SugarCRM is hedging its bets that corporations are sick of paying high licensing fees for CRM software. The 5-month-old company last week announced a new version of its freely available salesforce automation software, plus the addition of subscription-based technical support and training services.

"We saw this huge wave of open source building, and we saw various layers of the infrastructure software stack maturing," says John Roberts, CEO of SugarCRM. Commercial open source companies, such as Red Hat with its Linux-based operating system software and JBoss Group with its open-source application server, have begun to get attention from corporate users. SugarCRM decided the same model could work for business applications.

"So we all resigned in April and started writing," Roberts says.

The "we" refers to Roberts; Clint Oram, SugarCRM's vice president of products and services; and Jacob Taylor, vice president of engineering. The three left commercial CRM software maker E.piphany to launch the start-up. At E.piphany, Roberts was director of product management, Oram was a senior product manager, and Taylor was a senior development manager in charge of platform infrastructure and services.

The company is building CRM applications around the so-called LAMP stack of open source infrastructure software, which includes the Linux server operating system, Apache Web server, MySQL database and PHP Web development language. The software also can run on Microsoft Windows and Internet Information Server, Roberts says.

The vendor's first application, Sugar Sales, launched in July. It includes traditional salesforce automation features such as account, contact, opportunity and lead management. Since its debut, users have downloaded nearly 20,000 copies, and it has been translated into nine languages, Roberts says.

This week SugarCRM is releasing Sugar Sales 1.5, which includes an import tool to help users migrate data from competing mid-market CRM applications -- including Salesforce.com, Best Software's Act! and SalesLogix products, and Microsoft CRM.

Sugar Sales 1.5 users have the option of licensing SugarCRM's new Windows-based Outlook plug-in, which lets Outlook users save customer e-mails in Sugar Sales for sales activity-tracking purposes, for example.

Also this week, SugarCRM launched its Sugar Sales Professional service, which includes installation services, technical support and administrator training. Fees start at US$149 per user for the first year and US$239 per user thereafter.

It's through these subscription services that SugarCRM expects to take in revenue. The approach is similar to that of rival ComPiere, which also relies on a service model to fund its development of open source ERP and CRM applications. Down the road SugarCRM intends to release additional business applications: Sugar Marketing is due out this fall, and Sugar Service is due early next year.

Whether the world is ready for SugarCRM remains to be seen. Gartner rates the maturity of open source business applications as "embryonic," and says products are used in less than 1 percent of small and midsize businesses. "The lack of standards, and the sizable effort needed to get a large packaged application off the ground, limits the applicability of the open source development model," Gartner analyst Nikos Drakos wrote in a recent evaluation of open source software markets.

Bill Claybrook, president of New River Marketing Research, agrees the implementation requirements of large corporations will challenge any CRM start-up -- whether it's an open source or proprietary software maker. In addition, competition from proprietary CRM vendors such as Siebel Systems, SAP and PeopleSoft will be "huge," Claybrook says.