SugarCRM Inc., an open-source vendor founded by several former E.phiphany Inc. execs, will enter the software-as-a-service fray this week with an on-demand version of its Sugar Sales customer-relationship-management application, one that will offer customers the source code needed to build new applications, extend or customize Sugar On-Demand's capabilities, or link Sugar On-Demand to other systems and applications.


Since launching its open-source CRM offering in July, SugarCRM claims the software has been downloaded 60,000 times. Given the fast-growing popularity of the tool, CEO John Roberts says the company decided it was time to offer an open-source alternative to on-demand CRM providers like Salesforce.com Inc. and Siebel Systems Inc. Moreover, Sugar On-Demand comes in at a lower price point of $39 per user a month, or $25 to $30 less than Siebel and Salesforce charge. Sugar On-Demand also creates separate instances of each customer's application and database to alleviate any fears of data corruption some companies have regarding Salesforce's and Siebel's shared hosting models. "Why put everyone's data in one big database if you don't need to?" Roberts asks.


Customers who want to progress to an on-premises version of Sugar Sales also will have the option of moving their entire Sugar On-Demand apps onto the company's Sugar Cubed server appliance, which could then be plugged into the customer's internal IT architecture.


If SugarCRM's growth as an on-premise open-source app translates to the on-demand model, the company could quickly become a viable competitor to Salesforce and Siebel On-Demand. But Beagle Research Group analyst Denis Pombriant says the fact that customers will need to have open-source developers available to work with the company's code will prove to be a significant detraction for customers looking to reduce their development workload, not increase it.