SugarCRM is preparing for release later this month a major upgrade to its open-source CRM (customer relationship management) system, a software package SugarCRM's founders hope will woo customers that would otherwise turn to more expensive commercial CRM offerings.

Sugar Suite 3.0 represents a significant advance for the young product, which publicly launched in September. The forthcoming update adds campaign management, e-mail marketing and forecasting components to the suite, along with tools for broader back-office administration like project management and an employee directory.

"We started getting a lot of requests for the ability to manage internal projects," said SugarCRM Chief Executive Officer John Roberts. "People don't always see that as CRM, but I think that's one of the great things about being an open-source company. You sometimes come up with interesting things that you wouldn't traditionally think of, but that are really valuable."

Cupertino, California-based SugarCRM was founded in April 2004 by a group of developers that had worked together at CRM maker Epiphany. Frustrated by what they saw as the inefficiency of the commercial software development process, SugarCRM's creators felt an open-source model could build both better software and the foundation for a viable business, Roberts said. The company is backed by close to US$8 million in venture capital funding from Draper Fisher Jurvetson and Walden International.

The software's development home is SugarForge.org, where the source code can be downloaded for free. A commercial version, Sugar Professional, includes customer support and additional extensions, such as improved reporting and data security features. Pricing for Sugar Professional starts at US$239 per user, per year and drops with volume licensing. A hosted version is available for US$40 per user, per month.

Athenahealth Chief Technology Officer Bob Gatewood is in the process of replacing several hundred Salesforce.com licenses in his organization with SugarCRM deployments. Waltham, Massachusetts-based Athenahealth has been using Salesforce.com for four years, in which time Gatewood says the privately held healthcare practice management firm grew from US$2 million to US$60 million a year in annual revenue.

"We've gotten to a size where we need more control and tighter integration with our internal systems," Gatewood said. "We love open source, and we have a sizable development team already. This was really about getting the code."

Gatewood's group has extensively modified SugarCRM to suit its needs and will be going live with its deployment later this month. Eventually, Gatewood expects SugarCRM to roll out to 200 Athenahealth employees, cutting the organization's Salesforce.com licenses from 300 to 100. The move will reduce Athenahealth's software licensing costs, but that wasn't the primary motivation, Gatewood said.

"We have some customer case routing issues. The call center is able to resolve 85 percent of the calls, but the ones they need help with they have to send off to a subject matter expert. Salesforce.com's data structure doesn't make it easy for us to track it when that happens," Gatewood said. "With Sugar, all that stuff is transparent now. We could get in and change the code."

SugarCRM's customer base is a small fraction of that of major CRM vendors. SugarCRM has logged 150,000 downloads and sold licenses to 200 organizations, according to Roberts. The company is only lightly covered by analysts; in a recent report, Gartner Inc. listed SugarCRM among a pack of companies offering commoditized sales management tools suitable for "small, simple organizations."

Still, plenty of organizations don't need more than basic CRM functionality. "What percentage of the features do you actually use in Microsoft Word?" said Pride Industries Chief Financial Officer Tim Yamauchi, who picked SugarCRM for use in his 3,000-employee non-profit company.

Roseville, California-based Pride Industries employs disabled workers to provide a variety of outsourced maintenance and administrative services. Yamauchi had used a variety of CRM systems in previous jobs, and wasn't overly impressed by any of them. Pride Industries uses a number of open-source applications, and when its IT team brought SugarCRM to Yamauchi's attention, he was impressed by both the technology and the ethos of SugarCRM's executives.

"They're a young, entrepreneurial company, and they've been great to work with," Yamauchi said. When he requested functionality that would push out sales and marketing reports by e-mail, SugarCRM's developers provided it.

Freelance programmer Dave Fancella said he went looking several years ago for an open-source CRM systems to use in his work, but found the available options abysmal. He ended up opting for GoldMine, a commercial contact management system. Then, in December, NewsForge bought SugarCRM to Fancella's attention and asked him to write a review.

"I was really impressed with what I saw. I thought it was a very solid design," Fancella said in an interview. "For me, it doesn't make sense that a CRM package should ever be closed-source, because nine times out of ten you need some customization. CRM and open source is like a no-brainer. They should have been married years ago."

In his review, Fancella had a few quibbles with SugarCRM -- criticizing, for instance, the lack of an embedded e-mail client or support for outside clients other than Microsoft Outlook -- but concluded the software should satisfy the needs of most small to medium-sized organizations. He became so intrigued with the software that he later accepted a freelance development contract with SugarCRM, and is now working on the system.

SugarCRM's Roberts said the software is on a release cycle of around four months between versions. It's now available in more than a dozen languages, varying from French to Swedish and Lithuanian. What's next on the development schedule?

"That depends on our development community," said Roberts.