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Given all the noise that has been generated about customer relationship management (CRM) software over the years, solution providers in the channel could be forgiven for assuming the CRM market is pretty well saturated by now.

In reality, SugarCRM CEO Larry Augustin says that 60 percent of organizations today don’t have a CRM in place today. That means that while vendors tend to spend a lot of time and money trying to steal customers from each other, the bigger opportunity for the channel may lie in simply expanding the size of the CRM market.

The sad reality of sales management in most organizations is that they continue to rely on e-mail systems such as Microsoft Outlook to manage customer relationships. For many of them this is the path of least CRM resistance because many of them already have Microsoft Outlook installed. A big part of the reason for this is the cost of CRM software. While competition between, Microsoft and SAP is driving costs down, Augustin says many customers are still unaware that there is a viable open source alternative.

To help address that issue SugarCRM recently picked up an additional $33 million in financing. The companies that SugarCRM competes with are obviously much bigger, but Augustin says that many channel partners such as Augustin have come to recognize that working with an open source software provider is in their best interests. In, fact, SugarCRM now has 370 channel partners that have helped propel to being the third most widely used CRM solution in the world. In addition, SugarCRM in 2011 saw a 67 percent growth in top-line billings growth and added 2.700 companies customer list to bring its base of installed users up to over 1 million.

Augustin says the real difference that SugarCRM makes in that channel is that while CRM competitors are engaged in a price war, SugarCRM is based on an open source application that SugarCRM makes money on by providing commercial support. Ultimately, that means that solution providers make more money by either deploying SugarCRM as part of a larger on premise solution, or making it available as a cloud service that they host. Given the open source nature of SugarCRM, Augustin argues that in the final analysis a much higher percentage of the overall revenue involving any project winds up in the hands of solution provider.

In the meantime, as a category of software CRM has reached a critical juncture. Increasingly the better managed businesses are going to be relying on analytics applications to help them make better business decision. But unless that business has something that looks like a reasonably well structured repository for storing customer data, analyzing that data can become very problematic.

Going forward CRM is going to be about a lot more than managing salespeople and much more about managing the total customer management experience, especially as CRM software becomes more tightly coupled with supply chain and customer support applications. In addition, many of these CRM applications now feature social networking capabilities that are changing the way salespeople not only interact with each other and the organization’s customers for the better, but also the rest of enterprise.

In short, CRM software is rapidly becoming a vehicle for managing not only sales people, but also for transforming the way the business actually operates.