A Tale of Two Cities: SugarCRM - From Open Source to Open

I've always been a fan of SugarCRM - but a critical fan. One who griped because he loved.
Written by Paul Greenberg, Contributor

I've always been a fan of SugarCRM - but a critical fan. One who griped because he loved.  I've liked the quality of the platform and the products. I've liked the staff and management team. I've liked much of the outwardly facing attitude of the company to the public. But despite the company's ardent claims, I've never particularly thought that except for the early days, when open source was new and interesting, there was a differentiator there.  Either real or imagined.

In fact, to me, open source as an idea's actual value was never code availability, but the open culture and relaxed legal structure that it bred.  What was always interesting about SugarCRM wasn't that I could get a free, feature limited version and work on evolving the product with SugarCRM (a.k.a. Sugar from here on if I feel like calling it that) but that they had an attitude that said, "hey use it, develop it and even develop competing CRM products on it, we're cool with that."  AND they had an active thriving development community of 30,000 who loved writing code and talking about the product and collaborating.  All very, very nice things to have when you're a company who is trying walk what is actually NOT a fine line between being "open source" and commercializing the products that you had.

As far as SugarCRM's messaging goes, they've for years beyond even mild utility, focused on this "open source CRM" approach that.  In fact it has been - until now - (hold that thought) a dominant theme of the company. For the last two plus years, I've felt that the time had come for SugarCRM to recognize that "open source" as a differentiator was passé, no longer relevant, not in sync with the universe that we were living in. But until this year, they had been pushing and pushing open source as a differentiator in CRM when it wasn't and become increasingly thematically (not as a company) irrelevant to both the discussion among the influencers and the discussion among the buyers. It was setting them up for long term hurt, it seemed.

This was reflected in their conferences annually too. As much as fun as it has been to hang out with their sterling management team and their awesome staff, it was a tech conference and one that basically had one or maybe two speakers who didn't mention SugarCRM products in a speech.  The one was often me and the other a motivational type. That might be an exaggeration but I imagine you get the point.  Historically this has been a conference of "open source: the technological differentiator" at a time when, put extremely well in a great article in Wired Magazine last August called "The Web is Dead, Long Live the Internet,"

"Openness is a wonderful thing in the nonmonetary economy of peer production. But eventually our tolerance for the delirious chaos of infinite competition finds its limits. Much as we love freedom and choice, we also love things that just work, reliably and seamlessly. And if we have to pay for what we love, well, that increasingly seems OK...."

Simply put, what the author of the article, Chris Anderson says, is that no one but developers really cares whether something is open source or proprietary. They just want something that does what they want it to.

Hard to argue the simple logic, though I'm sure that some of you die hards out there can complicate it quite well thank you.

That's why I was glad to see that this year, due to a multiplicity of circumstances and a confluence of events, for the first time in all the years I've been associated with this immensely likable company, open source was no longer the theme, but "Openness the Culture" and collaboration was.

What Happened?

The alliance with IBM happened that's what happened. Larry Agustin's recognition that SugarCRM needed to move on - that's what happened.  SugarCRM's recognition that their platform was an extensible and scalable thing that allowed them to actually aim a bit more at the enterprise as a client that's what happened.

All of these things were essential to what the clear theme at the conference was - openness leads to collaboration.

That's what made this so interesting to the 800 attendees at SugarCon 2011.

SugarCRM had a kickass year in 2010. Record revenue, sure, but even more importantly record revenue that was driven primarily by the partner channel.

I have to admit, when they went to a partner driven revenue model about 2 years ago, I had a lot of doubts that they could pull it off. Going from direct sales to channel sales is a hard thing to do.  I often walk down streets littered with the shattered hulks of companies that tried to do that.  (Okay, okay, maybe that's A little hyperbolic) But they eventually put the right folks in place and damn if they haven't actually done it.  The bulk of their revenue is now partner driven and their focus is their channel in combination with a few strategic partners.

All this - an historic network of collaborating developers, strategic partners and channel-driven revenue, suggests a dominant theme, unveiled at the conference, that clearly is driving SugarCRM's direction over the next two or three years.

What's that, you are probably asking yourself?  Don't be shy, I'll tell you if you ask.

Go ahead. Ask. I'm waiting.

Ahhhh, thanks.

The dominant theme: Openness and collaboration which is now being driven by a dominant event - the global strategic partnership with IBM.

The IBM Partnership

Let me be clear about one thing. This partnership was necessary for SugarCRM. It was necessary because their market presence had been going retro over the past 12 months. It was necessary because the applications and platform became good enough to at least start to consider the enterprise. It became necessary because SugarCRM needed it.

But I want to make something else just as clear.  IBM needed it too. Much as I really respect IBM and always respected the Lotus "Division" (really more of a company within a company) with all due respect, they have never, ever, ever been able to get the "CRM Thing" right.

But, you might be saying, what about their Siebel practice, which is one of the largest in the world? What about the global CRM practice they profess to have?  Well, all true, they have those in name but CRM is a $16 billion industry that IBM could be and should be much larger in and, yet they don't provide thought leadership, nor do they have market presence.

But they do have Lotus - which has evolved from a division providing the most misunderstood platform in history to a leader in social business platforms (in the enterprise 2.0 sense of the word) - via their Lotus Connections platform.

Additionally, IBM is clearly realizing that to not just make the social business transformation they are making, which is staggering and monumental (see my post on Lotusphere here), they need to not only execute on CRM internally but they also have to provide it to an increasingly voracious public - and not just CRM but Social CRM.

To that end they've acquired Unica, for the marketing automation side of CRM and SPSS, in part for their customer analytics capabilities. Now the partnership with Sugar.

SugarCRM is as vital to them as IBM is to SugarCRM. Make no mistake about this.  I'll say it again. SugarCRM is as important to IBM as IBM is important to SugarCRM.

It was evident at Lotusphere and once again as evident at SugarCon 2011 that this was the case.  Sean Poulley, the VP of Social Cloud Business and the architect of this very smart alliance (and a great guy BTW) was in evidence all over SugarCon with a keynote and a keynote panel (with me and Larry A.) and a very accessible presence at the analyst day before the conference and during the conference.

So, we have something important here.  For both SugarCRM/IBM and one that could become important for the industry.  But, given the nature of alliances (and acquisitions, BTW), to make either work, there has to be some cultural compatibility.  Despite the size difference of the companies, there is a dynamic cultural match as SugarCRM moves more and more to an open source culture and away from the very geeky side of open source and IBM moves more and more to a total transformation to a social business.

What's fascinating about the culture intermeshing is that it is occurring as both cultures are transitioning.  On the one hand that makes this extremely interesting. On the other this also has lots of possibilities for a serious glitch or two unless both parties are aware of the transformations going on at the other one - and are loose-limbed about it, to some extent.

SugarCon 2011 - Products, Acquisitions, A Different Company

The vibe at SugarCon 2011 was better than it has been in years past - though, to Sugar's credit, it was never a bad one.  What always amazes me is that they manage to get people to attend again and again and there is a faithful loyal community of partners, users, and developers who swear by the company and the products that is global in scope.

Which is an okay segue into the products...

If I had to universalize what I saw and heard vis a vis products, I would say, upmarket stood out .  With that statement starting you in the face, you might think that I think that the integration of SugarCRM with LotusLive is a big deal.  Its useful, but I think the alliance trumps the integration by a long shot and, honestly, doesn't excite me that much. That doesn't mean its not notable.  But they've also integrated with Cognos, giving them some BI capabilities that they have long lacked. Even more interestingly, they're integrating with Cast Iron, which, despite the somewhat vague terms of the press release, means that not only can they integrate with legacy and third party systems (clear in the press release) but, if Cast Iron's history is any guide, will be offered as an appliance too (not at all in the press release).  THAT is a big deal, especially if SugarCRM goes upmarket.

They didn't stop emphasizing their IBM alliance with that announcement either.

They've also announced that they're acquiring iExtensions, the Lotus Notes integration toolset, from iEnterprises. Given the quality of iEnterprises CRM mobile apps for not just Lotus Notes, but Siebel, NetSuite, Microsoft Dynamics and of course, SugarCRM, this is a great move. I've been an admirer of iEnterprises for a long time - years in fact - so I think this is a move that couldn't be much smarter.

One odd thing about this acquisition, Sugar not only got the Notes toolset, but the CEO, John Carini (good man)  who will become the VP of Collaboration Services for SugarCRM.  That's like acquiring a player-manager in baseball....well...sorta like that.

I would have to presume then, that a. someone else will take over the formidable remainder of iEnterprises and b. that they will continue to create their non-SugarCRM, non-Notes related products. I hope so.  They just are really good.

SugarCRM didn't stop there with smart product moves.  The went social and mobile big time:

1.     The preloaded integration into the SugarCRM platform of the basic edition of InsideView's Sales Intelligence for free with a 50% discount for SugarCRM users for the premium addition - a hugely smart move, given the quality of Umberto Milletti's product.

2.     One of their partners, Clicktools, introduced Facebook to CRM - which captures Facebook data and directly populates the SugarCRM data store.

3.     They announced integration with Google, WebEx, Citrix Online among others.

4.     They've added support for mobile OSes like Android, Blackberry, iPad (not just IOS for iPhone), and HTML5 plus offline sync.

So, what we are seeing here is that SugarCRM is preparing to align itself with IBM even more closely as the partnership begins its honeymoon.  To do that and to stay aligned with a vision that reflects the transformation to Social CRM that a company like Sugar has to recognize, they are integrating social features and mobile capabilities that are also table stakes for the enterprise.

Good moves all around.

Which Leads Me to My One Big Concern....

The one concern I have, and it's a big one, comes on the heels of a statement made that went something like this.  "We recognize the importance of social analytics )(or as Mike Fauscette calls it, socialytics), but we aren't doing it now because our customers aren't asking for it."

Oops. That's a HUGE error in judgment. There is no question that SugarCRM plays well in the midmarket - it won places in Forrester's and Gartner's heart for that.  And, I don't doubt that the current (note the clever and deliberate use of the word current here) customer base might not be asking for it.  But I also heard SugarCRM execs undeniably say that they are moving upmarket to the enterprise and, if you talk to the prospects there, rather than the existing customer base residing in the midmarket, analytics like this are now coveted highly enough and in enough demand, to be considered table stakes.  SugarCRM needs to recognize that analytics are pay to play in the enterprise world, so they need to re-examine this quickly.

But that was the only big snafu at the entire conference honestly.  The rest of it shows a dramatic return to the SCRM/CRM stage and a big new direction tied to a shiny new alliance with IBM that is based on mutual need and value, not just a little guy allying with a big guy.

The promise is great here.

Oh yeah, one last thing. Thanks for making sure the content this year was something more than a technical advertorial for SugarCRM products. It was genuinely interesting for us analyst types and, more importantly, your customers and prospects in attendance.

Good deal.

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