What’s Up with xTuple—and Open Source ERP?

By guest blogger P.J. Jakovljevic, originally posted at Technology Evaluation Centers, April 30, 2012

While Virginia might have seen its share of controversy over the recent laws on women’s reproductive rights, the region’s business and entrepreneurial climate is undisputed owing to vibrant enterprise applications vendors. One such vendor is Deltek — long reported by TEC as the enterprise resource planning (ERP) leader in the government contracting sector (see the most recent post on the vendor), while another is abas-USA, an innovative manufacturing ERP vendor that leverages a multiplicity of popular open source and proprietary technologies (see the recent article on the innovative vendor).

This article features the third vendor from the same neck of the woods, xTuple (formerly OpenMFG), which recently turned 10 years young. As a commercial open source company, xTuple works with a global community of tens of thousands of professional users. Customers can tailor the vendor’s solutions with multi-platform support for Apple Mac, Microsoft Windows, Linux and mobile devices, and take advantage of flexible and transparent licensing and pricing options. xTuple targets mid-market enterprises and smaller organizations with solutions that are an alternative to the typical older, larger and significantly more expensive and complicated traditional ERP solutions (on proprietary technologies).

xTuple: Current State of Affairs Needless to say, the ERP software vendor xTuple, whose technology stack comprises open source technologies (e.g., PostgreSQL database, Qt desktop client, and much more recently the open source SproutCore HTML5 framework for data-intensive desktop and mobile clients), has seen much expansion in its business and customer base since its inception. The company reported a 35 percent growth in 2011 and currently has more than 300 paying customers (each with 20 users, on average) and nearly a million downloads of its free PostBooks accounting software edition to date.

xTuple’s direct customers are concentrated in North America and Latin America with local partners in other regions worldwide. The vendor’s ecosystem now includes more than 50 partners and translations in 25 languages. In addition, xTuple currently has 27 employees and expects to grow to around 40 by the end of 2012. Most of its employees are in the headquarters in Norfolk, Virginia, where xTuple owns and has been renovating a 10,000 sq-ft 1940s-era bank building. The vendor also has employees working remotely throughout the U.S.

In 2011 xTuple delivered three major product releases (3.6, 3.7 and 3.8 in its modest version numbering system) and many minor ones. The xTuple offering is available in the aforementioned PostBooks (free download) and commercially licensed Standard and Manufacturing Editions. The vendor also introduced the following two new commercial editions:

1. Project Edition — project accounting plus Standard Edition
2. Enterprise Edition — Manufacturing, Project, Web portal, Fixed Assets, xTuple Connect (formerly Batch Manager) data integration, plus the new Advanced Commissions module

See the company’s Web site for functional comparison and pricing of these ERP offerings. Last but not least, xTuple continues its push into the distribution market.

Never a Dull Moment with Ned Lilly, xTuple CEO What follows below is a candid discussion with Ned Lilly, xTuple’s chief executive officer (CEO), president and co-founder. Lilly is no stranger to TEC; here is an engaging article with Lilly from 2008. He is very well versed in current market trends and is not loath to engaging in friendly, competitive banter (Lilly also publishes the popular The ERP Graveyard Blog, tracking the once-rampant ERP vendor consolidation at http://www.erpgraveyard.com/). See xTuple’s bios of its top management as well as this article on Ned Lilly and the idea behind starting xTuple.

Our questions and Lilly’s answers are as follows:

TEC: Has your market and competitive landscape changed as of late and how? What trends have you noticed in the market?
NL: We're spending less and less time explaining the concept of open source and leading more with functionality and value with next-generation business management software. Then, when they ask us how it is that a 27-person company has a product that is competitive with companies 100 times its size, we explain how the open source development process makes for better software — faster.

Oddly enough, we don't run into other open source players that much, especially after Compiere’s acquisition by Consona Corporation. We typically compete with one of the Microsoft Dynamics ERP products, SAP Business One (although less of that lately), and sometimes NetSuite (although more often it's people moving off NetSuite). We face off against Epicor and Infor from time to time, usually for request for proposal (RFP)-based processes.

TEC: What is your ideal customer profile now in light of the latest product enhancements (or is it more of the same)? What percentage of your customers is in the cloud or on demand?
NL: There are still basically two buckets of customers: 1) “greenfield” opportunities (smaller companies growing out of QuickBooks, etc.) and 2) replacements for older, “Graveyard-y" ERP systems. The ideal customer for us is still someone with an inventory-centric business such as in manufacturing and distribution. Although, with our recently added project accounting and time & expense (T&E) capabilities, we're getting into more professional services type deals too.

As for the software-as-a-service (SaaS) install base, we've got a small but growing number of customers (approximately 15) using our integrated Amazon EC2 offering. Many of our partners also provide hosting and other managed services. In those cases, that's just a question of where the server lives; the licensing is the same. So it might be 10 percent of the total commercial customers in some kind of on-demand offering. We'll be expanding our cloud offerings in the 4.0 release with both a free offering and a series of commercial offerings.

TEC: What is the current state of affairs of xTuple releases, new enhancements, etc.?
NL: In addition to what you said in your intro, we just released 3.8.1, and the next major release will be a jump to 4.0 in May 2012. The really cool thing about 4.0 is that the new Mobile Web client will interoperate seamlessly with the desktop client. Both will talk to the same PostgreSQL database back end and, by the end of the 4.x series, the entire application will have been ported to the Mobile Web platform. We're not aware of any ERP vendor that has come close to doing this.

In addition to 100+ minor enhancements, release 4.0 will see the full suite of corporate/customer relationship management (CRM), accounting, and T&E capabilities available in the new Mobile Web client. In addition to the full application being available as open source, we will also offer totally free hosting for anyone who wants to run it in the cloud (no limit on the user count). A commercial (for a fee) cloud edition will give unrestricted access to the data (backups, application programming interfaces [APIs], etc.) and helpdesk support — and the ability to run a mix of Mobile Web and Desktop clients.

The general idea is that each major version number in the 4.x series will see at least one new module ported to the Mobile Web client. For example, 4.1 will almost certainly be sales order management; 4.2 will likely be inventory management and all the related commercially-licensed manufacturing and distribution functionality. We will continue with the same functional distinctions between our commercial xTuple ERP editions (see comparison) and encourage the development of new vertical add-on packages (including a commitment to help developers of existing packages port those packages to the new Mobile Web client).

“Social” Ecosystem Product Development
TEC: How are your major system integrator (SI), independent software vendor (ISV), reseller and other partnerships going? What is the state of affairs of your xChange app store, which was unveiled in 2009?
NL: One shining example of add-on product development from a partner is the aforementioned Fixed Asset product suite—a partner in New Zealand, a former SAP consultant, wrote a package for one of his customers that does basic fixed asset tracking and made that available for free on our xChange app store. He then added two commercial supersets covering depreciation and the general ledger(G/L) interface and ongoing maintenance of the fixed assets. The packages were so good that we included them in our Enterprise Edition; see here for the latest info on the update.

As for the app store, people are building cool things, like the fixed asset example I just gave you. But truthfully, we haven't done a very good job of pulling in all of the scripts and packages that people are building (customers and partners alike). There are hundreds of minor enhancements that are out there that we, partners or customers have done — but it's resource intensive to package them up and put them on the xChange. And there's the implied maintenance burden, too.

It's the kind of thing that if we had a big slug of investor money, and we were trying hard to look bigger than we were, maybe we'd throw a couple of people at it, and corral all that stuff, and get some kind of program behind it. I alluded to this in my previous answer when I said we were making substantial commitment to building a methodology for converting existing add-on packages to the new Mobile Web platform — we wouldn't do that if there weren't a substantial amount of material that isn't immediately obvious on the Web site.

But in general, we'd rather have a smaller number of high-quality offerings on our store, than a larger amount of untested, unsupported flotsam and jetsam like you sometimes see in other such places.

TEC: How is the freebee accounting PostBooks product doing, and is there any conversion to xTuple ERP?
NL: Extraordinarily well — coming up on 1 million downloads, and more than 50,000 active users registered on our Web site. Every week we hear from someone who has been running PostBooks for some period of time (often months or even years) and is ready to talk about a commercial edition upgrade, coming to a training class, sponsoring a new feature or two, etc. These users also buy stuff on the xChange store.

TEC: What non-typical ERP extras do you provide? For example, your aforementioned fellow Virginian peer, abas-USA, in addition to providing a self-contained database (free of charge) and APIs to major computer aided design (CAD) systems (e.g., SolidWorks by Dassault Systèmes), also includes an impressive document management system with optical character recognition (OCR)-based search through multimedia documents. Other capabilities that do not usually come bundled within an ERP system are computer telephony integration (CTI) and embedded business intelligence (BI) via Jaspersoft reports. In addition, there is the e-learning tool, which is built-in to the software and tracks users’ progress as they interactively train on abas ERP modules. You get the drift, and is there anything similar by xTuple, given your open source nature (an “R&D socialism” of sorts)?
NL: One really nice one is the Pentaho BI package, created by another of our partners (see here). We've had partners develop a number of interfaces to different shopping cart front ends, product lifecycle management (PLM), and CAD tools, various wireless warehouse solutions, and iPhone apps. In the latter category, one of our partners is working on a point-of-sales (POS) solution that uses the same hardware snap-on that the guys in the Apple Stores use to swipe your credit card, etc., from their iPhones.

TEC: I can see that you do not talk much about your "social" capabilities, despite that topic being “mandatory” of sorts these days. Is it because there is nothing generally available, there is not much demand for that by your customers, or for any other reason?
NL: Sorry, I didn't mean to obnoxiously ignore it. I guess we view it as a bit of a made-up trend among some vendors looking to get a little Facebook rub-off. We've had this kind of kind of functionality for some time, but just haven't jumped on the naming bandwagon:

• A logged and time-stamped internal messaging (IM) system that can connect to instant messages, e-mail, fax, text, etc. The same system publishes notifications of system events a user subscribes to (a kind of a poor man's workflow), e.g., new order received, quantity below zero, customer issue reported, etc.
• A verbose running conversation stream organized by a CRM account (customer, vendor, etc.) — all intra-company comments, short IM/text-style messages, e-mails, customer notes, etc., are accessible from one place.
• Our Web portal product exposes CRM communication to a two-way customer dynamic — it's a front end into as much of the CRM as you want to make available to trading partners (again — customer, vendors, partners, etc.). That can mean incidents (tickets), to-dos (by group or individual), projects/tasks, opportunities, etc. We've used it to manage communications with our value-added reseller (VAR) partners for years.

What else do you mean by "social"? If it's connectors to Facebook, LinkedIn, Twitter, etc., I'd say that's a great opportunity for third-party add-ons, but not really what I'd consider core ERP functionality.

Going Forward . . .
TEC: Is there anything that you are at liberty to say on the company's future moves, i.e., new functional scope, verticals, regions, partners, etc.?
NL: We've obviously got a lot going on — 35 percent growth last year, increased profitability, hiring like crazy (even hired our first-ever marketing director). The Mobile Web client is going to be the big news for the year, of course — and people aren't going to immediately realize how revolutionary it is. With a small core staff, leveraging the power of some unbelievable open source tools and communities, we've managed to do a total rewrite of the client — while still maintaining 100 percent interoperability.

The Mobile Web client will run in any modern browser, on any operating system (OS), and it will also be available as a compiled app that will work with the various app stores. It will be a single, 100 percent JavaScript code base, and it is actually “faster“ than the C++ graphical user interface (GUI) client. I don't have to tell you how terrible the performance of most Web apps has been historically — but we really believe this SproutCore HTML5 framework, in whose community we have invested heavily, is a game changer. The Node.js server, which manages an incredibly efficient data source in a very lightweight middle-tier, is also phenomenal.

And meanwhile, we continue to leverage the advanced features of the PostgreSQL database — the transactional processing power and some cool object-relational tricks make this database much more than a dumb data store, unlike database management systems (DBMSs) used by most ERP systems. Here’s a sneak peek at the talk we'll be giving at the Open Source Business Conference (OSBC) show in May to roll out the Mobile Web client, and a deeper dive for PostgreSQL developers a few days earlier.

TEC: Which modules, regions and verticals have been most active as of late? What do you foresee in 12 to 18 months — more of the same or not?
NL: We continue to add new VAR/SI partners worldwide at a healthy clip. The bulk of our business remains in North America, but we have very active, successful partners in Mexico, the Middle East, Europe, and Southeast Asia.

One vertical that we're going to focus on particularly this year is wholesale industrial distributors — starting with a cannonball into the electrical distribution pool. This is a market that has been disproportionately affected by the “ERP graveyard” consolidation — the overwhelming majority of electrical distributors seem to be running a handful of products acquired by Epicor/Activant or Infor. We've been working with a leading trade group in that market to build out an add-on package of features specific to this group, and we rolled it out at the IMARK GROUP showcase on March 27–30. I wouldn't be surprised if there were a broader Distribution Edition of xTuple by the end of the year.

TEC: What is your end game: eventually going public, being acquired for some hefty amount, or something else?
NL: The opportunity we see for xTuple is the democratization of ERP. So to that end, we're going to step up our efforts at a real ubiquity strategy — we want as many people as possible using the free version, and we don't care if we ever see a dime from them. We've seen the power of the "network effect" clearly over the past few years — the more people that are using the system, the better and more valuable the system is for everyone.

Open source really knocks the walls down and creates a whole new dynamic (pardon the obvious pun) that the incumbent proprietary vendors can't really answer in the long run. It's open source that is much more of a customer-favoring phenomenon than SaaS and cloud, which is at least partially driven by a new generation of vendor lock-in objectives. We'll embrace the cloud more fully, of course, with our 4.0 product — but we'll do it, once again, in a way that will disrupt the incumbent competitors.

So, to answer your question, we're looking to continue to grow the company, and in the long run, to significantly change the rules of enterprise software. We want what people currently call ERP and CRM to be as easy and accessible as consumer software — for companies of all sizes, from startup to Global 1000. We believe we have the technology, the domain expertise, and the global community reach to make that happen.

I get calls all the time from financial types, but that's not my interest now. We see an opportunity to build and grow a company that almost no one else in the market today can make. We're creating something of enormous value, and when you're doing that, the end-game questions tend to answer themselves over time. We truly want to grow your world.

References and Recommended Reading

xTuple xChange, Add on to Your ERP. July 15, 2009.

Technology Evaluation Centers (TEC) helps companies research, evaluate and select the best enterprise software solutions for their unique business requirements. From small businesses to large enterprises, private- and public-sector organizations in a variety of industries, TEC specializes in impartial and quantifiable software selection.