Deal Radar 2009: xTuple

Cost-cutting is still at the top of many an executive’s mind as the recession continues. Today’s Deal Radar company, xTuple, uses open source enterprise resource planning (ERP) to help enterprises streamline their operations at a lower cost without a vendor lock-in. Its main products, xTuple ERP: PostBooks and Standard and Manufacturing Editions, include capabilities for accounting, customer relationship management (CRM), sales and purchasing, inventory control and warehousing. ERP is designed to help companies to gain better control over operations, increase productivity, and produce measurable growth across all areas of their businesses.

Ned Lilly, president and CEO of xTuple, began work with open source during his time at Landmark Communications, a privately-held media company with revenues in excess of $1 billion. Later, he was a founding vice president of Great Bridge, an open source company which provided commercial products, services and support for PostgreSQL. In 2001 he created Open MFG, focused on manufacturing, which highlighted the cost savings of open source and the community collaboration around its hybrid source code license. In the summer of 2007, Lilly renamed the company xTuple and released xTuple ERP. xTuple is entirely self-funded.

When xTuple was founded, commercial software vendors lost touch with customers, as costs and business models were out of sync with the reality of the market. Mainstays of the industry disappeared almost overnight, and enterprise software customers realized that there was no longer any safety in working with large, established players. Small and mid-sized businesses had to make do with starter solutions like off-the-shelf software, as real enterprise systems were prohibitive in cost and complexity. Open source software was starting to come into its own, and xTuple’s founders saw an opportunity to build a new solution for small manufacturers by leveraging all the work on robust open source building blocks such as the Linux operating system, the PostgreSQL database, and the Qt framework for C++. For over five years, the company focused on manufacturing in order to build a lasting, sustainable business around a trustworthy product. 

Even now, the marketplace is spread out despite the consolidation of some failing vendors into mega-rollups like Infor. It’s rare to see the same two or three competitors from one deal to the next, although the Microsoft Dynamics product line is often seen. The xTuple approach of aggressively engaging the community of paying and nonpaying users continues to distinguish the company. 

xTuple’s market is the smaller end of the SMB marketplace. There are over 300,000 manufacturing companies in the US with sales of $1-100 million; xTuple regards this group as a core target. xTuple’s business model is simple: it engages an international community of users and experts in ERP, business processes, and key technologies to develop and maintain their product. This product is then delivered to paying and nonpaying users for a fraction of the cost of traditional ERP. The free edition of the product is placed in as many businesses as possible and then services like implementation, training and support as well as commercial software upgrades are sold to as many of those businesses as possible.

xTuple’s target customers are inventory-based companies such as manufacturers, distributors and retailers. Many professional service firms also use the software.  Within manufacturing, the system works best for discrete and batch process firms. The company’s main focus is on the SMB market space, but it is also working with several Global 1000 companies.

xTuple experienced revenue growth of 250% in 2008, compared to 2007. The company has been profitable for several years. The customer base has more than doubled in the past year, spanning verticals such as manufacturing, retail, and distribution, and geographies including Australia, Canada, Europe, India, Mexico and the United States. There are approximately 100 customers, mostly between $10-100 million in annual revenue, with approximately 15 concurrent users per company.

The PostBooks Edition ranked among the top ten projects on the SourceForge open source download portal, where it has been downloaded over 220,000 times. xTuple estimates that approximately 1,500 companies actively using its software in production. The company also has several hundred active individual contributors, who participate in online forums, fix bugs, create new functionality, and contribute to Q&A and documentation efforts.

The company plans to grow its worldwide partner channels. In 2009, xTuple is investing heavily in growing its channel from 20 current solution providers to a broader array of consultants, developers, and solution providers.

Ned Lilly’s thoughts on exit are, “We don’t think about it. With no pressure from short-term-focused investors, and continued strong execution, we expect to grow the business in both overall revenue (as we did dramatically in 2008), and profitability. If we do our jobs right, the exit question will answer itself to everyone’s satisfaction.”

Recommended Reading:
Deal Radar 2009: OrecX
Deal Radar 2009: Plain Black

This segment is a part in the series : Deal Radar 2009