Spanish ERP company flexes open-source muscle

Most open-source companies rely on business models (and development models) that aim to leverage large global communities of users and developers. The goal? Monetize some percentage of a very large number of community members. So it's hard to imagine a more unlikely candidate for an open source play than Enterprise Resource Planning (ERP), an industry dominated by big enterprise proprietary vendors such as Oracle and SAP that sell to Global 2000 organizations.

Openbravo, a Spanish-based ERP start-up, recently expanded its sales and executive footprint to the United States (the company's third largest market), with new CEO Paolo Juvara headquartered in San Francisco. Juvara joined the company to lead engineering in Spain in 2007 after a 14-year career at Oracle in that company's ERP and accounting products group. The Italian native was tapped as CEO at the end of 2010. I spoke to Juvara about the challenges of building a viable global business in ERP through open source and how he made the transition from engineering to CEO.

Question: What prompted you to move from a successful career at Oracle to a Spanish ERP start-up in the first place?
Juvara: You may find this hard to believe, but when I left Oracle in 2007 there were surprisingly few differences in how Oracle operated and a start-up. Each smaller product organization managed its own things very independently. Oracle was a very engineering-driven organization. So I did many things far beyond what you might consider within traditional engineering requirements, like sales training and competitive analysis.

You have an electronic and software engineering degree from Italy. How'd you end up building finance software at Oracle and then running an ERP company?
Juvara: When I starting working for Oracle and developed general ledger software, I didn't even know what a debit or a credit was. What was dual entry accounting? It is not part of the curriculum in engineering in Italy. The first piece of software I wrote for Oracle was an accounting engine and it was just taking high-level accounting rules and translating them into code. It was written in C. That was a pure technical job, like writing a compiler. You translate a higher-level language into a lower level language. But after couple of months, I took some financial accounting classes, too.

For engineering people who want to move into the executive suite or become a CEO, how do you recommend they prepare?
Juvara: The most important thing is focusing on customers. Most engineers are too focused on engineering and engineering problems and not how technology solves customer problems. When you think about solving customer problems, you begin to step above products and a technology focus to all sorts of business issues. Then being able to talk to customers and understand marketing to them, it's not hard to gain an understanding of sales and it expands from there. A bit of general leadership skills are also helpful. Those are as helpful in a development organization as much as in any other organization.

So why Openbravo?
Juvara: On paper, Openbravo was one of the most difficult start-ups you could imagine. There were a huge amount of challenges. With ERP the complexity is very high and the barrier of entry for a new company is high. The market is very saturated and very mature. Open source has its advantages and allows to lower some of those entry barriers, but developing a successful and scalable business model on open source is a very difficult.

Additionally, I could see from Oracle that the ERP market was very broken and that there were no good choices for customers. It's a multi-billion market and for the company that manages to be successful--hopefully that company is Openbravo--then the rewards are enormous. The combination of a difficult challenge and a great potential fascinated me and ultimately is what convinced me to join the company.

How do you compete with giants like Oracle and SAP? What are the biggest challenges?
Juvara: We provide better software to begin with. For our customers, it's lower risk and cost, and they can evaluate it first. Our software is more productive. It's easier to adapt to customer business requirements and grow with the customer. It doesn't lock you into a single best practice solution that might or might not be suitable for you. So on the product side, we believe we have competitive advantages.

The big challenges in our industry are marketing and sales. We get a huge amount of traffic and attention because we are open source. But it's very difficult to get people to engage with us on a commercial basis. We attract a huge amount of people interested in free software at zero cost, but those are not necessarily our ideal users to begin with. Organizations looking for free software at zero cost are in many cases sole proprietorships with just the owner as the employee who is looking for a way to track revenues and expenses; they should not be looking at ERP, they should be looking at Quicken or Contaplus. For qualified ERP candidates, customers should have an implementation budget of at least $20,000 to $50,000. When we do reach those prospects, we have a high success rate.