Are You Paying Too Much for Your CRM System?

By Geoffrey James

Sales reps for high-priced products like to tell customers, “You get what you pay for.” While that truism applies to many things, it’s not always true of software. In the weird world of high tech, the less-expensive software is sometimes of higher quality and more secure than the higher-priced alternative. This seems crazy at first – it’s like shopping for an automobile and finding out that a $15,000 Daewoo looks better, runs smoother and feels more luxurious than a $45,000 Lexus – but it’s true.

The reason for the apparent paradox is that there are two ways to create software. The first is the traditional “let’s make like Microsoft” scenario. The vendor defines requirements, hires programmers, assigns tasks, manages progress, completes products and then sells the resulting software. There is another way that software gets written, though, and it’s a process that’s unique to the industry.

Turns out that, if the requirements for a computer program are reasonably well defined, individual programmers will start building software to address those requirements during their free time. Such projects are called “open source” software because the software code – the instructions that tell the computer hardware what to do—is openly available for different programmers to examine and change.

You’re probably asking yourself: why would anyone work for free? Well, computer programmers may be weird, but they’re not stupid. These “open source” software development projects turn out to be incredible opportunities for programmers to become famous amongst their peers. Because everyone working on an “open source” development project also reviews every chunk of software that’s proposed to be added to the project, only the best ideas and software code end up going into the final product. Developing the software becomes a competition for technical excellence, with the winners usually landing big money positions inside traditional software development organizations.

Because “open source” software is offered to the world for free, it’s obviously less expensive than software developed through traditional methods. However, there is a major limitation to “open source” software – a lack of customer support. With traditionally developed software, the software vendor commits to keeping its customers up and running. However, because there’s no corporation backing the “open source” software, nasty little details like bug-fixes, upgrades and handholding during installation are strictly “catch as catch can.” And that can be a deal-killer for organizations where stable, well-supported software is a requirement.

Fortunately, there’s a hybrid development model, called “commercial open source” that combines the best features of traditional software development with the best features of “open source” development. With “commercial open source,” a vendor takes software developed through an “open source” project, adds features that make it more useful for customers, and then provides customer support, for a price. In essence, the “commercial open source” vendor leverages and adds value to the free labor that created the original “open source” software, passing the savings along to the user.

While not “free” (like pure “open source” software), “commercial open source” software is still less expensive than traditionally developed software. The reason is simple. Software research and development is expensive. Some software firms spend up to a third of their gross profits on R&D. With “commercial open source” the vendor needn’t spend nearly as much on basic R&D, which greatly increases profit margins, and allows the software to be offered at a lower price point. In short, “commercial open source” is what makes “open source” a practical alternative to fully supported traditional software, even for a mission-critical application like CRM.

This is not to say that traditionallydeveloped CRM software is obsolete or not worth your consideration. But if you’re interested in saving money on your CRM system, it might be worthwhile to look at some of the “open source” alternatives. These include the well-regarded SugarCRM (, as well as a number of smaller offerings, including hipergate (, Daffodil CRM (, Anteil ( and vtiger (