Meet the entrepreneur who is bringing 'open source' to enterprise software

Rushabh Mehta claims his firm is the biggest open-source project in ERP in India, and the second largest in the world

After his Master of Science (MS) in 2004, Rushabh Mehta joined his family business of manufacturing hospital furniture. A few years into it, the firm was implementing an ERP solution from a vendor and was facing some integration issues. ERP, or enterprise resource planning, forms the software backbone of any organisation, managing back-office functions such as accounting, sales data, and employee leaves and payroll.

Mehta, who calls himself a 'hobbyist programmer’, decided to create an ERP tool himself--one that specifically solved some pain points that off-the-shelf ERP products couldn't at that time. It worked so well that Mehta decided to start a new company around it. In 2008, he founded Frappe Technologies in Mumbai, which is better known by its product name ERPNext. The firm sells cloud ERP suites to enterprises and has recently raised Rs 10 crore from Zerodha, an online brokerage firm that is also a user of ERPNext.

ERP software is a large ocean, globally estimated to be a $40-billion market. It has sharks like Oracle and SAP, start-ups like Zoho and all the way to legacy firms like Tally. Like broader tech, ERP has gone through a multitude of changes as the present day offerings today are on the cloud, offered on subscription basis, and have become highly domain-specific.

What makes Mehta’s ERPNext special is that the product is ‘open source’, or free to use, modify and replicate, and has the source code in the public domain. Google Android, publishing platform WordPress, Python, the coding language, and even Wikipedia are examples of open-source tech products.

Mehta said in an interview that the software itself is free, while the company makes money from cloud hosting and support charges. To put it simply, when an enterprise buys ERPNext software suite, it does not pay anything for the ‘product’, but pays a fee as hosting charges (all software are hosted on either Amazon Web Services, Microsoft Azure and similar platforms) and for maintenance and support.

Mehta claims his firm is the biggest open-source project in ERP in India, and the second largest in the world, after Odoo, a Belgian ERP firm. “There is no licence for using the software, that is where it starts from,” Mehta says. “And it offers four (types of) freedoms -- freedom to choose, freedom to study, freedom to modify and freedom to redistribute. The catch is that if you redistribute, it must protect all the four freedoms.”

Open source has other advantages too. Open-source software are easy to configure and integrate with other technology part. For instance, a company’s core software may need to be integrated with the GST system or, say, Fastags, the new e-toll system. Mehta says with open-source tech like ERPNext, the customer is not tied to long-term contracts as is the case with other big ERP providers.

The open-source revolution in software has been many years in the making. More and more software are now open source – with code put up publicly on websites like GitHub – which, supporters say, helps in faster innovation and evolution on tech. “Open source is a very dominant methodology already on the tech infrastructure side. A lot of domains are dominated by such software,” says Mehta. “But ERP is still dominated by old proprietary software. It’s the next big area.”

For ERPNext, most of its growth has come during the past three years, when it went on to expand from a five-member company to become a 30-employee organisation. It currently works with clients such as ElasticRun, Zerodha and several top diversified conglomerates. For Zerodha, ERPNext powers its back-office operations, including customer call-centre, HR, accounting ledger and other functions.

“I attribute a significant reason of Zerodha’s agility, growth, and success to ERPNext. It is a key reason why a 30-member tech team has been able to build, maintain, and scale the largest stock broker in India, all in-house,” said Kailash Nadh, chief technology officer, Zerodha. He added that the two firms have also created FOSS United, a non-profit foundation to promote and encourage innovative FOSS (Free and Open Source Software) projects like ERPNext to be built in India.

Mehta said, the funding (from Zerodha), its first institutional investment, will help the company invest further in the product, as well install business development staff, as it looks to target big clients.