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

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.

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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, SugarForge.org 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.

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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.

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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.

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"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.

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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.

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