SugarCRM hits a sweet spot in the CRM market

SugarCRM’s Acceleration show hit London last week. CEO Larry Augustin kicked things off presenting to 200+ followers, fans, and sales prospects. I chatted with him afterwards.

Larry has an interesting profile. He has always worked in the open source community (SugarCRM is an open source CRM application). He founded and IPO’d VA Linux as CEO, and then became a venture capitalist and angel investor before joining SugarCRM. No sign of an IPO for SugarCRM on the horizon just yet though. As a seasoned finance professional I suspect he is watching the markets assiduously to get his timing right.

Larry is making waves again at SugarCRM. Revenues were up 68% in 2011, and 73% in the first half of 2012. SugarCRM is the fastest growing CRM vendor out there (including salesforce.com). His VC investors clearly like it. They provided another $33m in funding during Q2 2012. You might be forgiven for saying “But CRM is an old mature technology – where is all this growth coming from?”

Larry argues that CRM market penetration is tiny relative to the market potential – everyone who touches customers (and that’s nearly all of us) should have a CRM system. The trick is to make the software affordable, easy to use, and easy to deploy, he says. And that is exactly what SugarCRM is doing.

Affordable: the SugarCRM open source version is downloadable for free, and the Professional (paid for) version starts at $30 per person, per month.

Easy to use: a modern user interface and clear, uncluttered screens.

Easy to deploy: SugarCRM offers 5 deployment options – a SaaS version, a private Cloud version (powered by IBM), a public Cloud offering, a Partner Cloud offering, and an on-premise version.

Most SMBs go for the simple SaaS version, but Enterprise accounts like Sugar’s multiple deployment options, and the ability to move from one deployment type to another with a minimum of disruption. SugarCRM has sold mostly to small and mid-size companies, but is now forging a presence in large enterprises. This is helped by SugarCRM’s close reseller and technology partnership with IBM, which was the platinum sponsor of the Acceleration event. It’s no surprise therefore that SugarCRM has a IBM-centric Corporate version (including mobile support), an Enterprise version (including IBM DB2 and Oracle database support plus other features), and an Ultimate version that includes a Lotus Domino server connector. 

Why IBM has not got its enormous wallet out and acquired Sugar or another CRM vendor as part of its software vendor acquisition strategy is not entirely clear. Perhaps it just suits IBM that way, or maybe IBM doesn’t want to alienate those fiercely independent open source developer types who are integral to Sugar CRM’s business model. Either way, SugarCRM must be eternally grateful.

SugarCRM’s go-to-market model is dependent upon IBM and 350 other technology and/or reseller partners. These include IBM Cognos, GoodData and fellow open source vendor Jaspersoft that help to extend SugarCRM’s business intelligence capabilities. In addition SugarCRM has the open source community of developers who develop all kinds of add-on apps to extend the product offer. The scalability of SugarCRM’s business depends largely on growing its global reach through local reseller partners, rather than by building an expensive direct presence in every territory.

The main competitors for SugarCRM are salesforce.com and Microsoft Dynamics CRM. Although salesforce.com is drifting away from CRM into other areas recently (for example HR, Marketing, Databases), it is still a formidable competitor. However, salesforce has its hands full competing with Microsoft’s CRM Dynamics Online. The latter has 20,000 customers and is being aggressively marketed as a salesforce.com alternative. SugarCRM’s positioning as a niche challenger to the two titans is attractive for those customers fearing enterprise vendor lock-in.

The future for SugarCRM is based around the trends of Social, Mobile and Cloud computing. New updated native iPhone and Android mobile versions of SugarCRM will be available shortly to complement their iPad and Blackberry platforms support. SugarCRM will “stick to the knitting” of building deep and rich CRM functionality rather than being distracted into other adjacent market spaces such as marketing automation and call centre management. This makes SugarCRM an attractive partner for vendors of these kinds of customer management applications.

Larry’s vision of “CRM for everyone” is on track and looking good. He and SugarCRM’s team have done a great job of differentiating SugarCRM to date against their well-heeled rivals. As David might have said to Goliath “it’s focus rather than size that matters”. And that sums up the fun and colour of the Tech industry, after all. We wish them well, and will watch Sugar’s progress with interest.