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June 30, 2008

CRM Turkish Coffee With Chris Harrick, Talkin' Open Source CRM

By David Sims, TMCnet Contributing Editor


Let's hear what's going on with open source CRM. Drinking the Turkish coffee today is Chris Harrick, vice president, corporate and product marketing, SugarCRM (News - Alert).
 
DS: Describe the basic open source business model for someone who doesn't understand how a product can be marketed without proprietary ownership.

CH: Okay, let me use my company for an example, since I'm familiar with it. We write and release code under the GPL v3. The application is downloaded thousands of times per day by people all over the world. They provide the company with feedback on product quality and direction which is factored back into the development process.
 
They all write feature extensions which can be plugged into the product due to the modular nature of the application. We produce revenues from companies with more complex needs and dedicated support requirements who can subscribe to our commercial professional and enterprise products.
 
Then revenues from subscriptions are filtered back into the community edition code and the cycle continues. Open Source works on a large scale and every company needs a system to manage its customers.
 
DS: How does the technology guarantee the quality of products it produces?

CH: There is a misconception about code contribution with open source. My company, and I'm sure others in the field, are careful what is committed to the code base with an eye for IP rights, code quality, security and scalability. The community involvement occurs around quality feedback, language translations, and product complements and extensions of which there are over 500 today.
 
The project is quite analogous to Linux, where few people have code commitment rights but the extensions and derivations have taken on a life of their own.
 
DS: Is there any particular function you find open source products are best at, such as reporting, collaboration or customer support?

CH: Open source does the long tail very well. Meaning, if a developer in Lithuania wants to translate the application and customize it for a specific vertical in his home market, he can do that. Open Source products are more permissive, meaning you do not have to jump through lots of hoops to get your hands on a development instance like you have to with a proprietary product.
 
Again, using an example I know well, our open source offering is translated into 75 languages while most proprietary companies are in five of 10. So you see these feature extensions across all parts of the product – sales, marketing, support, reporting, collaboration and integration. If someone has an itch to scratch, open source can be a great platform to do so.
 
DS: You're at a cocktail party. Someone says "Open source, that's by techies for techies. I'm a real person, they're not programming for me." You answer by saying…

CH: Does your business manage customers? Is your current CRM provider responsive to your needs and provide the tools to tailor the application to your unique business needs? After those two questions, people understand how we are approaching the market. Proprietary software companies have a business and development model designed to benefit them, not the customers. We are breaking down artificial restrictions that prevent companies from being successful. Nothing very technical in that.
 
DS: How is on-demand and open source CRM technology reshaping the market?

CH: Open source promotes more flexibility and control over how the application is installed, customized and used. On-demand gives users the ability to use CRM software without installing any IT in house. The big difference is that many current On-Demand services are often more proprietary than traditional software. Customers have no control over their experience, their company data, back-ups, upgrades, customizations.
 
So these two trends are converging. Open Source is becoming the basis of next generation SaaS (News - Alert) architectures which mean they will be more open and less restrictive. Customers do not want a repeat of the wireless industry lock-in tactics by being trapped in a proprietary platform with languages that do not talk to one another.
 
DS: How do these technologies impact on the way companies manage customer relationships?

CH: The CRM market is still young. The majority of companies in the market are still using homegrown systems or a patchwork of technologies. Open Source broadens the market and allows more companies to use a first-class CRM product. So I think you are going to see continues innovation in the CRM market as more and more people use CRM packages and make their voices heard.
 
DS: What would help ensure that open source developers focus as much on the solid core as they do features of the product?

CH: By solid core, I assume you mean the underlying stack.
 
DS: That's right.
 
CH: Okay, then I think that issue is pretty well solved. Our product, for example, is written on the LAMP stack -- Linux, Apache, MySQL, and PHP. This has become the de facto standard for Web technologies. It scales to support sites like YouTube and Facebook (News - Alert). So if you are one of the many millions of users accessing those sites, you have open source developers to thank.
 
DS: For the on-demand vs. in-house CRM choice, where do you see open source products being able to contribute the most value?

CH: There is going to be a continued mix of on-demand and on-site for the foreseeable future. I believe recent estimates by Gartner (News - Alert) give on-demand CRM a 14 percent share in a $8.9 billion market. So we hear a lot about on-demand, and it is critically important, but it is still a small part of the market.
 
We believe that vendors should offer both options because needs vary depending on company requirements. If you are a small company who wants to get up and running quickly, go on-demand. If you are a large financial services companies trying to integrate CRM with 25 different applications, on-site is the better option. Both deployment options deliver value. It should not be a religious debate but a cold, pragmatic decision based on the needs of each company.
 
DS: How have open source programmers been forced to develop decent user interfaces?

CH: It is quite simple. People will not download your software if it does not provide a great user experience. The switching costs to the next open source product are minimal. Since the first test is usability, we and other open source providers make it an absolute priority.
 
DS: What do you see as the next biggest trend in open source CRM?

CH: Just from our point of view, one of the big areas we are working on is applying Open Source principles to the on-demand world. We released a product called Sugar Data Center Edition which allows partners to manage their own on-demand instances using Systems Management technology we developed to manage our on-demand grid. It breaks the black box approach of on-demand vendors and places more control in the hands of the people who are closer to the customers.
 
DS: If open source does come to dominate proprietary as the most common form of software in coming years, what will it have done that proprietary will have failed to do?

CH: They will have failed to listen to their users, because their development and distribution models are about under investing in engineering and over spending sales and marketing. This is the dirty secret of most public software companies, especially SaaS vendors. For every dollar of engineering they spend twelve bucks on sales and marketing convincing customers how innovative they are. But customers see it. They do not like being locked into vendors who do not innovate and they are looking for alternatives.  
 
DS: Thanks Chris. Oh, and don't drink Turkish coffee all the way to the bottom.



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