Open-Source Business Models a Sweet Fit for Web 2.0, SugarCRM says

By Peter Galli  |  Posted 2007-04-17 Print this article Print

The open-source business model fits in well with the concept of Web 2.0, says John Roberts, the CEO and co-founder of SugarCRM.

SAN FRANCISCO—The open-source business model fits in well with the concept of Web 2.0, John Roberts, the CEO and co-founder of SugarCRM, told attendees at the Web 2.0 conference here on April 16. Admitting that he did not know exactly what Web 2.0 meant when he started working on his presentation titled "Open Source Business Models for Web 2.0," Roberts said that the more he learned about the topic, the more he realized that SugarCRM qualified as such a company with its commercial open-source business model.
SugarCRM uses a distributed development cycle, where the code is written publicly and then taken in-house, customized, packaged and made available to customers. "Its all about providing choice to users," he said.
Click here to read more about how Scalix and SugarCRM have teamed up on integration. The SugarCRM team had studied nearly 200 open-source projects before launching the company, Roberts said, pointing out that it was not a pure open-source business but rather a commercial open-source company. It also gives away between 75 percent and 90 percent of its software code, and "that makes the phones ring for us as a company," he said. Factors contributing to SugarCRMs success included its commercial open-source business model, the focus on user adoption, its rejection of artificial restrictions and the notion that software was good, he said, adding that these were also key criteria for a Web 2.0 company. In terms of public participation, was the epicenter of its project, he said, adding that nothing was for sale on the site and there had been about 3 million downloads over the past three years. "Our sites are easy to use and that makes it easy for users to participate on multiple levels. Even our forums are open to the community, which is unusual as most companies do not open up access to them until a customer has bought their software, largely because they dont want them to see the bugs until the deal has closed," Roberts said. Read more here about how offers a Google AdWords service. SugarCRM also did not pay for any Google AdWords like CRM, but when a Google search was initiated using the CRM keyword, SugarCRM was listed on the first page of results, he said, which was attributed to the activity on, and accessibility of, its sites and their ease-of-use. There were still enormous opportunities for the company, which had nearly 100,000 users in 30 countries, compared with the total CRM market of $9.6 billion and 8 million users, he said. Customers were asking for more of an application infrastructure and that was something SugarCRM was now focusing on, Roberts said. Read more here about how SugarCRM uses a Microsoft license. Asked by a member of the audience about the fact that SugarCRM seemed to have "turned its back on OSI [the Open Source Initiative]" and if there had been any fall out from this decision, Roberts said its license, based on the Mozilla Public License, did not create any issues among its developers. "I love the OSI and I love the Free Software Foundation," he said, adding that he believed requiring attribution in a license was just fine and that people who wrote code should be acknowledged. In his part of the presentation, Marten Mickos, the CEO of MySQL, said the motto for Web 2.0 was "fail fast, scale fast," meaning that companies in this space had to undergo a lot of experimentation to quickly determine if their product would fail and, if not, be able to scale quickly as usage would grow faster than anticipated. Click here to read more about how MySQL is offering all-you-can-eat enterprise database licensing. "Software is clunky today, but this is being solved by open source and the architecture of participation. "If someone could create a proprietary architecture of participation, Im sure that would also work," he said. Asked what will happen in the next five years, Miklos said that 1 billion people were on the Internet today, but 2 billion people were using mobile phones, many of them dumb phones, and that those people and that power remained to be harnessed. While MySQL had been very successful in the Web space and not in the traditional corporate world, the shift towards business success was starting to happen, he said. The company had also not yet achieved anywhere near the commercial success it was striving for. "While MySQL is the first or second database in terms of popularity, it wins only about $100 million in revenue from the database sector as a whole," he said. MySQL is not abandoning Debian. Click here to read more. Asked about the threat open-source companies posed to proprietary ones, Miklos said being proprietary was the biggest threat to the business model of those companies, particularly as an increasing number of customers were questioning the value and applicability of a proprietary, lock-in model. Check out eWEEK.coms for the latest open-source news, reviews and analysis.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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