Sugar CRM took its annual customer and partner show on the road this week bringing what had been a Bay Area extravaganza to the Big Apple, the better to attract a sizable population of customers and partners from Europe and other points beyond North America. It seems to have worked because even though New York is one of the most cosmopolitan of cities regardless, I hear a lot of European languages in the corridors and I met many people from countries across the Pacific.
Sugar is a happening thing at least in part because, of all the CRM vendors, it has an innovative business model and a new assertiveness. CEO Larry Augustin tells me the company is growing in the area that is most important to mature and maturing software companies — the enterprise. According to numbers shared with me, Sugar is growing its enterprise customers at a rate quadrupling last year and I hope they keep it up. Admittedly that’s easy to do if you start from a small base but, still, it shows growth and validates the strategy nevertheless.
Sugar comes to New York off of some difficult transitions. The marketing and sales groups have been largely restaffed recently and I met more than one person who has been in a job or with the company for only a few months. But veteran, lead guitarist and Sugar returnee Martin Schneider anchors the group. I don’t know Schneider’s official title but a good approximation might be keeper of the flame. He came to Sugar about five years ago from the 451 Group, an analyst firm where he did some very good work. He stayed at Sugar for those five years doing more good work but ultimately went back to 451 only to return a couple of months ago to help the company through its transition.
It seems reasonable to say that Sugar needed a transition. For while the company has been making good numbers with its fundamentally different business model that included open source, but I think there was a realization that open source messaging would need some tuning for the enterprise corporate world. Also, the executive team was obviously looking for new members with the chops to play in the enterprise.
While it’s true that open source has done very well for the industry in areas like the Linux operating system, Apache Server and MySQL database (the core of the LAMP stack along with the PHP and PERL programming languages), open source is also representative of fierce commoditization. There’s little money to be made in operating systems, server software and databases today. They’ve run their races and the market has chosen a small handful to make standards. I know I’ll get mail on this but the issue isn’t how much money any of these items is generating today, Web servers are in the range of $2 billion, I think, but it’s how much the industries generated in dollar adjusted revenue in their hay days. Commoditization drives a market into a singularity where one vendor does most of the business and others eventually fail.
Yes, but what about Oracle, Microsoft and IBM in database? True enough, but databases are so embedded that they’re part of the hardware sale. Database might arguably be less far down the path that operating systems have already trod. We could go on but my point is that CRM is not in the commodity column yet and probably won’t be for many years. So Sugar’s initial thrust as an open source supplier was at best premature; it might have made sense if you didn’t see social coming. But CRM continues to be a jump ball because of all the innovation it spawns. SugarCon, to me, is a continuation of an effort to move the company from commodity supplier back to mainstream CRM supplier and it is largely successful.
In his keynote, Augustin was careful to focus on three things about CRM that keep it from being a commodity with a theme that stressed “every customer, every user, every time.” By this he meant making software that addresses the unique needs of users at all levels. Fair enough, but the messaging felt too reminiscent of days past.
I can’t help but note a small disconnect between the messaging and the reality of the software. The demos show a competent and easy to use product set complete with activity streams and social and other inputs. But the overall effect is one of automation rather than innovation and that has become my new yardstick and dividing line — more on that later.
You have to walk before you run and I accept that there are a lot of companies out there still learning to walk. By Sugar’s estimate, for every CRM user in existence today there are a whopping 25 who are not users or who are using some home grown system cobbled together from old databases and spreadsheets. I might start calling them home-groan soon.
The existence of so many uninitiated CRM-ers is plenty of reason to walk back any thought of CRM commoditization and to focus on helping those customers to walk the CRM walk. That said however, I think the whole industry has a short fuse burning on getting over the automation-innovation divide.
Some vendors have clearly crossed that chasm but the majority has not. You can see it in the demos of SFA that focus on the sales rep serendipitously having a big deal to close. The reality is that sales reps have fifty or a hundred deals to close and the hard part isn’t getting to the close. The hard part is finding the deals in all the sales data noise that need help in the first place. They are the deals revealed by analytics as having stayed too long in stage three of a sales process or the ones that have raced through and tweeted about their imminent need. It takes more than conventional CRM automation to find those deals and to take action on them.
That is where I think CRM is today and where most vendors need to apply elbow grease. Sugar’s special challenge (and you can say this about Sage too) is in communicating this to its partners. The messaging I heard at SugarCon straddles both worlds as it must if they expect to educate the partners and bring them along. So in many ways the most important messaging at this event is the future and most important constituents are the partners. Time to saddle up and ride in a new direction. It will be interesting to see how all this evolves.
On my way to Manhattan for SugarCon, the Sugar CRM user event and show. Taking a long slow train ride with plenty of leg room, WiFi, and power for optimum balance of productivity and sleep. Beautiful day out there, sunny and almost warm. What a good idea for Sugar to leave San Francisco to bring its show to its customers on the east coast. Still I like getting to San Francisco but will have the opportunity again when I head to Oracle Analyst day is a couple weeks. Busy time of year.
Looking forward to hearing Sugar’s evolving story. As the major open source player in CRM they have a unique approach to a market that’s only getting more complex where no one’s position is ever secure. I will be posting from there.
We recently published a video research note on SugarCRM’s mobile technologies. Please take a look.
I read Chaucer’s Canterbury Tales in college (yes, in Middle English and no, it wasn’t that long ago) and now every April brings me back to the opening verses about spring time and renewal. This April was especially memorable in our industry and as the month has just passed I wanted to take a moment to discuss some of the things I witnessed.
Mostly, for me, there was an unmistakable sense of renewal in CRM and in the tech sector more generally. Facebook continued to primp for its assumed to be historic IPO and bought Instagram, a company with an application for mobile devices and not much more than a website otherwise. Facebook paid a billion bucks for Instagram, no doubt a sign of the future. Marketo heading for its own IPO at some point bought Crowd Factory combining marketing solutions into a suite that will offer modern and ultra modern marketing.
Thankfully, there was more innovation than just the M&A variety. I went to a couple of analyst briefing sessions that were interesting for different reasons and I will have to assume that the events I couldn’t fit in were much the same. Oracle held a deep briefing to show off progress on all fronts. The event made me a believer that they have a plan or plans that merge into a powerful vision of engineered systems and software that meets some of the challenges of the social/mobile/analytic/big data world we’re moving into at light speed.
SugarCRM raised the bar and showed the world that it is growing rapidly and that its open source approach to business is very much in the mainstream along with operating system, server and database open source projects that support, in one way or another, the innovations in the rest of the industry. It looks to me like Sugar is becoming the go to CRM that everyone has to include on the shopping list. Open source might not be for everybody, but then again Sugar’s growth numbers and recent capital round indicate they just might be.
Salesforce announced its Government Cloud in an effort to capture some of the new business likely to come out of local, state and federal initiatives to cut IT costs and improve constituent service. When government becomes an adopter of a new technology like cloud computing it’s safe to say that it’s not a radical departure anymore.
But that doesn’t mean we stop innovating. As the Salesforce announcement made clear, the big issue for government will be security and, I would add, up time. So I look for a new era of innovation around both security and fault tolerance as cloud computing works to measure up to a nine nines reliability standard found in other utilities.
Finally, sneaking in just under the wire, on April 30, Paul Greenberg announced the second season of CRM Idol, the competition that seeks to discover hot emerging companies with great technology ideas in our space. Full disclosure, I am Paul’s friend, but that category includes about half the world. Last year, Idol’s first, was a great learning experiment. As one of the founding primary judges (others in the U.S. are Brent Leary, Esteban Kolsky, Jesus Hoyos) I was present for all of it and I can say we learned a lot.
We got a stellar crop of finalists last year (both in the U.S. and Europe) including Crowd Factory, Stone Cobra, Assistly and Get Satisfaction, which won the contest. Two of the four were bought — Assistly mid-way through the competition and Crowd Factory last month.
We are expecting big things from this year’s group of contestants too. The announcement by Greenberg on Monday is the opening of the season and companies interested in participating should visit the Idol website for details. There are a few rules that make this a real competition among emerging companies — you can’t be too old or too rich for example — so check it out.
Being a software entrepreneur is not easy. While you might think that venture funding has eased many of the burdens, raising capital is not easy though it can be insightful. VC’s look not just for new companies or new solutions but new categories. And what looked hot last year may no longer be attractive. They’re always looking for something that has never been seen before that nonetheless sparks interest and fills a need. CRM Idol is like that. The companies that do best are those that don’t conform to a pattern but instead break new ground.
If you pay attention to Idol you might get an idea of the future of CRM and possibly other things. Just looking at the Instagram deal tells me potentially that the hottest new companies might be those writing for the smartphone market. That, of course, would be a significant finding — the kind of thing that will make future Aprils so interesting.
SugarCRM held its user conference, SugarCon in San Francisco last week and by most measures it was a big success. The event, shoehorned into the Palace Hotel, will begin moving around next year settling in New York where it will attract a larger crowd, including many more customers and fans from Europe before possibly hopping the Atlantic the following year.
The movement is a manifestation of organic growth, which CEO Larry Augustin was happy to say included near or above 100% year over year growth in the two most recent quarters. You might be surprised by the uptick but it is an overnight success that has been years in the making. Moreover, if your thoughts about Sugar tend to equate its open source model with unprofitability, Augustin’s keynote might have been an eye opener.
In his keynote Augustin said that while most of us know about Linux, the open source movement is much more than the operating system. Linux is the open source version of Unix that gained so much traction and support when it came out because the open source model enabled programmers to donate their time and skills to make the operating system one of the most reliable in the industry. But the idea didn’t stop at operating systems and suddenly re-emerge in CRM. Augustin showed that web server software such as Apache, which has about half of the market along with open source databases and other technologies are behind many of the technologies we commonly associate with the social and mobile revolution.
All of that plus the continuing growth of SugarCRM’s partner ecosystem and compatible applications are contributing to the company’s continued growth — so much so that the company now claims to be the fastest growing CRM company. So things look good if you are SugarCRM. They have capable products and a business model that is now well enough understood that its representatives can spend less time promoting open source and more time solving customer business problems.
In line with all of that, the company has demonstrated a certain flair for managing the intricacies of operations by putting on a flawless customer event. Its future looks bright.