How Open-Source Apps Got Popular In The SMB Space

Open-source applications have won some acceptance within large corporations, although ERP applications from vendors like Oracle and SAP still predominate. But for midsize companies that need more than Excel and QuickBooks to run their businesses and are looking for alternatives to Microsoft's Dynamics applications and SAP's BusinessOne software, open-source applications are popular.

"I can't understand why more solution providers haven't figured this out yet," said Robert Kunz, president and CEO of KnowledgeBlue LLC, a Salt Lake City-based solution provider that resells open-source ERP and CRM applications from Compiere Inc.

Along with Redwood Shores, Calif.-based Compiere, other open-source ERP application vendors include Openbravo S.L., based in Pamplona, Spain, and relative newcomer Norfolk, Va.-based xTuple, which took the "best application" award at LinuxWorld earlier this month. The Apache Software Foundation's Open For Business suite is another option. SugarCRM Inc. in Cupertino, Calif., is widely seen as the open-source CRM application leader.

The open-development model helps vendors keep R&D expenses low, which reduces application prices. (Most open-source application vendors follow the model of making a basic "community" version of their product available for free, but charge a subscription fee for a "premium" or "professional" edition with more extensive functionality, service and support. Solution providers generally resell the premium product.)

KnowledgeBlue's Kunz says subscription fees are roughly equivalent to the annual maintenance fees commercial software vendors charge, but without the big, up-front capital expenditure for the original purchase.

Reduced capital expenditures free up more customer dollars to spend on the value-added products and services that solution providers offer, said Jonathan Castleman, president of CyberOptic Group LLC, Boca Raton, Fla. CyberOptic hosts Openbravo and SugarCRM applications for SMBs and builds commerce applications and services around them.

Another benefit to reselling open-source applications is that solution providers have more leeway to customize and adapt the applications for vertical markets and even individual customers, said Bill Freedman, marketing director at Compiere.

White Springs Co. Ltd., San Mateo, Calif., develops sales training applets that are ported to CRM applications from numerous vendors. But the SugarCRM application is the only CRM app the company actually resells because White Springs is free to strip out some functionality to build in its training materials.

About one-third of SugarCRM's sales involve a partner, said Martin Schneider, product marketing director. Altogether the company has about 150 resellers and technology partners. This month the company will ship SugarCRM 5.1 with advanced reporting and mobile computing capabilities. And the new Sugar Data Center Edition, now in beta, will allow partners to develop more value-added services, according to Schneider.

Most Compiere application sales are through some 50 channel partners, and the company is actively recruiting for its Compiere Partner Network, Freedman said. Openbravo has some 100 channel partners, mostly regional systems integrators, said Chief Products Officer Paolo Juvara. KnowledgeBlue's forte is providing midmarket customers with a complete stack of open-source software.