Open source or as a service?

Open source or as a service?

Summary: Athena Healthcare bowed out of its existing contract for Salesforce.com's on-demand CRM service and replaced it with open-source software from SugarCRM.

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TOPICS: Open Source
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Here's the nub of the problem with conventional business software: "Companies are paying too much for complex products that they can't fully control." One such company, described in this article, chose to solve this problem by bowing out of its existing contract for Salesforce.com's on-demand CRM service and replacing it with open-source software from SugarCRM:

"[Athena Healthcare's CTO Bob Gatewood] went open source, teaming up with the Cupertino, Calif.-based start-up to design and then graft his own CRM system onto his existing IT infrastructure, helping his company's bottom line and boosting employee efficiency across converging software platforms."

I wonder, though, how much control you get in the long run from tightly integrating your systems to a specific software implementation? SugarCRM's business model is founded on users of its software coming back to it for support and customization services, and despite its open-source credentials, the company keeps a tight rein on product development (that's pretty much the default practice among open source vendors, as Mambo's developers have recently discovered). So even though you could, in theory, cut free from SugarCRM and pursue your own development with full access to the source code, it's hardly likely to be an economically viable proposition. The reason packaged software exists is because of the economies of scale that result when vendors can spread the cost of product development across many customers.

That's why the (progressively more lamentably named) sforce, Customforce and Multiforce projects at Salesforce.com are such critical components of the vendor's forward strategy. Their purpose is to deliver control to customers using a more flexible, loosely coupled services model than the conventional model of software integration that Athena Healthcare has adopted with its SugarCRM project. If on-demand providers can combine lower cost with greater flexibility and control, then they may yet trump conventional application software, even when delivered under open-source licensing.

Topic: Open Source

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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6 comments
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  • The end result will be ...

    that the large companies with large in house IT staffs will cut their costs by moving gradually to open source which they are large enough to be able to successfully leverage.

    At the same time smaller companies will find their software costs driven upward by the absence of the big players who traditionally buy large blocks of licenses from the closed source providers. For those customers a dramatically smaller user base will result in significantly higher pricing for the off the shelf solution.

    Its all just another side of the 'economy of scale' equation.
    George Mitchell
    • Why will smaller companies suffer?

      Your assumption seems to be smaller companies will stick with closed-source and larger companies will move to open-source. You may be right, but I don't think it's a given, especially if closed-source prices increase.

      As open-source options become more competitive, so does the feasibility of providing cost-effective hosting services based on them. Our (very small) company is currently investigating having our IT services company host SugarCRM for us, and it looks like it will be quite affordable.
      spamagnet
      • as long as you use it out of the box you are good

        Your logic holds as long as you use the software as a stand alone application. When you start integrating things, the closed source applications freqwuently have "hooks" to tie different systems together (accounting, etc.). I don't know how deply the open source software hooks go. a smaller company might not have the staff to write the custom software to tie the systems together. Whenever any of the systems sis upgraded, the hooks may or may not work. With open source that is your problem, with closed source, the provider should have the new hooks in place, since they knew about the changes before release.
        don3605
  • Future undecided

    Added competition of 'OS' providers with 'Proprietary' providers can only be a benefit to customers by expanding the portfolio of choices. The pro's & con's of which will ultimately be better(i.e. productive and cost effective)for the customer.

    Which one will ultimately win out will be heavily dependent on the responsiveness of both sides, strength of the business models and the individual organizations.

    My personal experience has been that if it weren't for the advances of the OS world to compete less expensively, the 'Pro' world would be less responsive and maintain a stranglehold(i.e. more e$pensive).
    RedRunner
  • They're not mutually exclusive

    Software as a service has clearly has its benefits, and economies of scale are substantially reduce costs of hosted software.

    However, the Open-Source angle is a value add. It provides an organisation the flexibility to evolve from a pure vanilla hosted solution, to either customise the hosted system to solve some specific business need, or migrate to a more tightly integrated in-house run system.

    The beauty of the SugarCRM model is that code availability of all versions of their software, and the ability to select either a hosting software-as-service provider or run it in house, provides for choice and flexibility over an above the closed source alternatives.

    PS We're a SugarCRM partner, providing both On-Demand hosted SugarCRM, as well as standard or hihgly customised On-Site implementations.
    Marc Englaro
    www.insightful.com.au
    menglaro
  • SugarCRM's good version is commercial

    I was very excited to finally get SugarCRM working on an old computer of mine. However, the fact there is not grouping/team functionality make it pretty much useless if you want control over what various people can do with the CRM information that you enter into your account on the same machine. If I create a contact... then another user can come in and delete it. SugarCRM call it teams and they utilize it in their PRO edition. They've been able to do grouping since version 2 of their PRO edition. However, now at version 3.5 the open source version still doesn't have anything close to the PRO grouping structure.
    simon@...