By Chris Bucholtz

SugarCRM rolled out its newest product today, and the ideas contained in it are reflective of the evolution that the company (and open source CRM) have gone through in the last 18 months. It’s a rapid evolution that’s seen a shift in message, from one centered on the open-source nature of the product to one highlighting the capabilities, affordability and growth potential of the product as a CRM tool – and, oh yeah, it’s also open source.

That’s actually a difficult evolution to go through for an open source company. All such software companies are rooted in the open source culture, an environment that is very collaborative and collegial but which can also lead to a slightly myopic view of the world. What I mean is that open source software companies are often so excited by the possibilities of open source that they can get hung up on this and lose track of the fact that their customers are looking for a message about what software can do, not about how software is built. I heard this while sitting in on a call between our analysts and some SugarCRM folks last year; try as they might to stay on track talking about features, the discussion inexorably turned back toward open source.

That tendency has really faded into the background in recent months. In fact, SugarCRM seems to be on track to tone down a lot of the technical aspects of CRM that cloud the real business issues for actual users; the open source issue was the first one, and the most recent version, Sugar Express, announced today, could mark the spot when hosted vs. on-premise started to become a moot point, too.

Sugar Express is an on-demand version of SugarCRM targeted at small businesses which comes with a rather small price tag of $499 per year for up to five users, or $799 for up to 10 users (or about $8 a month per user, as Martin Schneider, the director of product marketing at SugarCRM, was eager to say). The software runs on the Sugar Open Cloud, the company’s term for the evolving platform the company’s been developing, which includes Module Builder, for building custom modules, and Cloud Connectors, or tools for integrating third-party data services for lead generation like Hoover’s and Jigsaw. The new product also provides plug-ins for Microsoft Office and access to SugarCRM Customer Support.

The thing to think about there is the idea of customization (an open-source theme if ever there was one) in the context of on-demand. SaaS has always been criticized as being inflexible and difficult to customize; open source has been seen as strictly an on-premise way of working with software. Obviously, Sugar’s serious about changing that.

“We don’t expect to see 100 percent on-demand, ever,” says Schneider, “but the tool kit allows you to do great customizations and still be upgrade-safe in an on-demand environment. Open source and SaaS used to be mutually exclusive; with the Open Cloud, it just isn’t going to be that way anymore.”

Schneider sees the audience for this product as the immense number of smaller businesses that have yet to adopt any type of CRM. What I find interesting is that Sugar Express can be sold as a point solution for immediate problems – lead management or basic SFA functions, for instance – and then, as companies become familiar with CRM’s power, new capabilities can be introduced at a pace that makes sense for the business. In other words, at this price point, there’s no need to become a CRM PhD. right from the start; you can grow into it. That’s how Sugar hopes customers will evolve into its Professional and Enterprise editions, which go for $30 and $50 per month as of today (in both on-premise and on-demand versions).

There’s been a lot of delivery talk and software developer jargon in this post, but I strongly suspect the next thrust by Sugar will use this one as a springboard to turn the emphasis to features, especially features created by its community and made available through its SugarExchange. The focus will turn to business-centric capabilities, which is the point when I believe small businesses will really jump on offerings like this. Sugar will never get away from its roots in the open-source community (where do you think those new features are going to come from, after all?), but it’s now turned a corner in aligning what it and its future customers see as truly important.