lots of technical and user support.
There are many questions that surround the one basic question: should a company use an open source solution over a typical paid-for solution? While the simple answer is “yes,” there are many issues that support the positives of open source.
- Open source can be a lower cost as there are no fees for software licenses.
- The open source code can be modified to respond to specific needs.
- Popular open source applications, such as Linux, have been very secure.
- Open source can benefit from collaborative resources.
Some questions to consider on the negative side of open source are:
- Do you have internal technical staff or will you rely solely on outsiders?
- Does the staff have time and resources to learn the new application?
- What resources will be needed to convert your existing data?
A critical concern for every application, regardless of vendor is security. It is important to understand that the accounting data and transactions are not embedded within the code. Currently open source applications have not been a target for hackers or crooks, and with the collaborative effort from the development community, leaks and bugs are patched and fixed quickly.
Another open source vendor, Open Systems Inc, provides a high level of ongoing support for their products. While there is a fee for this support, a typical customer receives a return on their maintenance in five years due to product upgrades and enhancements that are included in the fee.
Open source accounting software starts around $10,000 for the product, installation, initial training and verification of proper implementation. If you require totally free, check out freeaccountingsoftware.net from Support Chain Technology. Remember, “free” means having no support and outside resources to call for help. Custom installations that require modifications to meet unique applications can raise the fee to as high as $250,000. This is still lower than similar applications from major accounting software providers.
Open source is growing in popularity, quality and innovative business models, from commercial to non-profit. Its effect to your bottom line does not have a single, simple answer. Your analysis will include assessment of the cost/benefits, along with your system specifications to determine whether there is an appropriate fit for your needs. Of course, it should also provide a significant improvement over your existing application(s). Open source alternatives will expand over the years ahead. The programs should be in your radar screen.
About Author:
Richard Oppenheim, CPA.CITP, has used and written about technology for more than four decades. He currently provides advice through the Oppenheim Business Group. He can be reached at richopp@oppenheimgroup.comor through his Web site, http://www.oppenheimgroup.com .
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