Microsoft Corp’s decision to enter into a technical collaboration program with open source CRM provider and competitor SugarCRM provides obvious benefits for the open source business applications provider. But it raises questions about what it means for Microsoft’s own CRM strategy and its future market prospects.
The planned work concentrates on interoperability and administration between the SugarCRM application and the Windows platform for joint customers. The work will focus on improving SugarCRM support for Internet Information Services (IIS) and optimizing the application for Active Directory and Microsoft SQL Server, including SQL Express, SQL Server Workgroup and SQL Server Enterprise.
The work should result in benefits for a large proportion of the SugarCRM customer base since about 35% are currently running on Microsoft Windows Server.
SugarCRM will also use the Windows Installer XML (WiX) toolset to build its next product installation as a Microsoft Software Installer (MSI) package for Windows Server 2003. This is also an important move as SugarCRM CEO John Roberts said he believes pain-free installation is a critical matter as far as open source is concerned.
The benefits to SugarCRM are obvious because, in addition to the technical improvements that will ease installation and administration of SugarCRM on the Windows platform, Microsoft’s backing also provides it and the open source business applications area with increased credibility.
While SugarCRM positions its application as a scalable enterprise-level product and has snagged some local government departments, its customers tend to be small- to medium-sized operations whose IT operations are founded on Microsoft technology. SugarCRM has a high profile among open source business application providers but its market share is negligible. In late 2005, it had about 250 paying customers although downloads had hit the 350,000 mark.
Microsoft has the difficult task of balancing its open source activities against its own business areas, in this case its CRM interest, an area where it has failed to make much of an impact. Microsoft, whose CRM application is targeted at the small to medium business sector, is in direct competition with SugarCRM.
Although its CRM application has been light on features, Microsoft has had the platform argument in its favour. But by working with SugarCRM to ensure better interoperability it appears to be diluting this particular advantage.
Microsoft has developed a habit of giving away its CRM crown jewels, though. Version three of the CRM product introduced deep Office integration but through the joint Mendocino project with SAP AG, which provides for access to SAP back office processes from Office and Outlook, Microsoft is sharing another of its valuable business application assets with a potential rival.
The impetus for the SugarCRM agreement did not come from the Business Solutions business unit so it reflects Microsoft’s softening stance on open source rather than its CRM strategy. It is probably more of a proactive move to protect its infrastructure position within SMB’s, but the company representatives were unavailable for comment by press time.