One of The VAR Guy’s early mentors always said “software wants to be free.” Maybe “nearly free” is a better term to use. Somewhere between proprietary CRM software like Oracle/Siebel and modern hosted applications like Salesforce.com, a new market opportunity for channel partners is emerging.

Small open source companies such as Centric CRM and SugarCRM are carving out a niche for themselves in the application sector. Centric CRM has only 20 employees but has landed business with midsize companies and even a few enterprises. A deal with US Food Service, for instance, could eventually blanket more than 5,000 users, notes Centric CRM Chief Marketing Officer Michael Harvey. Centric CRM and its low-cost open source model serve customers that “can’t afford Siebel,” says Harvey.

But what about fast-growing Salesforce.com? Harvey estimates that Centric CRM costs half as much as a Salesforce.com. (Although The VAR Guy can’t vouch for that.) And with a hosted application, customers lose flexibility and integration with their own applications, he asserts.

The VAR Guy is not predicting a Salesforce.com implosion. But there’s no denying the growing demand for open source apps like Centric CRM and SugarCRM.

Centric’s top priorities for the rest of 2006 are shipping version 5.0 of its product and building its channel. The VAR Guy has got to wonder if Microsoft’s Dynamics CRM partners will give Centric CRM and SugarCRM a look.