The cost and complexity of customer relationship (CRM) has long stymied IT. But John Roberts, Clint Oram, and Jacob Taylor believed there was a better way. So in the spring of 2004, all three quit CRM software vendorE.piphany and – after just three months of coding – launched the Sugar open source project.

That turned out to be the start of a wild ride. Built on open source stalwarts PHP, MySQL, and the Apache web server, SugarCRM now boasts more than 1,200 paying customers of its commercial Sugar versions and more than one million downloads of Sugar Open Source. Primarily focused on small-to-mdeium sized businesses (SMBs), the company has also moved upscale with a Sugar Enterprise version and such large customers as BDO Seidman =, the world's fifth largest accounting firm, which has 2,000 Sugar users.

According to chief executive John Roberts, the Sugar name was meant to describe a product that delivered a "sweet experience" for users. When Sugar debuted on SourceForge.net in 2004, it attracted developers like ants to honey – enough activity to shake loose a first round of $2 million (£501,000) from Draper Fisher Jurvetson. By the end of 2005, the founders had netted second and third-round funding totalling $24.5m, a watershed amount for an open source venture whose primary product was an enterprise application rather than infrastructure software.

Early on the company got a taste of the power of community in accelerating Sugar's evolution. In 2004, when the founders introduced Sugar at LinuxWorld, they decided to externalise the application's language streams for translation, recalls Chris Harrick, director of product marketing. "They did that on a Friday. I think the 'aha' moment for them was, when they came back on Monday, Sugar had been translated into five languages."

With SugarCRM's first developer conference debuting last week, the company continues to capitalise on community-based enhancements. And of course, the open source model also makes it possible to maintain a minimal marketing budget. "It allows us to get our software into the hands of users at a very low cost," says Harrick. "The community model reinforces itself. As communities grow, as more people learn about the software, more people are willing to pay for support and pay for the advanced functionality that we offer in our commercial version."

In addition to Enterprise, Professional, and Open Source editions, the company offers three methods of software delivery: installable, hosted, or preloaded on an appliance. With Sugar as a leading example, the notion of an open source enterprise application has rapidly evolved from far-fetched idea to mainstream choice.