Is ErpNext a good deal for micro-enterprises?
While in Brazil where I showed Erpnext to an old friend, who could be a potential ERPNEXT customer. When I showed him the pricing….did not believe my eyes……$ 70/month….must be a typing error 
Maybe I have missed something, but the price increase came as a bolt out of the blue. @not_a_countant refers to a Newsletter…I just checked my mail accounts…and cannot find this. Anyway I have read the diverging opinions in here:
For a while already I intended to write a contribution about the following question: “Would I now (2018) select ErpNext again to run the administration of our micro-business?”
I believe it fits very well in the ongoing discussion about the subscription fees. My view is based on my own practical experiences with ErpNext.
Dogs Love It (DLI) is an absolute micro (or even nano) enterprise selling fresh frozen dog food to local customers from our home here in the Netherlands. It run by my wife, a friend of hers, and I do the accounts. We do not even have a shop, we run DLI from our house in a residential area. Early 2011 we formally registered the company and we received an avalanche of offers from banks and administration offices (bookkeepers) for accounting solutions.
I had only a few very simple requirements for the accounting software:
- Enter the sales and purchase invoices, keep track of accounts inclusive of VAT
- Cloud-based.
- Affordability read CHEAP.
There existed also in 2011 solutions meeting 1) & 2) but 3) would cost some 10% of our low turnover and 50% of our low profits. We were just starting!
Therefore I started to Google on “free cloud based accounting software”, tested several options and selected ErpNext that costed $6 per month (from memory). One of the convincing arguments to go for ErpNext was the promise that an external website-webshop would soon be implemented. To have one integrated system appealed very much to me.
Present new users have no idea how primitive and clumsy the user interface was as compared to the present modern and intuitive interface. The functionality was limited and the frequent use of parameters with a “coders name” (I still remember the “print rate” meaning the tax-inclusive unit price) and/or Indian-English expressions limited the intuitive feel. There were less than 100 paying customers, there were 2 or 3 messages per day on the forum, the whole team was 5 or 6 people, and their support/service orientation was beyond any comparison (one of the reasons they “made it” I believe).
Those were the days.
Adopting a non-standard system meant that I had to understand accounting, I have spent considerable efforts to understand the Chart of Accounts, debits-credits, VAT regulations including the EU intercommunity purchases (we buy a lot from Germany) and how to do the simple customization required. Localizations such as national CoA’s, languages etc came much later.
I have customized the system and the main challenge figuring out how to deal with the VAT and reverse charges for intra community purchases.
I still do use the English version, and I have hardly made any changes, and it runs fine, since 2011.
However, in the meantime ErpNext has become a complete overkill in terms of functionality!
I make sales/purchase invoices, use the website/webshop, email sometimes an invoice, and every 3 months I produce the VAT statement. That is it.
Addresses I manage using Google Contacts with all the advantages of a mobile telephone….
After this intro, the question I want to address is: “If I had to make the decision now (2018) would I again select ErpNext”. Many things have changed over the last 6 years.
Systems offered now in NL are almost all cloud based
- Due to fierce competitions the prices have dropped considerable and thanks god our revenues/profits have increased, so we could effort an NL standard offer.
- Most of them contain or easily integrate with a POS or an Ecommerce platform.
- They all interface directly to the major banks in NL for simple bank reconciliation.
- They run a pre-installed Dutch chart of account fitting the type of business.
- There is no need to understand accounting basics: just enter your purchase/sales invoices and the built-in intelligence takes care of the rest.
- Many have an OCR system that enters the purchase invoices semi-automatically saving a lot of time.
- With one click one produces the required 3-monthly VAT statement and end-of-year statements.
- Many of them have a Dutch Helpline during Dutch office hours.
- No discussions with annoyed accountants that hate the use of a non-standard solutions. (For a small company in the EU it is like this: you select your accountant and he will tell you which bookkeeping software to use or you select the software and their website will tell you which accountant nearby supports the product)
If you look at the bullets above you may understand that the answer is probably “no”. For less than the present minimum subscription of $70 I have quite a choice of cloud based systems that are hassle free adapted to the Netherlands environment. And likely I would opt for one of these.
I believe I can cautiously conclude that ErpNext is no (longer) competitor in the market of micro-nano enterprises in “western countries”. But they can have it for free, just download, may be your comment. No thanks, one look at the daily number of messages from the self-implementers convince me that I want to run it from the cloud. No headaches.
Coming back to the topic of the tread, “the business of ERP and pricing it right” I have some comments.
I believe there should be a more fine-grained differentiation in terms of functionality, user-group/type of company, economic environments and price.
$70/month is and then $800/month is just too far apart. No automaker will offer their cheapest entry model for $10,000 and their next model 11 times more expensive for $110,000.
In terms of functionality, different users have different requirements. There are probably few users who really need and use all the functionalities offered by ErpNext. And there are plenty of nano-enterprises in this world where one person, the owner, does all what needs to be done to keep the business going. For nano-enterprises $70 seems way to high, thus obviously no longer the type of SME Frappe is targeting.
“ERPNEXT for Everything” or “ERPNEXT for Everybody”
We have seen an explosive development in the ““ERPNEXT for Everything” movement with the developments of modules for agriculture, healthcare and schools and companies and service providers with strong IT skills stretching the capabilities of ErpNext.
I speculate based on my own experiences outlined above, that the “ERPNEXT for Everybody” ecosystem may be shrinking. There are 100s of millions nano-enterprises, millions of SME, and maybe 1000 global players-large multinationals. The recognition of ErpNext by authoritative Gartner as top-player, the attendance of silicon valley icons to the Erpnext conferences, has resulted that ErpNext is now on the eyes of larger also western enterprises. As a consequence subscription fees have been adapted to industry standards and it is questionable whether this is a good development for the 100 million micro-enterprises.
The present pricing seems to be inspired by Western pricing models. Still a large part of Erpnext paying user base lives in non-western economies. An SME in India, Kenya or Peru has to consider the following: Pay $9600 a year for the cloud subscription or hire a system administrator for less and download the software for free.
There seems to be a need to have price differentiation for different levels of economic development. Many companies do this. ESRI, the leading GIS company, has steep discounts for licences in developing economies and Microsoft Navision licenses in Kenya are way lower than here in NL.
Being less attractive for nano-enterprises (ErpNext for Everybody) ignores a expanding potential target group, keeping in mind that International Finance Corporations (IFCs) like the World Bank exert pressures on many governments to improve their tax revenue collection and many developing countries have introduced VAT. (No restructuring no loan!)
The 100 million nano-enterprises, the informal sector players, are forced into bookkeeping and more transparency. If I ask small entrepreneurs in Kenya about their accounting software the answer is “none” or they use an illegal crack of “Quickbooks”.
The core question for Frappe as company is how it wants to generate income from its cloud subscriptions.
Targeting a higher and higher level of customers allowing higher and higher subscription fees, or target the 100 million nano-micro-small enterprises, with much lower per user revenues??
Or both??? It may be possible to reconcile the two somehow conflicting approaches: Erpnext for Everybody or Everything.
I believe that for many small enterprises the potential to use the complex functions of Erpnext (in the future), the modularity, the external website, the simple customization and so on, combined with a headache free cloud subscription model, may be an appealing proposition, that should be clearly communicated in the branding of ErpNext….(start small paying little and grow big and pay a bit more OR start simple and ERPNEXT grows with your business complexity…)
There is a need for predictability and stability. A serious business is transparent in its pricing policy. Inform new customers about the expected yearly price increase and do not annoy your existing user base with a sudden very steep subscription fee increase. I was an early-adopter of Google-for-Business and they reward this by never sending me an invoice.
You could have a “for life price policy”. Increase the yearly fee by xx% but do not increase the fee for existing customers or only with the inflation rate. Similar the development path should be without big surprises. An online high-end retailer like Jerry Harvey has likely very different requirements than a B2B high-tech company like ESO Electronic. Both companies make extensively use of ErpNext. For a potential customer is is worth knowing where the focus is gonna be.
There has been a lot of experiments/trials with different commercial models (cloud subscriptions) for ErpNext mainly based on per user cost, The model where the Service Level Agreement is the main price determinant has not received much attention. ( for example $5/per month/user with no support/use the forum, $10 get support within 3 business days, $25 guaranteed priority support within one hour during Mumbai business hours, $100 the private mobile telephone number of our CEO )
I, with many others including the Frappe team, readers of this forum, foundation members may all speculate about the best model, but a lot of it is based on guessing, intuition and gut feeling. I do not doubt that especially Umair, and of course Rushabh and Nabin, have knowledge about the Erpnext target group.
For Frappe as a company there are a few core questions as they mainly derive their income from cloud-subscriptions and services to self implementers.
- Why use or not use ErpNext?
- Why run Erpnext on your own server and not in the cloud?
- Why did you know have an SLA with us?
- What should we do to get you on board as a cloud-user?
There is a community of 7691 persons that could be mobilized to get better insight. A part of this group is likely willing to provide market information.
Step 1.
A professional marketer uses the community to design a market survey. This prevents that relevant issues are ignored, participatory and open design.
Step 2.
Use the email addresses Frappe must have collected (forum members, trial accounts, real accounts, demo’s given and so on) get a clearer idea about the present customer base, willingness to pay for Frappe services, unwillingness to pay for Frappe services, and so on and so on. Based on this data/knowledge a competitive analysis could be made for different users segments (Fresh/Quick books etc at the low end, Odoo, Navision, Epicor etc for the middle segment).
Also the Adworks advertising recently discussed could be more targeted.
Erpnext could ask permission (like Google is doing) to send anonymous information to Frappe. This would give insight about the relative importance of the functionality/modules.
Such detailed market information with help Frappe to make informed decisions about pricing and development priorities and will also be beneficial for the FOSS component of the project.
And possibly reconcile the Erpnext for Everybody or Everything.
Looking back, do I feel that I made the wrong choice in 2011 adopting ErpNext?? NO!!
I learned a lot. I never realized that business and their requirements could be so diverse. It was interesting to study business logic/accounts instead of using a blackbox, and finally I have been following in detail the challenges and the many zigzag changes of policy and trials of the team in Mumbai seeking a viable business model for a fantastic Open Source project. Thus I gained insight in how to run an OS project with their many challenges. That is something I benefit of professionally.
But as argued above, unlikely I would select Erpnext again if the choice had to be made now. Unless it would also really target the nano-enterprises of this world.
