Analysis: Now Is The Time To Consider Open Source CRM

Affordability Is Key
Low cost drives most open source decisions. Eighty percent of 238 IT decision-makers surveyed by Forrester Research late last year said lower cost of acquisition or ownership was a primary reason for buying open source software. At Sterling PCU, Edwards says cost was a major reason the company dumped Salesforce, which he said had too many "hidden costs" such as charges for data backup. About two dozen employees at the company use a hosted version of SugarCRM.

Cost isn't the only benefit. In Forrester's survey, 68% cited freedom from vendor lock-in as a key attraction, and half cited IT staffers' familiarity with open source technology. More than a third said open source software is of higher quality than proprietary software, since its source code--bugs and all--is visible to everyone.

Some customers use Centric CRM's applications because they need more control over the software to customize and integrate it with other apps at the source-code level and not just with APIs, CEO David Richards says. Companies also can try free versions of open source CRM risk-free before deciding if they want to pay for supported versions, something that's tough to do with SAP and Oracle products, Forrester analyst Liz Herbert says.

American Suzuki Motor uses open source CRM software from Anteil to post auto parts inventory information to the carmaker's dealer network. Suzuki found it easier to tailor the software to its own needs than a proprietary packaged application. "It's flexible," says Steve Stepp, regional parts distribution manager.

Despite the obvious benefits of open source CRM, some potential users--particularly larger companies--might be leery about relying on software from a small vendor without much of a track record. "The issue of most concern is who's backing up these applications," Herbert says. "For some larger enterprises, that creates uncertainty."

The growing list of third-party companies that offer support and services, including training, hosting, integration, and implementation, should help. Corra Technology provides custom development, systems integration, and deployment services for SugarCRM users. Hosting service company iRadeon combines SugarCRM with open source project management and e-learning apps and offers them as a bundled service for $50 per month for five users.

Big Names, fewer fears
One company getting attention is SpikeSource, which assembles packages of open source software, including the MySQL database and apps such as SugarCRM and Centric CRM, and sells the integrated systems and support services through value-added resellers. Silicon Valley veteran Kim Polese, best known for her role in the development of the Java programming language, is the company's CEO. SpikeSource has financial backing from Kleiner Perkins Caulfield & Byers, and board members include former Oracle president Ray Lane and Sun Microsystems co-founder Bill Joy. Such big names could allay IT managers' fears about adopting open source apps.

Questions also have been raised about whether open source CRM apps can scale up beyond a few dozen users. But SugarCRM has a customer with more than 500 users, CEO John Roberts says. And Centric's Richards says one customer has 1,000 users and others will eventually reach 5,000 or more.

Open source CRM generally does come up short against apps from SAP and Oracle in features and functionality. For small companies that want easier implementation and fewer bells and whistles, that's not such a bad thing. But it may hinder acceptance among bigger companies looking for sophisticated reporting tools or security access controls.

But open source CRM apps are improving. Last month, SugarCRM released version 4.5 of its application with new data-quality management tools, enhanced sales forecasting, a mobile client, support for 40 languages, the ability to personalize user interfaces using Ajax, and support for Microsoft SQL Server database and Active Directory services.

And they're maturing fast, thanks in part to the open source development model that calls for offering improvements made to a product's source code back to the vendor. IRadeon, for example, is developing reporting capabilities for its application portal that it will offer back to SugarCRM, strategy VP Jeff Minich says. "Eventually the open source alternatives will catch up," he says. "And we'll help drive some of that development."