Eighteen months ago John Roberts, Clint Oram, and Jacob Taylor decided to quit their jobs at Epiphany, a maker of customer-relationship software. The trio wanted to target the same market, but write a new application developed using open-source code. It took them only three months to create the program and just another month to close their first round of funding. Little more than a year later, their company, SugarCRM, has given away more than 325,000 copies of its software, and raised a second round of capital, for a total of $7.75 million.

Giving away software isn't your typical path for a venture-capital-backed startup. But Roberts & Co., are smack in the middle of the next frontier of the open-source movement: business applications. "No one had funded an open-source application company at that point -- it was all infrastructure," says CEO Roberts. "We broke a glass ceiling."

Consider it shattered. The open-source movement is making another big thrust forward. Entrepreneurs, investors, and many analysts say they're confident that all of a company's business software -- representing hundreds of millions in sales -- will soon be available as open source. "I don't think there are any limits," says Ray Lane, a Kleiner Perkins Caufield & Byers partner and software industry veteran.

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