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Open-source SugarCRM eyes stock market entry

The open-source packaged application company, which is releasing the beta of a major product upgrade, is on track to go public, CEO says.

Applications company SugarCRM intends to file to become a public company within two years, said CEO John Roberts.

SugarCRM launched three years ago in what Roberts said was an "experiment" to use an open-source business model to create high-quality customer relationship management applications. The company on Monday released a beta of Sugar 5.0, a major update to its application suite.

Since its launch, SugarCRM has funded its growth largely from revenue, rather than the $26 million in venture funding it raised, he said.

"Now we're at a point where we're acquiring customers extremely fast," Roberts said. "We've gone from 'we hope to (go public)' to 'we absolutely are on track.'"

Roberts anticipates that the company, which now has 125 employees, can grow to $100 million in yearly revenue in the next couple of years.

The open-source business model, which had not been tried in packaged applications before SugarCRM launched, is what has allowed the company to grow so rapidly and to focus on making quality software, he said.

Doing software engineering in the open, where outsiders can view the source code, has improved the product development process, Roberts said.

Selling is easier, too. Because the company makes a low-end version available for free, most of its customers are already very familiar with the product and don't require a costly sales and marketing process, he said.

Roberts said that SugarCRM's approach can be replicated by other companies. Database company MySQL has said that it intends to go public, and middleware provider JBoss was sold to Red Hat for $420 million. Last week, XenSource, which has built its commercial product on top of an open-source hypervisor, was bought by Citrix for $500 million.

Traidtional software companies spend too much on marketing and sales and not enough on research and development, Roberts argued.

"I came to Silicon Valley to write great software. But we saw this disconnect in enterprise software companies," he said.

Enhancements to Sugar 5.0 focus on making the application foundation more robust and appropriate for large-scale deployments. A final version is slated for release by the end of September or in early October. It will be released under the General Public License version 3.0.

New features include an Ajax e-mail client that is closely integrated with the applications and a revamped on-demand version. On-demand installations account for 40 percent of SugarCRM's customers.

The new version also includes a Module Builder that lets business users visually create and share their own application add-ons.