Analyst: China Martens
Commercial open-source enterprise resource planning vendor xTuple continues to expand its product line and capabilities in order to try to appeal to more customers across more industries. It has ambitious plans for 2009, looking to debut a point-of-sale module, which can be booted up independent of the ERP apps. This dipping of a toe in modularity may mark the start of a trend to package up pieces of its integrated suite to appeal to customers requiring that specific functionality in the hope they later choose to expand their use of its software.
The 451 Take
Does today's economic crisis favor open-source players like xTuple? We believe so, with a positive effect on their businesses more likely down the road rather than right now. Even as organizations postpone ERP adoption or migration off an existing supplier's apps, they can begin checking out fully open source ERP, like xTuple's PostBooks®, for free. Getting familiar with the product may well lead to the commercial open-source version of the same software making it to shortlists once ERP purchases are unfrozen. What will undoubtedly help xTuple gain more attention is the ability to point to well-known, sizable customers. Ramping up momentum in that area will enable the ERP player to stand out among its open-source peers and SaaS rivals.
Context
Based in Norfolk, Virginia, privately held xTuple, formerly known as OpenMFG, now employs 20 full-time staff members. Founded in 2001 and profitable for the past three years, the commercial open-source apps company continues to be totally self-financed. The need for external investment remains a largely theoretical issue for xTuple and isn't something it's aggressively seeking. While additional cash might help it in areas like speeding up software development, xTuple is keen to stay in charge of its own destiny. With all the recent political connotations, we'd hesitate to use the word 'maverick,' but xTuple is certainly more quirky than its rivals. For instance, in March, it marked the first release of the standard edition of its apps by presenting the top 13 customer-driven enhancements to its ERP software during the past four years as though they were an album of greatest hit singles.
Products
xTuple has three ERP editions — PostBooks®, Standard and OpenMFG — which are all part of the same code base, with the company keeping upgrades in sync between the trio. PostBooks®, which debuted in mid-2007, is aimed at small businesses and is the fully open-source version of the apps, available under the Common Public Attribution License (CPAL). The two other editions — Standard and OpenMFG — are commercial open-source products and available under xTuple's own hybrid license, which gives third parties full access to the apps' source code while enhancements made to the apps return to xTuple for review and quality testing and may end up as part of the product. First available in March 2008, Standard targets midrange customers in light manufacturing, distribution, retail and other verticals with more sophisticated features than PostBooks® in areas like inventory control and warehouse management. OpenMFG is xTuple's flagship offering, focused specifically on the needs of manufacturers, including those involved in discrete and batch process production manufacturing.
As we've noted before, xTuple's technology foundation is an interesting mix — Trolltech's Qt toolkit for C++ on the client side and the PostgreSQL open-source database on the server side. xTuple views Nokia's 2008 acquisition of Trolltech positively, feeling in the loop both prior and post-purchase, and seeing the Finnish mobile device maker put more resources into Qt, particularly around Macintosh support.
Customers
xTuple has around 100 paying customers, mostly organizations with $40-50m in annual revenue, with the average number of users per firm between 10 and 15. They include automotive outfitter Cloud-Rider Designs, bearings and pulley manufacturer Moline Bearing and ink manufacturer and developer Pemla Ink Technologies.
xTuple's largest win to date is a gradual replacement of legacy Oracle apps at a major North American self-storage and haulage company, which the company declined to name. Beginning with the customer's manufacturing operations, the long-term project is set to become a 1,000-user ERP deployment. xTuple also has a large retail customer it doesn't identify, which is using its apps for its indirect channel. With that user and a few others, it's beginning to see a new use of open-source apps developing where an organization's corporate headquarters continues to use Oracle or SAP apps, but its channels use open-source apps, because they're cheaper and easier to deploy quickly globally.
Paid support for PostBooks® for 1-4 users starts at $600 per user per year. Annual software subscriptions for 5-19 users begin at $800 for Standard Edition and at $1,000 for OpenMFG, respectively. xTuple also offers monthly software subscriptions as well as perpetual licenses for both Standard and OpenMFG. Customers can opt for appliances preconfigured with both xTuple's apps as well as the PostgreSQL database. In January, it launched its xTuple Network, a series of remote server management options, starting at $2,000 per year and including automatic ERP upgrades and an hour of data cleanup. Customers can pay extra to add in extra hours of data cleanup as well as offsite backup and database tuning and optimization.
Strategy and roadmap
Part of the reason for xTuple creating a full-blown open-source version of its ERP apps was to pique more users' interest in its commercial apps and services. It has seen that happen since PostBooks' debut 18 months ago. For instance, a small company running PostBooks will buy support for the app from xTuple, then 6-9 months down the line it starts requesting features and ultimately moves to either Standard or OpenMFG. At the same time, xTuple is also seeing CIOs at much larger organizations start experimenting with PostBooks®, perhaps laying the groundwork for future large-scale deployments of the commercial open-source flavors of the app. The interest in its apps from a variety of customers led xTuple to extend the focus of its apps beyond manufacturing.
Getting modular is another way to generate more appeal among users, with customers starting off with a separate app focused on one particular area of ERP and then eventually migrating to the full-blown ERP offering. xTuple's first move in this direction will be the carving off of a separate retail edition of its ERP product due out in the first quarter of 2009. Users will be able to load the point-of-sale module separately from the main ERP software. The company will be looking at offering other modules. Although it provides customer relationship management features in its apps and continues to expand on their scope, xTuple doesn't expect to spin CRM off into a separate product because that would dilute its focus on being primarily an ERP apps vendor.
xTuple is about to release version 3.2 of its ERP software, with some features appearing in each of its three editions and others just in one or both of the commercial open-source versions. New in 3.2 is the embedding of the Qt/Designer graphical user interface editor in the apps, making it easier for third parties to build add-ons to xTuple apps. The company expects to debut release 3.3 in the first quarter of 2009, when it also hopes to unveil xTuple Exchange, an online marketplace on its website where customers can download plug-ins from partners for free or for a fee. XTuple doesn't have particular ambitions for the Exchange at present; it's more of a nice-to-have feature and a demonstration of the extensibility of the architecture underlying its apps.
A major long-term area xTuple is working on is looking to create a full Web client while also gradually paring down its current Qt C++ client. The idea is to eventually have the client screens stored in the server database as XML UI files. Customers would then have the option to use either the Qt GUI client or the Web one, with both effectively functioning as containers to load with information from the database.
Competition
With three flavors of its ERP apps, xTuple is looking to have presence in the small, midsize and enterprise markets. At the low end, it tends to see users jumping ship from accounting software from Intuit and Sage Software. Both of those players have slowly woken up to the need to retain their customers and are trying to make their midmarket stories clearer. Microsoft has positioned its Dynamics families of ERP and CRM apps as spanning all sizes of users, and xTuple runs into Dynamics NAV in particular a good deal. It also encounters SAP with its SMB on-premise apps suites, Business One and Business All-in-One. XTuple has seen less of Consona and Infor during the past year in competitive situations despite both apps providers having a strong focus on manufacturers.
xTuple has yet to really face off against SaaS apps suite provider NetSuite, but has won a few replacement deals particularly among former NetSuite customers unhappy with hikes in subscription prices. Given that NetSuite targets several of the same industries as xTuple, having released the first light manufacturing version of its apps suite this summer, it's likely the two will compete more often.
Another company xTuple might come across more often is fellow commercial open-source ERP peer Compiere, since both are now encroaching on each other's core verticals, with Compiere getting into manufacturing, while xTuple moves more into distribution and retail. Meanwhile, another commercial open-source ERP company, Openbravo, is already a player in the retail arena thanks to its acquisition of open-source touch-screen point-of-sales apps company Librepos in October 2007, and it has worked on integrating the POS software with its ERP apps.
SWOT analysis
Strengths
xTuple has started to reap some rewards from its decision last year to finally release a fully blown open-source version of its ERP. Not only are some of those open source users beginning to pay for support and then migrate up to either Standard or OpenMFG, but PostBooks® has also won xTuple an entrée into larger potential customers.
Weaknesses
For a small company, xTuple has a lot on its plate at present – ensuring that three versions of its ERP apps remain in sync, widening its support for different industries and becoming more modular alongside a few longer-term development projects. Can it continue to support and fund all this work solo, or will the firm be turning to VCs sooner than it might've liked?
Opportunities
In the current climate, cheaper alternatives to on-premise ERP apps like those offered by xTuple are going to definitely be of interest to customers large and small. The beauty of open source is that firms can try the apps out before they buy for as long as they like and then make the move at their own pace.
Threats
Despite consolidation at the mid-range and enterprise levels, ERP remains a highly competitive market. At the low end, Intuit and Sage are starting to more aggressively try to retain customers looking to move from accounting apps to ERP, while the midmarket is highly fragmented and often features local players in different geographies. At the high end, both Oracle and SAP continue to be the dominant players and, with their continued purchases of vertical expertise, keep on ramping up the industry-specific nature of their ERP and CRM apps.
Reprinted with permission from 451 Research