SugarCRM: The Case for Enterprise Open Source

Historically, one of the biggest knocks on open source software has been its lack of presence in the enterprise software space. We generally define “enterprise software” as software that solves some sort of problem faced by the enterprise (the business). A rapidly evolving product known as SugarCRM is single-handedly shattering that stigma, and putting some serious enterprise-grade CRM (customer relationship management) capabilities into the hands of the everyman, or everycompany, as the case may be.

SugarCRM was founded in 2004 by CEO John Roberts, GM Clint Oram, and CTO Jacob Taylor. Since their founding, they’ve grown to a respectable 55 employees. In 2004, the same year of their founding, the company scooped up Communications Solutions 2004 Product of the Year Award. Not shabby.

The core product (SugarCRM Open Source) is freely available, so if you are running a business, you are able to download and implement the system without any software license costs whatsoever. This core offering serves up a lot in the way of functionality, including integrated contact managment, marketing campaigns, opportunity management, project management, lead tracking, account relationship management, web portals, integrated shared calendar, and RSS syndication. A nice “dashboard” metaphor brings all of the elements (and others) together nicely.

SugarCRM is also offered in 2 different commercial editions. The SugarCRM Professional edition adds additional features such as team management, MS Outlook integration, wireless access, sales forecasting, catalog management, and quoting. Among other things, the more robust SugarCRM Enterprise edition adds support for Oracle 9i and 10g on the database side, as well as some access to professional services and dedicated support services. If you want an easier path to going live, they also offer hosted solutions on a per-user basis.

SugarCRM (the company) gets open source. They realize that in order to be successful as an open source company, you basically have a very limited playbook. You offer a freely available core product, that is distributed via the open source license, and you grow your revenue streams around licensing for more advanced versions of the product, as well as professional services. If I’ve said it once, I’ll say it again: open source businesses are essentially services companies. (See: Software, Services, and Revenue, Oh My!).

From an architecture standpoint, SugarCRM is built around the wildly popular LAMP stack (Linux, Apache, MySQL, and PHP). The LAMP stack represents a fast growing open source enterprise software stack that more and more companies are using as an alternative to expensive proprietary software stacks (because of its lower cost and freedom from lock-in). While it is nice that the Enterprise edition will function with an Oracle database, it certainly isn’t required to achieve very respectable performance results. MySQL has come a long way from its early days – far enough, in fact, that Oracle acquired Innobase, a key technology provider to MySQL AB, the Swedish firm that produces and distributed the MySQL database engine.

While all of this sounds great, what really sets apart SugarCRM, in the opinion of this veteran technologist, is the fact that the leadership team has completely immersed aspects of online community building within their portal site located at SugarForge. Through the service at SugarForge, users are free to download and share themes (look and feel modifications), language packs, custom plugins, and other information. Also supported are support forums, a project lead database (mined by custom CRM implementors and service providers), and even a live chat (there were 8 or 9 folks in there a second ago chatting about customizing various aspects of the SugarCRM product).

From a cost perspective, there is simply no contest when you start laying out the numbers. According to Corra Technology, an open source software integration services firm, SugarCRM is over 6.5 times less expensive from a total cost of ownership (TCO) standpoint, when compared to rival salesforce.com:

First Year Salesforce.com Total-Cost-of-Ownership: $ 7,800
Subsequent Year Salesforce.com Total-Cost-of-Ownership: $ 7,800
First Year SugarCRM Total-Cost-of-Ownership: $ 1,195
Subsequent Year SugarCRM Total-Cost-of-Ownership: $ 1,195
First Year Monthly Savings: $ 550
Subsequent Year Monthly Savings: $ 550
One Year Total Savings: $ 6,605
Two Year Total Savings: $ 13,210
Three Year Total Savings: $ 19,815
Savings in License Fee per User per Month: $ 110

Should Oracle, Seibel, et al, be scared? Not yet. The open source CRM movement is still creeping up from smaller companies to mid-size firms. Eventually, though, it is entirely conceivable that SugarCRM could exert some upward pressure on the aforementioned bellwether players, in much the same manner that MySQL put upward pressure on rival database maker Oracle within the enterprise database market.

Should salesforce.com be scared? You’d better believe it.

The future looks bright for SugarCRM, especially given their unique positioning at the nexus of the CRM wave and the open source movement, as well as their marquis capitalization via Draper Fisher Jurvetson, Walden International, and New Enterprise Associates (NEA). These are storied, lynchpin investment firms, and they made the decision to jump into the enterprise open source market for a reason.

Cheers.

5 Comments

  1. I am big fan of opensource, however; this article is kinda misleading. With open source CRM, you dont actually get the entire suite, you need to have IT staff to implement and maintain and what about the costs of hardware?

    Opensource is a great idea, but it is not free nor does it actually save money when compared to salesforce.com or any of its rivals such as salesnet, netsuite, salesboom or entellium.

    Opensource is here to stay for sure, but it is not for everybody. Think about the thousands of businesses that are small, and have no IT staff, CRM to them is critical but there are lower cost options out there.

  2. Interesting comment, thanks for stopping by.

    I never said that open source was free … I did mention that the core SugarCRM offering was freely available, and this is true. As I pointed out in the 5th paragraph above, the “free” component to an open source business is essentially the carrot.

    I will say that as far as hardware goes, the cost is minimal. To roll out a SugarCRM implementation (for even hundreds or thousands of users), the hardware costs are minimal. You could do the whole thing, with a fault tolerant, redundant architecture, for less than $10-15K.

    And as far as functionality for the small business goes, quite frankly, SugarCRM (out of the box) offers more than adequate functionality, at no cost (as far as the software goes).

    I do agree that Open Source isn’t for everyone.

    The cost of IT staff to implement any solution will be present, irrespective of the solution chosen. In certain environments, the cost will be higher than others – there are a lot of drivers behind that number.

    See my piece entitled “The New CIO’s Open Source Decision” for my take on some of the criteria for successful open source adoptions:

    http://www.scottburkett.com/index.php/archives/199

    Cheers.
    Scott

  3. If SugarCRM “got opensource”, they wouldn’t be planning on changing to a Microsoft license:

    Link to article here

    They played the opensource card long enough to get the help of the OSS community. Now it’s time to cash out!

    Now that Microsoft has their well-worn meat hooks into SugarCRM, it’s just a matter of time before the product becomes post-digestive material.

    Users that will get screwed by this inevitable conclusion should take comfort in the fact that SugarCRM founders can now retire in comfort.

  4. Harry – thanks for stopping by. Interesting article, and it will indeed be interesting to see how this evolves over time.

    Cheers.
    Scott

  5. SugarCRM entered into an agreement to make SugarCRM available to Windows Server customers based on customer demand. The bulk of customers still use the LAMP stack, but what is wrong with providing your customers with another option if that is what they want?
    – David Gearhart

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