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Open source or proprietary CRM: Your next big decision?

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21st May 2010
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Will open source vs proprietary CRM become as hotly debated as on-premise vs on-demand? Even SugarCRM's Larry Augustin isn't so sure...

SugarCRM has traditionally been portrayed as the package for those buyers who want their CRM open source – but CEO Larry Augustin admits that most customers will be more interested in the on-premise vs on-demand debate than the question of whether their CRM is open source or proprietary.
As part of SugarCRM’s world tour, Augustin and his team stopped by London last week, so meet and greet customers, partners and potential clients, and talk up the imminent launch of its next application, Sugar 6.
But while his predecessor, John Roberts, was convinced that open source would revolutionise CRM, Larry believes that it’s Sugar’s flexibility that will be most appealing to the masses, rather than its open source nature.
"Clearly there are customers that highly value the fact that we’re open source and that they have that access to the code if they need it, and they can extend the system or make changes if they need to. And there are other customers who are not so interested in having access to that - but they’ll like the notion that they could if they wanted to," explains Augustin.
"The on-demand vs on-premise issue is certainly a big one right now because of the cost of the infrastructure and a lot of people just like being able to outsource that. Certainly at the infrastructure level I think open source has reached the point where people just won’t do infrastructure unless it is open source. But it has not reached that point at the applications tier yet. I think we have to see how that evolves. Applications are a little bit different than infrastructure. The buyer in the infrastructure case is the IT person and they care more about the open source nature of the product than, for example, a business line buyer like the VP of sales. The VP of sales is less likely to be asking questions about open source and right now applications are bought by the business buyer mostly and not the IT buyer. And so it isn’t as prevalent in their minds as say the on-premise vs SaaS question is today."
Under the hood
Nonetheless, Augustin is quick to emphasise that while some buyers may not be interested in what is under the hood of their CRM package, open source does deliver real benefits – particularly in terms of SugarCRM’s selling point, flexibility. The CEO points to his company’s ecosystem of third party add-ons which the developer community has built around the project.
"We have got integrations today with over 50 different applications and probably over 100 companies now building extensions," he says. "And that gives our customers wide variety of add-ons, extensions and options to choose from. So even if they are not taking advantage of the open source nature directly in how they deploy or use it, they get the benefits of it indirectly in terms of the openness, the open platform and the ecosystem, and the extensions that we’ve been able to build around the product."
Interestingly, Augustin believes that Europe is more receptive to open source’s charms, reflected by the fact that SugarCRM has found the continent to be a happy hunting ground of late – culminating in the recent opening of a European office in Paris.
"My observation is that in Europe there is more interest in open source - it is more important and people pay more attention to it than in the US. It still gets a lot of interest in the US, but I just think that Europe is frankly ahead of the US when it comes to looking at open source code," he explains.
"One of the things we see in Europe is that concerns about privacy (in terms of our data access) are a big issue to people. And it is one of the reasons that people go with us in Europe, because they know where their data is if they have customers that want their data to stay in the UK or France, and don’t want the potential for, say, the US Government to have access to their data via the US Patriot Act. And they’re just concerned about maintaining that privacy and security and they can do that with us, whereas they can’t do that with a traditional SaaS offering from a US-based offering."
It's all about the flexibility

But it’s flexibility that Augustin believes is his company’s main proposition. And to this end Sugar has been busy advancing its open cloud strategy of providing CRM on multiple cloud computing platforms by offering its applications on Windows Azure - "A big part of our strategy is that we run anywhere as an application… Today we have customers running on Amazon Web Services, on Rackspace, on a variety of other service providers, and one of the other places that we’re running now - and we’re in beta testing with this - is on Microsoft’s Windows Azure platform. We think that will give us another great hosting platform cloud option for our customers."

And it is of course also in beta testing of its latest offering, Sugar 6 - "We really think of our target user as the next generation of salesperson who is very web-savvy, and used to things like Facebook and LinkedIn, and understands that kind of interface, so we really tried to break out of the mould of the traditional desktop office application and build a more of a Ajax or Web 2.0 style."
Augustin believes that all of this positions his company nicely as the CRM option for customers that want flexibility, irrespective of whether they are interested in open source or not – an interesting shift in message for SugarCRM considering that Augustin’s processor was adamant that open source would revolutionise CRM.  
"Open source has had a huge impact but I don’t know that it completely revolutionises CRM," Augustin concludes. "At some level, open source is an implementation technology option that does change how you can approach it and gives you benefits in the industry. But ultimately when you look at any software, particularly application software, it is about the features that you deliver to the customer. It is about being a great CRM system.
"We’re looking to be revolutionary about how we think about CRM and in particular about social CRM and the interaction with the web, and you can see some of that in our Sugar 6 release, and we think that is what it means to be revolutionary around the application. I think open source is an important part of that, but open source is more of a technology infrastructure choice than it is a feature set choice."
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