Rushabh Mehta holds a production engineering degree from Mumbai University and also has a graduate degree in Industrial Engineering from Penn State University, U.S.A. He has worked with his family business in manufacturing for close to 3 years. When they decided to exit it Rushabh did not take up anything in production or manufacturing industry. He started up to fulfill his childhood dream of being a software entrepreneur. He is a self taught programmer and when asked of his first interaction with computers, he reminisces, “I was lucky to have an old PC at home at a young age, with an ancient graphic card, so all I could do was write BASIC programs.”
He started up in mid-2008 and initially continued with services. But his heart was much more into products than services. At that time, they were a team of 18. They cut down to a team of 5, wound up all the services projects and started working full time on ERPNext which was launched in 2010. ERPNext is an ERP for a small business and includes the usual financial accounting, inventory management, sales, purchase, HR but also had a built-in CMS. It can generate your website and product catalog. They are in the process of building a shopping cart interface too (alpha version already released). Rushabh says, “The goal is to have one platform to manage an entire business. Right now ERPNext is ideal for companies in manufacturing, retail, distribution and services.”
Initial days with Open source
Before Rushabh went to the U.S.A, for his industrial engineering degree, he had primarily developed on Microsoft platforms. But in the US, he was pushed to other platforms like Java and Python. He says, “I happened to attend an interesting conference on Semantic Web, which was all the rage in 2002-03, and I started following a different community. Python was a language I could immediately relate to and I loved its elegance. And the entire Python community is mostly Open Source. When I started building a product in Python, it was always Open Source, though there was not much business thought gone into the decision.”
When they became a full product company in 2010, they realized that there are dozens of ERP products and it would make sense to position themselves as an Open Source company. That thought took three years to formalize and they completely shifted their positioning only this year. When Rushabh had started he had no idea why they were in business. When he became an entrepreneur, he was only chasing a dream, which was partially formed. Once they figured their core business, they did not have the right team in place. When that was in place, they needed to put the right culture in place. Rushabh says,“The good thing is that we evolved from all these phases and were lucky to have the ability to stick around. But it was extremely stressful.”
Customers’, partners’ and competition’s reaction to an Open Source ERP
ERPNext was included in the winner's list for the BOSSIE Awards given to top Open Source projects in the world this year. This list has included Wordpress, OpenERP, SugarCRM etc in the past. Probably the first project to originate out of India on that list was vTiger CRM, which is India based, but it started as a fork of SugarCRM.
He says, “Very few people take a chance on a no-name startup, especially if it is a mission critical application like an ERP. So we never got any kind of traction. It did not help that we were very poor at selling and PR. I am very thankful to our early users for sticking with us and their high level of engagement that kept us going. The scenario is changing now. We have been able to create a presence in the market. But it is still a long way to go for us. The good thing is that, for now, our existential doubts have receded.”
Rushabh explains his selling points for ERPNext. “Our cloud version comes at Rs 30,000 per year for unlimited users and full product, and there is nothing that comes close for a price with a feature comparison. Our user interface is very good and the product is Open Source, which is a very rare thing in India.” 80% of their revenues come from cloud. They also give commercial support which gives them another 15% and about 5% is in the form donations. They have more than 150 paid customers on cloud and many Open Source users. They don't track their Open Source users. He adds, “It is hard to estimate, but we are always surprised by how many of them are out there. It does cannibalize our revenues, but we are happy to get the traction.”They have experienced that partners usually go after big brands as they don't want to risk a new name to customers. He believes that having a partner strategy is not a good idea for any startup. But now that they have built some name, now they find independent companies providing ERPNext services globally. Rushabh says, “They are not related to us directly and they don't have to, but it is good to see an ecosystem being formed. We are also seeing clones being formed. People just remove our name and post it as their product. We are flattered by the imitations. Competition is happy to ignore us. On a lighter note, we know they tell customers that we don't have a genuine product, because of our pricing. But I think that might begin to change. In Open Source, OpenERP is growing very rapidly and we are happy to remain in their shadows. I think they are watching us and we saw they are also building a CMS module like the one we have. So it is validating our strategy.”
Current scenario and the road ahead
ERP is a hard and crowded market but the last year has been good for ERPnext. The number of queries on their forum and issues on GitHub is increasing. These days, they are getting a contribution from the community almost every week. Rushabh shares that there are probably four or five teams, in Brazil, Germany, Saudi Arabia, Canada and in India who are actively developing on this platform. It took them five years to get where they are today. It has been very slow in terms of Open Source contributions, but now it is picking up.
Their biggest users are in manufacturing and distribution and now after including a built-in Point-of-Sale, they are getting a few users in retail as well. They are happy to see interest from the Open Hardware community (the maker movement). One of the teams (fritzing.org) presented ERPNext at the Open Hardware Conference at MIT, which is the world's top such conference and they got a great response. So we are now seeing the benefit of Open Source.
They have been family funded so far. They did send presentations across to a few investors in India but there was no follow up, from either side. Rushabh says, “I think Open Source and ERP are not hot keywords with investors. It was not that we were looking for funding per se, but it would have been great not to carry the load all alone. We have just begun. So far our focus has been only the product. But beginning in 2014, we will start thinking more about growing. Currently we are in process of completing all our product documentation and building up our infrastructure capabilities before we enter the next phase. Some very good ideas are cooking, but we will launch them slowly.”
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