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VAR, ISV partners see opportunity in SugarCRM model

Some ISVs and VARs see growth and profit potential supporting commercial open source applications.

SugarCRM, which bills itself as the pioneer in "commercial open source CRM," raked in an additional $20 million in investment this week.

But while vendors oriented toward open source are getting acquired and financed -- Sun Microsystems is buying MySQL for $1 billion -- skeptics wonder if there is a viable business model for value-added reseller (VAR) or independent software vendor (ISV) partners of these vendors. They want to know what the open source partner opportunity is.

Chris Hens and Doug Guilbeau say there is plenty of partner opportunity in commercial open source. Companies like MySQL and SugarCRM have an open source flavor in that they offer free, flexible license options as well as commercial licenses for sale. Users of the commercial software are not required to feed fundamental code changes or improvements back to the open source community.

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Hens, president and chief operating officer of White Springs, a San Mateo, Calif.-based ISV, says his company's application sales growth on SugarCRM far outstrips that on its other supported platforms. White Springs integrates popular sales methodologies with SugarCRM and with PeopleSoft, and Oracle financial applications. Its numbers are tripling on SugarCRM alone, however.

White Springs digitizes standard sales methodologies -- from Miller Heiman, Sales Performance International and others -- and runs them inside the host business software.

Customers range from very small to very large companies, Hens said. "We sell to GE and we sell to Billy Bob's mom-and-pop shop."

Levementum is a VAR and systems integrator which also sees its SugarCRM business growing.

More customers are finding that traditional CRM applications that manage contacts or leads "aren't getting the job done," said Gilbeau, director of implementation services for the Chandler, Ariz.-based company.

Many customers already using an on-premise CRM or sales force automation (SFA) application start out looking at, the hosted CRM pioneer, as a potentially cost-saving alternative. Ironically, SugarCRM credits with some of its own success.

"Salesforce has done a great job teaching the world about CRM for seven years, and that's paved the way for people to look at us as well," said Jeff Campbell, channel manager for SugarCRM. He said the company's customers range from small entities with five users to companies with thousands of users.

Joint Levementum/SugarCRM customers also run the gamut from very small concerns to enterprises.

Open source proponents say knitting together components of the LAMP (Linux/Apache/MySQL/PHP) stack affords customers more flexible, customizable software at a lower cost than the more "integrated" Microsoft stack. Integrators on the open source side of the fence say they can reap the rewards of that.

However, as Microsoft proselytizes commercial open source ISVs -- SugarCRM included -- some of the lines are blurring. Microsoft estimates that 30% of SugarCRM customers, for example, run the application on Windows.

According to Campbell, 60% of SugarCRM customers run the software on premise, but the same code base is available in a hosted version. About 30% of total sales are partner-influenced or sold, and the rest are direct deals, he said.

Guilbeau, Hens and Campbell spoke to from the annual SugarCon conference in San Jose. At that event, SugarCRM and iEnterprises announced the Mobile Edge Express application that lets SugarCRM users get to their data from BlackBerry devices.

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