Open-source CRM and ERP: New kids on the cloud

Users report significant ROI

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Rather than pay someone to support a packaged application internally, cloud computing in general allows enterprises to take advantage of applications that they can tweak to address their specific requirements. Leveraging economies of scale, cloud computing providers can make support costs less expensive, and it's generally less costly when it comes time to upgrade as well.

"The cloud is about having a custom-developed application versus something everybody else is packaging,'' Wetteman says. She says, for example, two years ago, everyone was using the same applications for sales force automation. Now with something like, companies are creating custom HR or e-commerce applications.

Adding open source to the equation allows customers the added benefit of being able to tinker with the code, although only a handful of application vendors are offering an open-source cloud model, she says. (See sidebar, below.)

Of course, flexibility is at least somewhat in the eye of the beholder, observers acknowledge. "The definition of open source differs" depending on who you talk to, explains Saurabh Verma, global services director at Acumen Solutions, Inc., which does both cloud-based and traditional systems integration. Even if CRM is developed with open-source technology, "that doesn't necessarily provide the flexibility to the client of truly using open-source power,'' he says. In other words, "you can tinker with the code to do some customizations based on the model, but you cannot change the way their tool is built."

That's fine with Dentry, who says he's more focused on the cost benefits than on the open-source issues.

Get off my cloud

Chuck Schaeffer, CEO of cloud-CRM provider Aplicor in Boca Raton, Fla., says he recently "seriously" considered going with an open-source business model and spent a fair amount of time and energy researching it. In the end, though, he concluded the timing wasn't right for two reasons.

"Customers are quite willing to pay for mission-critical business software," and his key customer base -- midmarket global firms -- are not yet ready to make the leap into open source for their key systems. The second major consideration was how to make money. "Show me one successful open-source mission-critical application software vendor," he says.

Still, the door to going open source isn't closed forever. "I think this is something we'll come back to, but not in 2010," Schaeffer says. Most companies are running open source somewhere, and after some successes in the enterprise application field, there might be more comfort with the notion.

In the meantime, the open-source cloud computing approach is more of a hit among small companies and startups, which Forrester Research says are the main users of cloud computing at the moment. They don't have a complicated infrastructure of IT investments to manage. Right now, many enterprise-level deployments are experimental and consist of non-business-critical projects.

There are concerns about a lack of control over the data and about security. However, cloud hosting companies maintain that security is one of their core competencies.

Aplicor's Schaeffer explains that most cloud software providers fall into one of two security camps: multi-tenant or isolated tenant. In the first, all customers share one large database and security is provided by the database row or field. In an isolated-tenancy setup, each customer has its own database, kept completely separate from all other customers.

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