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SugarCRM to launch on-demand service

With its open-source model, the company has the potential to shake up the industry, one analyst says.

SugarCRM is about to launch an on-demand product for managing customer relations that it says will set businesses back just a fraction of the cost of other products on the market.

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.

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SugarCRM has a business model similar to that of Red Hat. It offers a free open-source version of its customer relationship management (CRM) application, Sugar Sales, on and sells licences for its enterprise version, Sugar Sales Professional, which includes additional features and services.

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

The on-demand product will bring CRM to companies that could not use it before because of restricted IT and financial resources, Smith said. 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's entire offering is on-demand, and a basic package 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's conference on Tuesday.

As well as Sugar On-Demand, the company is also due to launch a standalone server that has the CRM application and a 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 the fully integrated quotes module provides an advantage over proprietary vendors, which typically require the integration of third-party packages to provide this functionality. uses an external product, QuoteWerks, to provide quote functionality.

Fast forward
SugarCRM has benefited from the development skills of the open-source community, which has shortened development time, according to Smith.

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

Smith said her organization has only 50 customers so far. She declined to mention a definite target, but said SugarCRM would like to reduce the amount of money being made by the CRM industry by offering lower-priced solutions.

"CRM is a $6 (billion) industry; we would like to reduce that by half," Smith said.

Wendy Hewson, an analyst at Hewson Group, said 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," Hewson said. "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 road map 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 by 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," Governor said. "It's like a personal trainer for proprietary vendors--knocking on the door and saying, 'You're fat, get out of bed.'"

Ingrid Marson of ZDNet UK reported from London.