Nice Series B for SugarCRM:

"SugarCRM Inc. today announced that it has secured $5.75 million in Series B funding for ongoing development of its open source customer relationship management (CRM) platform. The investors are Draper Fisher Jurvetson (DFJ), a Silicon Valley venture capital firm that led the company's $2 million Series A financing eight months ago, and Walden International, a global venture capital firm based in San Francisco that led the Series B round."

The new round reflects the rapid growth of the Sugar Suite of CRM applications since their introduction in July 2004. Sugar Open Source Edition(TM) has been downloaded by over 100,000 users to date, while Sugar
Professional Edition(TM) has over 100 commercial customers. The products have already been translated into more than 15 languages, and a hosted version of the Professional Edition called Sugar On-Demand is available for a monthly fee with no need for in-house software installation or maintenance."

According to SugarCRM's pricing model SugarCRM costs something between US$ 200-250 per seat/ per year.

100 customers with 100 seats each bring in nice US$ 2 million in revenue. pretty good considering you have close to 0 marketing and development costs.

It seems that open source software model is catching on. Take a well-established best of breed open source solution (MySQL, Movable Type, SugarCRM) and provide extra enterprise services and participate easily in the scale that the product has reached already.

Pro:

- minimum marketing expense
- established product with established user base
- development is relatively cheap (you just have to coordinate a bit the ongoing open source development)

Con:

- limited upsales potential
- fiercest competitor in-house
- wisdom "You can never compete with free services"

I really like the model as it comes close to a fully distributed enterprise. You outsource development and marketing. You hunt for premium customers only (easy segmentation) and can scale back your efforts and still your (core) product is thriving in user base.

It seems SugarCRM will not be the last one going the way of enterprise usable open source software....