Open Source CRM Opportunity May Be in the Cloud

by Drew Robb

Enterprises may be slow to adopt open source CRM, but the real market for the software may be in SaaS and cloud computing deployments.

Open source CRM software projects are growing in number, but analysts question whether they'll meet with widespread acceptance by enterprises.

Rachel Flewelling of Info-Tech Research Group said flatly, "Our clients just aren't interested in open source CRM, so we don't do any research on it."

Dale Vile, an analyst at Freeform Dynamics, strikes a similar note.

"While the enthusiasm for open source in the systems software arena is generally strong and growing, acceptance is much further behind when it comes to core business applications," he said. "The overall trend in business apps is away from customization, particularly anything that involves code cutting, so the potential benefits of open source in terms of freedom to modify/derive are not really relevant."

Vile added that any perceived cost savings on software, even if they do stand up to scrutiny, tend to be relatively insignificant when considered in the context of overall project costs like hardware, implementation and integration services and internal costs.

"For these reasons, the case for open source CRM implemented on premise is unclear, and I do not see some huge shift in this direction in the mainstream," said Vile.

He sees potential for open source CRM as the enabling technology behind software as a service (SaaS) offerings. Already, there are some big guns playing in the cloud CRM market, such as Salesforce.com, Microsoft Dynamics and Oracle. But they can be expensive for smaller and mid-sized organizations.

"Open source-based alternatives providing a more cost-effective solution as a fully supported service could be seen as relevant by many," said Vile.

Accordingly, a host of open source players have arrived on the scene, including SugarCRM, openCRX, vtiger CRM, Daffodil CRM, JunariCRM, hipergate, CiviCRM, Opentaps and CentricCRM.


SugarCRM Gets Noticed

The one that is garnering the most attention is SugarCRM, which claims 7,000 customers and more than 600,000 end users.

Forrester Research saw fit to include the company in its most recent Forrester Wave for midmarket customer relationship management (CRM). According to Forrester analyst William Band, SugarCRM has traditionally been targeted at the mid-sized and small organization market, but it continues to improve and is finding a home in smaller divisions of large enterprises. Band said that while the SugarCRM code is available for free, the Professional and Enterprise editions are fee-based. The company also recently unveiled an OEM version.

"Sugar Enterprise offers a sound low-cost choice for organizations that want deep customization flexibility in a packaged CRM application," said Band. "The open source model allows organizations to take a basic CRM platform application and build upon it using their own IT resources or add-on modules available through SugarCRM's partner and developer communities."

He lists SugarCRM's strengths as being offered as SaaS or on premise, lower cost and usability. On the downside, he worries about limited support for analytics, customer data management and field service. That said, the company was classified as a leader in the field by Forrester.


'The Cloud Exists Because of Open Source'

Martin Schneider, senior director of communications at SugarCRM, believes that the convergence of the cloud, mobile computing and open source are helping open source applications gain traction. As a result, ISVs, VARs and end users now have more open, interoperable and cloud-ready components on which to build and manage processes like CRM, ERP and e-commerce.

"The cloud exists because of open source," said Schneider. "Any tech company that is truly working in the cloud or offering a cloud service is leveraging open source in some way."

He finds it amusing that proprietary SaaS providers like Salesforce.com label their offerings as part of the cloud. To his mind, they are not true cloud applications in that they are not open, portable and as free to own and scale as open source-powered cloud services and systems. Case in point: VMware has been erecting its own open source-based cloud stack. Others will likely follow suit.

The key differentiator is whether the vendor offers user access to source code, as opposed to locking them in to proprietary environments, he said.

"In time, this walled garden will prove impossible to scale to any greater lengths and will crumble," said Schneider.

Schneider said interoperability, faster deployment and customers being able to control their own destiny are becoming prized features, so many CRM vendors are trying to follow suit. The problem, he said, is that some CRM software is too dated to adapt to the challenges of being a Web-based tool with open development and subscribing to other open source principles. He sees ample opportunity for open source CRM to take root, particularly at the mid-market and SMB level. But he isn't planning to ignore the enterprise space.

"SugarCRM is a horizontal CRM provider, selling to all industries and market segments," said Schneider. "That said, the product is very popular among manufacturing, financial services, healthcare and technology providers.

“We do sell to the enterprise, but mostly through our expansive VAR partner network, as they perform most of the customizations and other professional services traditionally required by large-scale enterprise CRM deployments," he said.


  This article was originally published on Friday Oct 8th 2010
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