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SugarCRM eyes a public offering

Speaking at SugarCRM conference, the Sun CEO touts MySQL's open source model and growth rate

SugarCRM began in 2004 and offers its Sugar CRM package via a hybrid commercial-open source model and delivers it via onsite and on-demand modes. The company has amassed more than 3,000 customers in 30 countries, SugarCRM officials said. InfoWorld Editor at Large Paul Krill met with Clint Oram, SugarCRM co-founder and vice president of open source community relations, at the company's SugarCon 2008 conference in California this week to talk about the company and where it is headed.

Can you explain the rationale behind coming up with an open source CRM system?

Oram: When we first started thinking about the idea of building SugarCRM, we had spent our entire careers working in the world of proprietary software, working in the development of CRM solutions over the last 10-15 years. [CEO and Co-Founder] John Roberts has been working with CRM since 1992. And what we saw was that it was a very inefficient model, building software [and] keeping your customers very distant from your developers, having product managers in the middle of the process who may or may not actually come up with the right ideas. So what we thought was -- there's got to be a more efficient way to build software, and we saw the success that was happening with JBoss, MySQL, and others and basically set out to build a new software company that really changed the way that CRM software was built, the way CRM software was distributed.

Some of the key ideas there was to build an open source solution, to really put the power of the development in the hands of a community of developers around this and to shorten the distance between the end user and the developer. We went on from there and a variety of key ideas [have] evolved over the course of the last couple of years.... We said: Why not architect the software so that you could start off with our on-demand solution, if you don't have any IT infrastructure in place, and as you grow the solution and as it proves its value to you and that sort of thing... then you can bring it on-site and actually integrate it more deeply with your other systems, such as your financial system, your provisioning system, your order management system.

Another key aspect was the idea of a subscription model. Our focus, our philosophy, was to really focus on delivering value to the end customer, the end user, as opposed to building a lock-in model. If you look at proprietary software companies, what they do more than anything else is build a very tight lock-in model that keeps the customer entrenched in that company and makes it as painful as possible to walk away from that software solution.

Does Sugar leverage any open source projects?

Oram: We've built all the Sugar application code ourselves. We sit on top of the PHP [Hypertext Preprocessor] application stack. So PHP, MySQL, Apache -- we leverage all those technologies underneath us, but the actual core code itself that constitutes the Sugar application we wrote with our community.

Why did you use the LAMP [Linux Apache MySQL Perl/PHP/Python] stack?

Oram: That was actually a pretty strategic key decision that we made back in 2004. When we set out, we thought we were going to build a Java application on top of Oracle. That's what everybody was doing back in 2002, 2003, and 2004. And as we sat down and started prototyping the application, we were actually prototyping it in PHP just because PHP was quick and fast to build a user interface in. Then we started looking at all the different PHP applications that were available on SourceForge. So that's where we got started, and we started looking at the other PHP applications. One of the key things we looked at was we really wanted to have as many people in the world using SugarCRM as possible, and frankly, PHP is just more accessible than Java for the average person.

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Who are you taking customers away from -- or are you just getting new CRM customers?

Oram: Well, there's a combination of both. Basically one of the fascinating things about the way the open source model works is that [with] traditional software proprietary models, you spend two years building the software solution, then you go hire a really expensive marketing and sales organization, and then you go out and [do] target marketing into specific segments, hoping that what you've built would meet their needs. Hoping that what you just invested in building would actually be the right solution. Open source has a completely different approach in that we build our solution, we post the Community Edition on the Internet, and downloads happen around the world. We have downloads in every country in the world happening right now. And that demand pulls us into markets. So our phone has been ringing off the hook since we first started launching the company back in 2004. We're not targeting specific segments, we're not targeting specific sizes of companies. Companies are calling us. We have customers from the smallest of SOHOs [small office/home office] to SMBs [small/medium-size businesses] to SMEs [small and medium-size enterprises] up to the largest of enterprise. ... We've taken customers away from pretty much everything, from the smallest of solutions up to Siebel's.

What license are you using?

Oram: Our Community Edition is licensed under the GPL (GNU General Public License) v3.

Why did you go with GPL 3 over GPL 2?

Oram: When we were looking at the GPLv3, basically what we saw is the most modern open source public license that's going to last for the next 10 years plus. The v2 was written over 10 years ago [and was] really designed for a different age of computing. The Internet really hadn't taken off.

What is the benefit of v3 for the Internet?

Oram: It's got some provisions in there about how the distribution of the software comes into place, how the patent protection comes into place as well. It's a more modern license and we really felt that we wanted a license that would go with us for the next 10 years.

What is SugarCRM's sales model?

Oram: You can download Sugar, open source Sugar Community Edition today. Go to our Web site, download it from there. No restrictions around distributing it, around modifying it, all the things that you'd expect with publicly licensed software. We have three editions: Sugar Community Edition, Sugar Professional edition, Sugar Enterprise edition. The Professional and Enterprise editions are commercially licensed products; these are the subscriptions that we sell. You can deploy them onsite or on-demand, so there's kind of two dimensions there.

What's a difference between the three of them?

Oram: There's more functionality in Professional, more functionality in Enterprise. The Community Edition has really been designed for small companies, for the SMB, SOHO environment. The Professional Edition has really been designed for SMBs and SMEs, and the Enterprise edition is designed for the largest enterprises around the world. With the Commercial Edition, not only do you get features and functionality that aren't available in the Community Edition, but you also get full support, training, access to professional services, all of that.

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What's the difference between SugarCRM and Salesforce.com?

Oram: There are three key areas where Sugar really differentiates itself from Salesforce.com. First -- and I think one of the things that people come to us first around -- is the flexibility of our deployment model. Being able to go onsite or on-demand is something that a lot of customers like. We have customers who start with us on on-demand and they intend to go onsite, but they don't know when, and they haven't done it yet. But they like having that flexibility. Other customers just start with on-demand and six months later they go to an onsite solution.

What's the difference in functionality between what you do and what they do?

Oram: From just a high-level functional perspective, we just look at the check boxes. We certainly are in the same space. We have marketing sales and customer support functionality. We have some built-in e-mail marketing capabilities that they don't have in their solution. Our e-mail client is a top-notch Web-based e-mail client, similar to what you might find with Google mail or Yahoo mail. You won't see that in Salesforce.com.

Our user experience is where we win the end users over. If it's end users sitting in front of Sugar versus Salesforce or Siebel or SAP or any of these other solutions, that's where we really win. We've got the most modern architected solution on the market today, with the most modern user interface that's designed to allow end users to personalize it to the way they want to use the application. On the home page, using AJAX [Asynchronous JavaScript and XML] technology, you can move and drag and drop the forms on the screen so that the data flows in the way that you're looking. You have the ability to do all kind of saved searches and reports.

Is SugarCRM profitable?

Oram: We've had a very good year last year. We're not talking about our finances specifics, but last year was a fantastic year for us.

You're privately held. Do you figure on going public or being bought up?

Oram: We're laser-focused on going public. Basically the last couple years have been really about proving that this model works. We're going public in eight to 12 quarters. We've got the company absolutely laser-focused on that.

Is there anything else you wanted to mention?

Oram: The first few years of SugarCRM were [focused on] proving that this model works, getting the software built, getting the company built. Really, [seeing] the marketplace evolving to the point where it was comfortable with the idea of purchasing commercial open source. And we're past that now. Now this is a company that's all about execution. We had a fantastic year last year. Basically we're past the "prove it" stage and now it's about execution and it's about focusing on going public in eight to 12 quarters.