SugarCRM to launch on-demand offering

Experts believe this latest customer relationship management product could force down the cost of CRM and make rival vendors such as Salesforce.com raise their game
Written by Ingrid Marson, Contributor
SugarCRM is about to launch an on-demand customer relationship management (CRM) product that it says will set busineses back just a fraction of the cost of Salesforce.com's offering.

Tara Smith, director of marketing for SugarCRM, told ZDNet UK on Tuesday that the company will announce the launch of Sugar On-Demand at the end of this week.

SugarCRM has a similar business model to Red Hat. It offers a free open-source version of its CRM application, SugarSales, on Sourceforge.net and sells licences for its enterprise version, SugarSales Professional, which includes additional features and services.

Smith claims that her company is unique in gaining revenue from an open-source business application, rather than a back-end product, middleware or operating system. "We are one of the pioneers in open-source vendor space -- we provide a business tool which interacts with users rather than just a back-end product," said Smith.

The on-demand product will bring CRM to companies that could not use it before because of restricted IT and financial resources, said Smith. The company is hoping that the product, which will cost $39.99 per user per year, will rival the on-demand offerings of companies such as Siebel and Salesforce.com. Salesforce.com's entire solution is on-demand and a basic solution costs $995 a year for five users, according to the company's Web site -- five times the cost of SugarCRM's proposed offering.

On-demand computing is seen as a big trend in technology, with ex-Oracle boss Ray Lane speaking of its rising importance at Salesforce.com's conference on Tuesday.

As well as Sugar On-Demand, the company is also due to launch a standalone server which has the CRM application and its Linux, Apache, MySQL and PHP (LAMP) stack already installed. More details on the server, called Sugar Cube, will be available next week.

The upcoming releases come hot on the heels of the release last week of version 2.0 of SugarCRM, which included a fully integrated quotes module, additional lead management capabilities and team selling functionality.

Smith said that the fully integrated quotes module provide an advantage over proprietary vendors, who typically require the integration of third party packages to provide this functionality. Salesforce.com uses an external product, QuoteWerks, to provide quote functionality.

SugarCRM has benefited from the development skills of the open-source community, which has speeded up development time, according to Smith.

"Typically CRM companies do about two releases a year; we've been able to do releases every six weeks," said Smith. "What was typically done in 24 weeks is now done in six weeks, that's a four-fold improvement in development time."

Smith said her organisation has only 50 customers so far, but has ambitious targets for the future. She refused to mention a definite target, but said SugarCRM would like to reduce the amount of money being made by the CRM industry, through offering cut-price solutions.

"CRM is $6bn industry; we would like to reduce that by half."

Wendy Hewson, an analyst at Hewson Group, said that the open-source model should help SugarCRM gain a competitive advantage over proprietary vendors.

"Sugar are the new kids to watch on the CRM block," said Hewson. "The economics of open source, minimal sales and marketing costs, which releases funds and management effort on product development, engineering and quality, should change the rules of the CRM race. Sugar have published an ambitious roadmap for product development - I'm waiting to see how they deliver."

James Governor, analyst at Red Monk, said that SugarCRM is likely to shake up the industry through forcing other companies to cut costs and be more innovative.

"SugarCRM doesn't have to have large percentage in the market to be a success or threat to Salesforce," said Governor. "It's like a personal trainer for proprietary vendors -- knocking on the door and saying 'you're fat, get out of bed'."

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