CRM Takes the Open Source Freeway

Two years ago or so, a handful of upstart companies entered the CRM market offering open source technologies designed specifically for this space. At the time, open source CRM was neither mature nor relevant enough to corporate deployment needs to make much of a dent in the CRM space.

Fast forward two years. It is difficult to find third-party figures documenting how deeply open source CRM has penetrated the industry, but anecdotal evidence from the leading vendor in this space — SugarCRM — suggests that the market is beginning to take notice.

“2006 will be an extremely exciting year as we look to double and triple our customers,” Clint Oram, co-founder and general manager of Sugar Online told CRM Buyer.

To be sure, few analysts believe open source CRM — which can be deployed either as an on-premise or as a hosted application — is positioned to disrupt the top CRM vendors’ market share.

“Open source CRM does have its place, but it is not as big as the hosted CRM market place,” AMR Research analyst Robert Bois told CRM Buyer.

Changing Patterns

That may change as open source CRM providers gain more traction. SugarCRM has only been operating for two years — and only landed its first commercial client in October 2004. Since then, Oram said, the company has added some 400 commercial clients.

Furthermore, the code base on the company’s Web site is downloaded about 200,000 times each month, but SugarCRM only has usage information on its commercial clients.

The number of downloads is bolstered by another statistic: 4,000 developers have signed onto the SugarForge.com development community. Those figures prove SugarCRM’s influence is growing, according to Oram.

“The truth is, nobody knows how many deployments there are of open source CRM,” he continued, “not even the analysts. They typically get their usage numbers directly from vendors — so if we can’t tell you, then they certainly can’t.”

SugarCRM is about to get a better handle on this segment of the market with the introduction of its new Sugar Network in a few weeks.

Sugar Network targets companies that are using open source CRM, providing training services and popular plug-ins, such as those for Microsoft Outlook and Microsoft Word.

“It will come at a price point that will be compelling to this market and will help us get a better understanding of the market,” Oram said.

Who’s in the Game?

It may be that open source CRM has penetrated deeper into the small end of the CRM market than analysts have realized. “The biggest advantage of open source CRM is the low cost — in the majority of cases it appeals to smaller customers looking to implement a tactical CRM project,” Oram pointed out.

A few years ago, open source CRM’s appeal was also due to its customizability, he continued. Hosted vendors, though, have made significant advances in this space, and that competitive advantage no longer exists.

Although open source CRM is still cheaper, Oram admitted that “the hosted vendors are becoming more competitive on customization.”

Although the sweet spot for open source CRM is typically in the 30-to-50 range, it is not exclusively for small companies, Oram said. SugarCRM has clients with deployments as high as 9,000 seats, he claimed, and the company is getting set to announce a series of large company wins in the next month.

Open Source or Shared Source?

Open source CRM may not have broad market appeal, though, argues Alan Ranciato, president of TechWhale Solutions, a company that was formed in early 2004 on an open source model but soon after shifted to a shared-source version of BlueWhaleCRM.

“We were the only .NET open source CRM product on the market,” Ranciato told CRM Buyer. “The reason we shifted away is that there does not seem to be much support of open source in the development community, at least on the Microsoft side.”

TechWhale decided to make its source code available on a fee basis, he explained, selling a CRM product that is highly customizable. “It gives the company a better option compared to the proprietary systems on the market. Some may offer APIs, but few will ever open up the code.”

Both open source and shared-source models are well suited for large and small ends of the market, Ranciato acknowledged, but with limitations.

“Frankly, I think very small companies are not well positioned for open source since it requires some in house IT expertise,” he pointed out. TechWhale’s client base is typically situated in the mid-market, he said.

Despite his reservations, Ranciato is still a believer in open source CRM.

“In the Microsoft world, there is just not that open source mentality. Sugar is a great example of what open source CRM can do,” he remarked. “They have a great product — I am just not a fan of their platform.”