Outwitted by its own ecosystem

Summary:iRadeon offers hosted CRM based on the SugarCRM code for nine users at the same price SugarCRM charges for a single user.

Dana Blankenhorn has highlighted a great way to sidestep the cost of SugarCRM's 'hybrid source' model without the hassle of having to implement and customize the open-source version yourself — get it on-demand from iRadeon instead.

When I was looking at SugarCRM as a rival to Salesforce.com the other day, one thing that didn't make sense to me was how expensive its hosted option was. Considering that SugarCRM's CEO John Roberts boasted to BusinessWeek back in June that, "We're turning a $10 billion market space into a $1 billion market space," I was a bit taken aback to discover that his company is undercutting Salesforce.com's avowedly premium pricing model by just 50%. At $75 per user per month for the enterprise version and $40 for the professional version, SugarCRM is either hosting very inefficiently, or it's retaining a fat margin for itself. (My benchmark for how low hosting costs can go in this market is FreeCRM, whose costs per user per month are low enough to return a profit from showing banner ads on the pages of its free-of-charge product — evidently, it measures its per-user hosting cost in pennies rather than dollars).

Thanks to Dan Farber's detailed analysis of SugarCRM's licensing and business model, I now understand that the company is really just a conventional software vendor that maintains a cut-down open-source version as a marketing gimmick — what one commenter on Dan's post very neatly categorized as 'teaseware'.

It's somewhat satisfying, therefore, to discover that SugarCRM has been outwitted by its own open-source ecosystem, where iRadeon offers hosted CRM based on the SugarCRM code for a monthly fee of $75 for nine users — the same price SugarCRM charges for equivalent functionality delivered to a single user. To paraphrase John Roberts, that's turning $75/user/mo into $8.50/user/mo, which is much more the sort of economics I would expect from applying the on-demand model to open-source applications.

Topics: Open Source


Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant. He founded pioneering website ASPnews.com, and later Loosely Coupled, which covered enterprise adoption of web services and SOA. As CEO of strategic consulting group Procullux Ventures, he has developed an evaluation framework t... Full Bio

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