SugarCRM CEO: It's the End of Salesforce

By Renee Boucher Ferguson  |  Posted 2008-02-08

SugarCRM CEO: It's the End of Salesforce

SugarCRM Chairman and CEO John Roberts is convinced that the era of open-source applications is upon us.

So he told eWEEK Senior Writer Renee Boucher Ferguson on the eve of the company's second annual SugarCon conference Feb. 6-8.

And in many ways it has. Open-source operating systems such as Linux have become mainstream, as have open-source vendors such as Red Hat.

And while the four-year-old SugarCRM has just outgrown its startup phase, according to Roberts, the company has gained a respectable following with its open-source project. This includes 65,000 members in its open-source community and 12,000 developers using its SugarForce platform, many of whom have translated SugarCRM into 570 languages and built 470 extensions to the suite.

The commercial side of the company, which sells and supports SugarCRM's software, has about 3,000 customers. The company announced Feb. 6 a $20 million investment from New Enterprise Associates, bringing the total funding in SugarCRM to $46 million.

Existing investors Draper Fisher Jurvetson and Walden International also joined this round of funding. 

Q: What is the big message you want to impart to customers at this year's SugarCon conference?


A: SugarCon is our second annual user and developer conference, so it's a really exciting event for us an open-source project and as a software and on-demand company. In the early days the conference was mostly engineers. This year it's developers and customers. We've transcended the last couple years to end users as well. But I think, stepping back from it all, as a company that's less than four years old and started as a commercial application from day one, [this conference] is really more validation that commercial open source is ready for prime time - clearly a new IT model for companies going forward.  


Q: There has been a lot of validation for open-source technologies like operating systems, databases and application servers. But the story is not quite the same for open-source applications for the enterprise. What challenges do you still face as a provider?

A: That's exactly the story. You have folks like you and me that have spent our careers in enterprise apps. Most of open source has really been about the OS or app server or database and the thought was, four years ago, that open source was not applicable to applications, and certainly not enterprise apps, and it wouldn't work. We always believed open source was more applicable to enterprise apps.


Now we're seeing the adoption of Sugar Professional, of Sugar Enterprise from companies like the Royal Bank of Canada, H&R Block, Men's Wearhouse. It's getting mainstream, and commercial enterprises are betting big. And rightly so. Open source is more modern, more quality and is a better value.



Q: How much of the SugarCRM community development goes back into the commercial SugarCRM product?

A: It varies on how you look at it. As a company, as a project, we did author SugarCRM from scratch. We didn't harvest it, we actually wrote it. And we continue to do that, but we chose to open-source license under GPL v3. It's usually completely the opposite - harvest, then create a license. We actually wrote it. In terms of our core platform, we do write and manage 100 percent of it. On the other hand, we designed a platform that is very extensible, to support a lot of extensions. What you get is a core team in Cupertino building a rock-solid foundation as a plug-in-based architecture and SugarForce that makes it really easy for developers to build and add on to our code.

Q: What is the incentive for developers to contribute to your open-source community?

A: Why should a business developer contribute to a business application? That's not the case. If you look at CRM, it's a viable part of any company, any business. When you're dealing with customer relationships, customer experiences, you bet IT and you bet the business folks are laser-focused on providing a superior customer experience.


The issue is that up until this point they've always been dominated by proprietary, lock-in software vendors like or Oracle. Why do we have to do this? Why can't the customer be in control? Why can't we add a feature if it doesn't exist? This conference is showing this is a much better approach. As we've been getting larger, our events are getting larger. It's really more validation acknowledging that there are a lot of smart people in the world outside of Silicon Valley.

Q: There have been a lot of anecdotal and analyst research that suggests CRM implementations still fail at an alarming rate. Does open source CRM do anything to alleviate that situation?


A: I think Sugar solves a lot of those issues. I am not sure if open source does. We're in the fourth generation of open source and every generation is based on newer technology. Ultimately, you're dealing with sales forces that are not accountants. What they're looking for is user experience. Do employees really adopt an application and treat the app as their friend? If they do, they can get great power. That's where Sugar comes from; Sugar CRM is your friend. It's also a friend of that company - as end users embrace it more, senior management gets visibility.


On-Demand Plans



Q: Where are you at with on-demand?


A: Today we only offer Sugar On Demand for our professional and enterprise editions. From our perspective, we're about 70 percent onsite and 30 percent on-demand. But our on-demand business is growing dramatically.


What's interesting about our on-demand business is we worked the last four years the right way to do on-demand, which is multi-instance. In general there was a solid first generation of on-demand software, then the next generation was multi-tenant, but it has a lot of weaknesses to it. Now it's possible to have a more modern generation called multi-instance - one instance, single-tenant, multi-tenant, multi-instance. We're not the only ones to do this. It provides complete upgrades, a complete framework, but gives customer their own database and makes backups a million times easier.


Q: What are your on-demand plans going forward?

A: Expanding our data centers. Right now we've invested heavily in data centers in Silicon Valley. We will invest in additional ones in Asia and Europe in the next couple quarters. The one thing...we allow our resellers to resell Sugar On Demand. Even though we don't have an on-demand environment in France, we allow [resellers] to run Sugar On Demand in local IT centers. That gives more localized versions, which we found to be a very powerful offering.

Q: Having a platform for the on-demand development of applications seems to be all the rage in the CRM world. There's with its platform, SAP with Business ByDesign, Microsoft with CRM 4.0. Where does SugarCRM stand on the platform front?

A: Sugar 5.0 is a platform. One of the core capabilities of Sugar 5.0 is this thing called Module Builder. What's really exciting and unique versus proprietary companies is anyone in Sugar can build a module - an event module, or to manage media contacts - on the side. So now in Sugar 5.0 [users] can create [applications] completely visually. You don't have to be a programmer. What's nice is it saves it as a package, and you can share it across the Web.


So it generates license code, and stamps it GPL 3, whereas a company like will go and invest in a proprietary programming language or create a very locked-in environment. I am not sure the world needs another proprietary language. SugarCRM is absolutely open. We have government organizations that use Sugar to manage and handle healthcare records...though I am reluctant to use the platform word; it's abused by so many vendors.


If someone is spending $90 million every three months on marketing and they want to use the platform word every other sentence, that's fine. But that doesn't mean it's a real platform, or a good platform, or it's worth what they want to charge for it. That's why I've been waiting for reality to settle.




CRM Shakeout, or the End of Salesforce?

Q: Do you think there will be a shakeout of the CRM platforms?

A: On the platform side, we've always believed that the customer is in control and let's not hide behind artificial restrictions as the reason for calling it a platform. But the reality is there's only so much you can customize - that's the reason for calling a platform a platform.


But the reality is there's only so much you can customize; you can only customize what [the vendor] says you can customize. Our perspective is the platform is something you should be able to do with anything that you want. Ultimately for us it's about facts. It's about let's put Sugar 5.0 or Oracle or let someone who understands platforms and it will be night and day between what's a real platform and what's marketing.

Q: What is SugarCRM's road map for the coming year?

A: This year, 5.0 was a major release of the Sugar open-source community. It's huge for us last year with adopting GPL v.3. We're also at a point where we're investing not only in our own on-demand [capabilities] but our partners on-demand. We don't believe we should be the only Sugar On Demand out there. We're investing in global on-demand working in 6.0. It will probably ship in the fourth-quarter time frame.


Those are the big key things. You're also seeing our deployment sizes getting larger and larger, so we'll be doing some announcements on multi-thousand deployments. A lot of folks like to pretend we're just in SMB [small and midsized businesses], so we'll be announcing multi-thousand deployment deals, which will completely end the debate of scalability or maturation of SugarCRM and commercial open source in general.


I do think there is a shift this year we are starting to see. The business models are shifting. The lock-in base for on-demand models are kind of at high point . More and more people are really questioning why is there only one way to do something, and I am an idiot if I am not thinking that there is only one way? Sometimes onsite makes a lot of sense. Sometimes on-demand makes a lot of sense. It's amazing that vendors say there is only one way to do something. There are multiple ways of doing things.


Now we're seeing that more modern architectures like Lamp running on site are so much more effective. So we're seeing that technology is eating into the castles of proprietary on-demand. I'd say that's how we're seeing it. That's what we believe is reality.

Q: Who do you consider your competition?

A: We have some unique competitors, but we run an Oracle database. Microsoft is a competitor, but we run on MS SQL Server. In some ways it's legitimate co-opetition. I put Microsoft in that category. We compete but we're friends and partners in other respects. Our developer conference is a good example; Microsoft and Oracle are sponsoring it. That shows good spirit.


On the other hand, there's Salesforce. I think that model of building propriety, lock-in [services] is expensive and [customers] are getting very old and inflexible software. There's a lot of frustration among Salesforce customers. They're happy there is a new game in town, and a new app in town called Sugar. And it has some exciting advantages over the system they've been running over the last couple of years, which is OK but does not help achieve real objectives.

Q: What's the next evolutionary step for CRM ?

A: From our standpoint, in the old days, pre-SugarCRM, the thought was -we live in Silicon Valley , we're smarter than the rest of the world, we build it, you buy it.'

That's changed. You're looking at fundamental business problems that every business shares: running an effective sales force. Managing a customer base. Giving management effective tools. Those are key issues that will never go away. Because of that CRM as a software category will never go away. There are some exciting developments that are going to make CRM exciting - mash-ups like Google with Open Social.

Standards are maturing, but we'll see by the end of the year, with standards like Open Social, and advances of intelligence within the devices we are using, the sheer power of our laptops, and always-on connectivity that it all really is creating a new renaissance of CRM capabilities.


All the work that's been done on the B2C layer is really starting to hit B2B. Traditional, ultra-serious boring applications are becoming very dynamic. These are the biggest shifts in years.


I see it all converging this year...there is collective intelligence around the world, where people are willing to share ideas on something that is maybe not so interesting as a trouble ticket, but the fact is there might be 300 people interested in sharing information on a trouble ticket. Because real innovation really comes from people sharing innovation. That's really exciting. It is the beginning of a new renaissance. The proprietary guys won't survive it. The engineering outlook is changing.

Q: What does SugarCRM need to go forward, to capitalize on this emerging world?

A: It's really just being open. SugarCRM is the first enterprise-applications company to write an open-source license - it's such a large, powerful enterprise application that we've done over the last four years. We definitely took a new road. As a result, four years later, it's proven to be the right thing.


Being open, rejecting the artificial lock-in, most companies are afraid to move away from that. That's what they base revenue on. If you're going to base revenue on that you have to be able to create something that is open - [to show] what are the features, how expressive [are your tools] how open are you at the global level. Are you willing to GPL your work at a global level? We're seeing that we can do well and good at the same time.


That's the lesson we've learned. We can stay true to our mission - staying open and putting customers in control. We're doing very well economically and we're really pleased with our [success]. For us, it's continuing to be focused.




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