To Open Source or Not to Open Source

The release of SugarCRM 3.0 in April and Salesforce.com's announcement of its Summer '05 release to introduce several open-source tool kits in June have signaled yet another move by vendors into this rapidly developing space. While many companies are attracted by the low cost and customization functionality, recent developments within the space and continued popularity could open new possibilities and introduce best practices for those looking to invest. At $39.95 a month, the added functionality in SugarCRM 3.0 (improved marketing functionality, sales forecasting, and campaign and project management) means companies are getting a lot of bang for their buck. But Sheryl Kingstone, program manager and industry analyst for Yankee Group, warns that while open source CRM technologies are gaining momentum among SMBs, smaller companies may not be as willing to write code for an on-premise, open-source application--a recurring problem of open source CRM. "They just don't have the time," she says. "Also, there's not a lot of open source code prebuilt for the CRM industry. If a company doesn't understand CRM process and strategies and they're simply trying to get it cheap, then you've got a problem." SugarCRM is leading the industry in prebuilt coding, but other players are entering the field. Salesforce.com's announcement to release its STAP 1 tool kit as open source in June means the industry giant is delving into the space. Kingstone says this could signal a shift by customers toward Salesforce.com, as the company could leverage its extensive experience in sales strategy and practices, not just technology. This reflects the advantages and disadvantages to open source CRM, she says. "The advantage to open source is, if you find the code already built in, like with SugarCRM, you're leveraging component pieces instead of having to build it yourself. "The disadvantage is, there are a lot of packaged software companies that understand what the best practices are--they understand the roles of embedded sales methodology. People have learned that CRM is not just about decreasing process automation costs. It's about leveraging the information you have to gain insight into your customer base." With many of the packaged software vendors and even consultancies moving forward with this approach, Kingstone feels Salesforce.com is leading toward eventually building a platform on which customers can build custom prophecies. This would create "a huge ecosystem of companies sharing customization with Salesforce.com. That brings a huge swell of existing customers that can lend some best practices and expertise that SugarCRM doesn't have today." In the end, Kingstone says, the most important advice with open source CRM is making sure companies look to outside help. "My recommendation to enterprises that are serious about open source and trying to go with the custom-built approach," she says, "is to bring in a consultant that really understands CRM strategy."