Open Source CRM Solutions
While open source software has clearly been a disrupting technology and made strides with enterprise infrastructure tools such as operating systems and web servers, it has not seen the same penetration in the business applications market.
According to InformationWeek, "Open source CRM software is a tiny portion of the $5.7 billion a year CRM software market ... The dozen or so vendors of these applications, meanwhile, face an uphill battle to convince large businesses that their software is as scalable and functional as commercial CRM apps." In a 2008 report, Analyst firm Gartner cites that open-source CRM software has yet to make inroads and that the market share for open source CRM application offerings will remain below 1 percent when compared to the overall CRM software industry.
Analyst Paul Greenberg, president of the crm consultancy, The 56 Group LLC, similarly concluded, "While I think open source is a credible alternative to on-demand, I've come to the conclusion that open source is only going to be an alternative and a continuous force -- not a fabulous business model for CRM. All in all, I think that while open source CRM gained some absolute ground when measured [against] where it was a year ago, it lost relative ground due to the speed and credibility that on-demand gained over the year ..."
The open source value proposition suggests that free software is good and when a community of technical participants can read, modify and redistribute software source code, the community and the software evolve. While this value proposition is valid with some types of software, such as (Linux) operating systems and (Apache) web servers, it has not proven successful in the front office CRM or back office ERP (Enterprise Resource Planning) business applications market.
CRM software and ERP business systems are the information processing lifeblood of most organizations. Their predictability, integrity, availability and support resources cannot be compromised in any fashion without ensuing a corresponding compromise, and presumable interruption, to the organisation's viability.
At the time of this article (April 2008), there were 174,385 open source solutions on the popular SourceForge distribution site. History indicates that an extraordinarily high percentage of these projects have profit intentions, however, are unprofitable, struggling projects that will unexpectedly and without advance notice cease activity. There are currently over 30 open source CRM software solutions (see sidebar for partial list). While the volume of alternatives is impressive, the vendor churn is alarming. History would again suggest that the majority of these systems will fail to exist in two to four years. Betting the business on the wrong open source CRM software system can lead companies down path of troubled reliability, support problems and obsolete software.
The absence of licence fees is a big part of the open source CRM economic argument, however, analysts and CRM veterans recognize that with CRM total cost of ownership (TCO), software licence fees are about 10% to 15% of the total investment. Implementation, customization, hardware and the IT labor for internal or outsourced support are where the real costs lie.
Open source CRM systems are likely to cater to two user types, entrepreneurial technologists who have the technical skills and passion to mold a solution to their specific requirements and cash-strapped companies that have no other choice. However, with business success and enough time, both user types are likely to migrate to commercial business software systems as their demands exceed open source capabilities and they place greater emphasis on the business' core competencies.
The Linux operating system and Apache Web server have demonstrated wide spread market adoption and are pinnacles of open source success. However, just as the database giants of Oracle and MS SQL Server face almost no serious threat from MySQL, the CRM software vendors are experiencing no measurable loss to open source solutions.
Several open source CRM software vendors are combining the disruptive nature of open source licensing with the disruptive nature of hosted deployment.
Commercial open source software-as-a-service (SaaS) applications are on the rise and projected to grow at over 24 percent annually through 2012.