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SugarCRM Distribution Case Study
SugarCRM, the open source customer relationship management company, offers a good example of how to motivate and empower channels in an open source model. SugarCRM has several versions of their product, the freely available Sugar Open Source base product, and commercial Sugar Professional and Sugar Enterprise versions. They've signed up 70 partners worldwide in 15 months, a community that now contributes some 30 to 40% of the company's revenue. Because these partners have access to the source code, they do things like local language translation - half of the languages the product is offered in were developed and are maintained by partners. Partners also contribute enhancements to the SugarCRM open source community, called SugarForge.org, enhancements that include LDAP integration/authentication, plug-ins to other contact repositories, and skins. Interestingly, just as SugarCRM offers different product tiers (free and two commercial flavors, all open source), so too do many of SugarCRM's partners. Many post product extensions to SugarCRM on SugarForge.org, which can be downloaded and distributed free, and they also offer commercial versions of these extensions for heavier-duty usage. In this way, the hybrid free/commercial open source model exemplified by SugarCRM spawns an entire ecosystem of hybrid resellers/developers.

By directly participating in the improvement of open source products, partners benefit by offering products that are tailored to their customers' needs. This helps their sales by giving them the flexibility to custom-fit the product to meet their client's needs, and it also adds an important revenue stream, since partners can charge for truly custom integration and development. One such SugarCRM partner, AnySoft (www.anysoft.com.br/sugarsuite), has developed about 20 new modules for Sugar Suite, one of which earned them the spot as current SugarCRM Project of the Month. According to AnySoft CEO Marcelo Leite, "I always try to have the user's perspective of the product, and use our business experience to understand how the software can make a company work better." Leite adds, "One of the modules I created, the Organizational Chart, lets users have a visual representation of who's who in the customer account, easily rearrange the tree, and keep the focus on the right target." Sweet.

What's more, the emerging popularity by companies like SugarCRM to offer both freely distributed versions and commercial versions of their products allows traditional VARs to ease their way into open source. They can begin by simply reselling the commercial version and offering traditional integration and support services. Once they become more comfortable with the product, with how their customers use it and how their customers would like to see it improved, they can bring a developer or two on board to build a custom module for that customer (see Figure 4). The choice is theirs to make this enhancement freely available to the vendor and other VARs or to charge for it.