The recent SugarCon conference in San Francisco was a great opportunity to get an update on SugarCRM and meet some industry colleagues. Including Mitch Lieberman from SugarCRM who invited me to attend and also has been very generous with his support of our new communities: SocialBusinessOne and SalesEdgeOne. Thanks, Mitch!
For this post I’m going to focus on changes to SugarCRM’s strategy, based in part on an interesting chat I had with CEO Larry Augustin.
Does open source matter for CRM software?
Let me state my bias up front. I like open source. The CustomerThink community wouldn’t exist without it, because it runs on the LAMP stack (Linux, Apache, MySQL and PHP) as the infrastructure plus Drupal for community/content management. All open source and “free” in that we don’t pay for the software.
If you want to use Drupal, just go to drupal.org, download it and you too can create a world-class online community, run a site like whitehouse.gov or whatever you can dream up.
Oh, but there’s one catch—services. I can assure that part is most certainly not free, because someone has to take the software that was created and shared by the open source developers turn it into a useful design, fix bugs, upgrade, etc. etc. And programmers have to eat too, you know.
OK, so open source can work for web sites, but what about CRM solutions? Uh, sure. Sort of.
RightNow’s SaaS solution is built on the LAMP stack, but you won’t see that pushed as a primary benefit. Why would a customer service executive care? Salesforce.com’s SaaS offering is based on a proprietary architecture (using Oracle’s database) but I’m pretty sure sales users only care whether it does the job for them.
But SugarCRM has really “featured” its open source heritage from the beginning. Has it worked? Not so much, in my opinion.
Larry Augustin stepped in last year as interim CEO when John Roberts left (or was pushed out), and more recently took the reins permanently. He certainly knows the open source industry, because in 1993 he founded VA Linux (now SourceForge) and led to company to an IPO in 1999. Augustin wouldn’t comment directly on why Roberts left, but my speculation is simply that the business was not developing as the investors had hoped.
Having interviewed Roberts a couple of times and heard him speak passionately about how open source would revolutionize the CRM industry, I can only conclude that SugarCRM fell short of his dream. In my view, open source is a feature, not a benefit. I’m still very skeptical that most business people—the primary CRM buyers—will care what’s “under the hood.” What really matters is the quality of the solution (function + usability) and what you get for your money.
New UI, Expanded Partner Relationships
That said, on the solution side, I was very impressed with the new look for SugarCRM 6.0, now in beta and due to GA in July. Very slick and Web 2.0ish interface, thoughtfully designed with popups and dropdowns to reduce the number of clicks to get things done. I’m not sure how much the open source community had to do with this design, but in any case if you’d like to take a look, you can download it from SourceForge.
In terms of function, the core product still focuses mainly on SFA, but there was a nice array of partners in the expo that can provide complimentary solutions, such as:
- Angel.com for speech-enabled IVR
- MindTouch for document collaboration
- Jigsaw for business information
- Pardot for marketing automation
And then there’s Microsoft. In his keynote Augustin said that SugarCRM has making a “big bet on Microsoft Azure” to provide cloud computing options for running SugarCRM. Unfortunately I found the Microsoft presentation that followed boring and long-winded, but there’s no real doubt that Microsoft is in the game now. Better late than never.
So there’s plenty of good news in the product and partner strategy. But in my interview Augustin talked a bit more about improving sales execution to capitalize on “strong” demand. While he didn’t diss the outgoing CEO by any means, it seems clear that the company wasn’t hitting on all cylinders or the leadership change wouldn’t have been made.
One more time: Does open source matter?
But I’m back to asking: Does open source really matter to CRM software solutions? More specifically, can it help make a successful software company?
My answer is yes, if an open source development strategy can be translated into a better product and/or a lower cost solution.
I can’t say I’m sold that SugarCRM’s product is better than other SFA products on the market, although the new UI is impressive. SFA is SFA, and everyone has partners to fill in the gaps. Bottom line: the product is not going to be the only factor in winning deals.
Augustin rightly pointed out that SugarCRM’s large open source community can address the business viability question. If you don’t think viability matters, please talk to former customers of Entellium, Helpstream and LucidEra. Some CIOs will sleep better at night knowing that they can get their hands on the code if needed.
But the real leverage is cost. Open source = free developers for the base product. And a “freemium” strategy can also help defray marketing costs, because some users of the free Community Edition will turn themselves into future paying customers.
Open Road Ahead
I think Augustin is on a better strategy now, to focus on differentiating the product (not how the product was built), strengthening partner relationships, leveraging the cloud and running a tighter ship over all. As open source fades a bit into the background of SugarCRM’s marketing messages, the focus needs to be simply marketing, selling and servicing a great CRM solution in the eyes of business customers. Open source can be a means to that end, but it’s not the end.
While he declined to provide any financial metrics as a private company, Augustin seems upbeat about SugarCRM’s progress and prospects for SugarCRM in 2010. We’ll have to wait and see if the new game plan delivers the results that he and his investors expect.
Further Reading:
- “The Future of Software Exists in Great Ideas”: An Interview With SugarCRM’s John Roberts (2006)
- SugarCRM Rides the Open Source Wave (2007)
- Recap on SugarCRM 2010 Conference (Tatyana Kanzaveli)
- Sugarcon Day 2, Re-cap of Paul Greenberg’s Keynote on Social CRM (Jacob Morgan)
- Re-cap of SugarCon Day 1 (Jacob Morgan)
- So, Like — I Presented Today… (Esteban Kolsky)
- Open Source CRM Solutions (Rich Bohn)
