CRM in the Cloud Creates Channel Opportunity

Once a solution provider decides to get into the cloud computing either by building their own data center or leveraging the services of a hosting provider, the most important thing they can do is pick an initial application that will resonate with a lot of customers.

With that goal in mind many solution providers would be well advised to take a look at customer relationship management (CRM) software in the cloud. Despite the fact that companies such as Salesforce.com have been in the CRM cloud space for years and the recent entrance of Microsoft, the adoption rate of CRM software in most business segments is not all that high.

Of course, solution providers could opt to resell either one of these offerings, but the margins on those offerings can be pretty thin. A third option in the CRM space that solution providers might want to consider is SugarCRM, an open source application that by definition offers comparatively higher margins.

SugarCRM is available in a community edition that comes with no support from SugarCRM and a variety of commercial editions that come bundled with support from SugarCRM. In either case one of the key differentiators for SugarCRM is that as an open source application it’s a whole lot easier for solution providers to add value by customizing the application for their customers, versus trying to get everybody to sign up for a one size fits all approach to what for most customers is really the front end of an extended business process.

The company claims that message is starting to resonate with customers. It recently announced that revenue and billings for the first quarter were up 43 percent over the same quarter in 2010. The company’s first-quarter results also represent a 9 percent jump in revenue over the final quarter of 2010, which saw a 56 percent jump over the same quarter the previous year. Perhaps more importantly for partners concerned about the viability of SugarCRM, the first quarter marks the first time the company was cash flow positive.

Nick Halsey, chief marketing officer for SugarCRM, attributes much of the growth to sales generated by channel partners, 38 of which he notes doubled their billings in 2010. With the arrival of mobile computing and social networking in the CRM space, Halsey says the opportunity for partners to sell CRM software has never been better because customers are keenly interested in applications that leverage those technologies.

Cloud computing represents a major opportunity for the channel. But like most new things it’s critically important to find some initial success when launching what amounts to a new business model. The nice thing about CRM is that most customers know what it is. But better still, not many of them have actually committed to a particular application.