Open source CRM the right fit for SMBs

Open source CRM, while still young, is starting to catch on with small and medium businesses. Yet, enterprise companies might be better suited, one analyst says.

Open source CRM hasn't gained much traction in enterprises businesses, but it is starting to see some acceptance among small- and medium-sized businesses (SMBs).

SugarCRM Inc., in Cupertino, Calif. an open source CRM company launched in May by former E.piphany executives, already claims its software has been downloaded more than 50,000 times. Additionally, it has released version 2.0 of its Sales Professional edition, and last week announced a hosted version of the software.

And it's not alone. Last month, CentraView LLC in Blue Bell, Pa., unveiled its own Java-based open source CRM/sales force automation project.

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While most open source CRM offerings are targeted at SMBs, they may be better suited to enterprises, said Wendy Close, research director with Stamford, Conn.-based Gartner Inc. Some of the enterprise CRM vendors have at least begun to offer Linux support for their applications. San Mateo, Calif.'s E.piphany announced in August plans to make its CRM suite available on Linux. PeopleSoft Inc. in Pleasanton, Calif. and Germany's SAP AG are anticipating some of this demand as well and offer Linux support, but have yet to see many customers make the switch.

"What's interesting is you can now find free lead tracking, contact, account and task management, executive dashboards, and customer services applications," Close said. "The challenge is most small and midsized businesses don't have the resources to take on an open source CRM project."

Prevalent Networks, an IT security consulting firm in Bedminster, N.J., doesn't. It's depending on SugarCRM for development. A former customer of FrontRange Solutions Inc. of Pleasanton, Calif., Prevalent didn't see the adoption of FrontRange's application it needed from its users, said Jonathan Dambrot, managing partner. When the company went looking for something new, open source became a consideration.

"Open source was a draw in our search," Dambrot said. "But it wasn't the only area [we looked at]. Open source is nice because it's flexible and allows us to do what we want to do in the future. The way the Sugar guys have created the company, they've got full time engineers who are helping develop. We depend on those guys for development."

Dambrot said the application isn't as robust as he might like it, but he is confident it will mature. In fact, SugarCRM has already worked with Prevalent to develop some additional modules around Prevalent's business processes.

Most companies with less than 1,000 employees do not have the IT resources to develop open source CRM themselves, and will have to rely on companies like SugarCRM, Close said. In fact, software is only 15% of the total cost of ownership over a five-year CRM project, she said.

One Gartner client, a large insurance company, has a home-grown direct mail marketing application and is looking to open source for further development, Close said. Larger companies with bigger IT staffs, particularly financial services organizations which tend to build a lot of their own applications, are more likely to embrace open source down the road, Close said.

"The question is, can Sugar provide enough of an ecosystem of support that a client would feel confident they could get resources they need," she said.

Prevalent has certainly placed its trust in SugarCRM. It's currently running its multimillion dollar sales pipeline on the product.

"We've kind of bet on it," said Dambrot. "We've spent a lot of time on it already. We put a lot of faith in it and so far it's paying dividends."

CRM lags behind other open source applications in terms of adoption, but it shows promise, Close said. One area where its impact might be felt most is among hosted CRM vendors. that will be forced to lower prices to compete with free code.

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