Previously on The CRM Watchlist…
Monday, you got a look at CRMnext, Infor and NetSuite. Today? SAP and SugarCRM. These two are perennial Watchlist winners because they are hardcore, well established players in the CRM world who have the corporate chops to sustain an impact in the industry and in the marketplace. If you're a hater, you'll hate that I just said that, but its incontrovertible truth - at least for now. Of course, nothing is inevitable, but we're going to take a peek at why SAP and SugarCRM are, for at least right now, winners once again.
SAP wins the Watchlist year after year. Year after year, they build on their CRM products, they surprise with innovations. They make relatively prudent (though expensive) acquisitions, that, even when they seem to be over the top, (Successfactors) manage to work out pretty well.
With 2013 over, a look back sees not just a repeat of this pattern, but some new levels of improvement too. Let’s look at what they’ve done.
- Build on CRM product and surprise with innovations – They have the best field service application I’ve ever seen – especially for the field service technician. Aside from the standard scheduling/routing apps, this application has a visualization engine that lets you break out a SKU#-tagged part and look at it in high definition 3D on a mobile device and click through on the part to a detailed explanation of that part – and even, a part ordering. Innovative and useful. Ever see it? Or even hear about it? Stay tuned. On the bigger stage, they’ve managed to migrate their CRM applications to HANA, their in-memory platform (more later on that) which expands its power by magnitudes.
- Prudent (though expensive) acquisitions – The acquisition of ecommerce platform provider Hybris was a genuinely great move on the part of SAP. This not only makes them competitive with Oracle (ATG acquisition) but at the same time a. gives them the ERP version of CRM (see NetSuite order management and ecommerce definition) and add to their overall customer engagement portfolio. (See below)
- SAP Jam – Led by superstar industry thought leader and SVP Sameer Patel, SAP’s collaboration in the cloud offering competes with anything in the market e.g. Lotus Connections and all others. It is firmly on an integration path with all customer facing applications, putting SAP in a position to be squarely in the universe of digital business transformation. This is a long way from SAP’s former collaboration product – Streamworks – which, pardon my verbiage –was a piece of…crap. There is also a vision associated with the Jam work that gives SAP a potential leg up on the competition – if the vision isn’t derailed – always a question at SAP.
- Revamp of Interfaces – SAP took note. They saw what Infor was doing. They understand one of the historic issues that ERP, Supply Chain, analytics and to a lesser extent, CRM applications had was look and feel. In fact, one historic note in reference to this. Prior to 2007, despite SAP claims of a lot of the CRM market – a lion’s share of the market in fact – SAP CRM was barely an application and uglier than sin itself. But under the guidance of Bob Stutz and the development led by Jujhar Singh (now both at Microsoft), SAP CRM 2007 was the first true CRM suite that SAP ever had. I remember an extensive discussion among analysts and SAP itself about the clean white interface, which was described as “Google-like.” It was entirely uncharacteristic at the time, of SAP and was thus all the more notable. The effort that SAP is making with what they are calling Fiori, which is a complete revamp of their user interfaces to something more usable and beautiful and Lumira, which is a revamp of their analytics presentation so that it is understandable more intuitively is something that not only dwarfs the SAP CRM 2007 initial interface refresh, but is far bigger in scope and more dramatic in effect.
- Messaging alignment with market – To be clear, this is both strictly concerned with the CRM messaging alignment and in the context of the broader ongoing messaging framework and message change that is being architected by Chief Marketing Officer Jonathan Becher (more on that later). About 3 years ago, the SAP message began to shift from a hard core product focused feature function CRM message to one that was rooted in customer experience. At the time a book came out, authored by Volker Hildebrand and Vinay Ayer and Reza Soudegar with strong support from then SAP CRM leader Jujhar Singh, and called The Customer Experience Edge, which was a pretty decent book that focused on customer experience. But as those of you who read my series last September on Diginomica might have noticed, I made it clear that there isn’t and never was a customer experience “market.” A technology company with a focus on that, since its identified with its technology, not its conceptual framework, falls into an uncomfortable place if it is messaging around something that really isn’t how the market opportunity is shaped. But there is an emerging customer engagement market – though one that is ill defined and what is refreshing is to see the SAP CRM messaging emerging with both feet on the ground around customer engagement. They are finally getting their act together on the messaging after years of continuous transition – a harbinger of good things.
But, like Infor, SAP didn’t win an Elite Award? Why not? They have the revenue and the stability and a culture, while it has its flaws, still cherishes innovation. So what is it that on the one hand, makes them win year after year and on the other holds them back from an Elite status?
What they have to do
- Get a sustained CRM leadership in place – There is an irony to this statement. SAP’s CRM group actually has a long time, highly experienced, highly regarded, pair of leaders who are thoroughly attuned to and aligned with the CRM market – that would be a pair of their VPs, Volker Hildebrand and Jamie Anderson. Yet, SAP has had a revolving door of SVPs and Presidents and others who are placed at the head of the practice, who, because of their own concerns or internal politics or other unfathomable reasons, either leave or are pushed out of the leadership (the latter most often is the case). This has set back SAP’s CRM practice more than once. My suggestion – give it over to the duo who knows it best – Volker and Jamie, stabilize the leadership and get what can be an excellent show on the road.
- Stop over-relying on HANA messaging – I’m aware that I’m being sacrilegious but it’s time to deemphasize the HANA messaging and treat it for what it is – an integral part of an enterprise software and services offering. HANA, HANA, HANA is a consistent repeat SAP message – I think because they are proud of what they have with HANA – and they should be. HANA is apparently responsible according to recent numbers for about $1 billion in revenue to SAP – a fast mover in the 18 months or so it’s been emphasized. So there is value there. But it is NOT what enables the outcomes that business people are looking for. It enables the enablers of the outcomes – the software and services, which support the results that business people are looking for. Put it into perspective and in the CRM practice area – focus on engagement – not HANA.
- Concentrate on two great strengths – There are two areas where SAP are champions without a doubt. Vertical industries and analytics. I wanted to say undisputed champions but I knew that someone – many people probably – would dispute me – which then makes them no longer undisputed – so I didn’t. So lets say, SAP is world class in this two areas. They have comprehensive vertical maps in 24 industries – the most recent being sports. I would venture to say that since Jonathan Becher said that sports was their first new vertical in years, that some of the process maps need refreshing, but SAP as a company is one of those companies that just nails industry processes so that they truly can at least operationally understand the verticals they’ve chosen to be in. On the analytics side, since the acquisition of Business Objects in 2007 and the alliance with Netbase in 2011, they’ve managed to build what might be one of the great analytics capabilities (of course accelerated by HANA.J) made available to a business enterprise. With their capabilities, they can bite off a big chunk of the space and with their new customer engagement analytics, (though I still have to see them in action so I don’t know if they are any good) they have a huge opportunity. For example, to combine both areas that I’m suggesting they concentrate on – in sports, they will never own the CRM side of it – Microsoft has too dominant a foothold in that domain; but they could own the analytics side, which is currently wide open. Yet, even with a sports vertical team, they are moving so slowly that it is puzzling. But regardless of that, their value proposition for vertical solutions and analytics is superb. They need to move on it and start the ball rolling since at the moment, the ball is only on the court, and not their court.
- Step up the analyst relations program – In the past, SAP had what was easily one of the best analyst programs in the business. To be fair, when it comes to Sapphire, they still remain almost the ne plus ultra in how they deal with influencers. But, beyond Sapphire, they are doing very little. Roughly two years ago, they (apparently) decided to significantly reduce their investment in the analyst relations/influencer relations area and it has shown with diminishing deep ties to the analyst community beyond the typically formal stuff that all companies do. For example, the Business Influencers program which seems to be SAP code for independent influencers has been reduced to the remarkable Malcolm Kimberlin, holding the fort on his own, with very few to no resources. Luckily for SAP, Malcolm is held in extremely high regard by the independents so the relationships have been sustained positively. But there is only so much a single person with no infrastructure can do in the long run. SAP should take an example from its own efforts at Sapphire and generally replicate the idea for AR/IR work. They’d be a lot better off than they will be in a year or two if they do.
I have little doubt that, barring SAP tripping on its own feet (which could happen), they will be a Watchlist winner of some sort for years to come. But their challenge is to be more than that and while not more than that this year, they won nonetheless, which makes them a serious impact player with some real upside.
What makes SugarCRM almost unique in the market is that they are a “pure play” – a company that is dedicated to only CRM. For the last decade this company, led for the bulk of it by the ubersmart SugarCRM investor, CEO Larry Augustin and superb technologist and co-founder of SugarCRM CTO Clint Oram, they’ve managed to take what started out as an open source CRM application, evolve it to an open source CRM platform which was so good even in its early incarnations companies who competed with the SugarCRM applications such as Carousel CRM were actually built on the SugarCRM platform!
But the evolution didn’t stop there. By focusing around open source before most companies offered any open source components, they differentiated themselves in the marketplace and simultaneously built a committed community of 30,000 volunteer developers who were working on the product or related products in what was (is) called SugarForge.
But smartly, SugarCRM understood that open source over the years was less and less of a differentiator and after a while wasn’t really much of a consideration for most companies. Their prospects, as they moved from small business targets to the middle of the mid-market targets, were more concerned with what technology they could get from SugarCRM that would enable personalized outcomes for their users. So SugarCRM deemphasized the open source message – currently, it’s non-existent – and focused on the development of their platform so that it could be highly customizable, agile – exceptionally flexible. This culminated in late 2013 with the release of SugarCRM 7.0 – their best platform to date – with customization available down to the singular object.
But in late 2011 something occurred that dramatically accelerated SugarCRM’s evolution as a company even as they continued to consistently evolve their technology. IBM chose them as the go to strategic partner when it came to CRM. What made this a uniquely good alliance is that IBM needed SugarCRM as much as SugarCRM needed them. IBM didn’t really have a CRM portfolio to speak of. They had components of one – Unica, SPSS etc. They had (at that time) a 68,000 seat implementation of Siebel and IBM Global Services seemed to have a Siebel practice (I’m never sure with them about what they are doing though they won the Watchlist this year in the Consulting/SI “division”), but there was nothing coherent at all that could put them competitively up against the players like Accenture who were killing it in the CRM marketplace.
SugarCRM changed all that for IBM. What made this interesting is that it coincided and also was a driving force in SugarCRM’s desire to move upmarket from what was (and still is) their sweet spot, the middle of the midmarket to the larger enterprises. But they had some issues that they had to resolve. First, there was some question about their scalability. Second, their partner network – which was in the form of a traditional channel wasn’t really equipped to sell to the enterprise – especially the U.S. partners.
Scalability was resolved as an issue when the 2012 announced, 2013 completed with the announcement that SugarCRM would replace over 68,000 seats of Siebel CRM at IBM. By mid-2013, they had done so with very few glitches. Scalability? Check.
The partner network was a trickier subject since they had moved in 2009 from a direct selling model to a partner sales model. The bulk of SugarCRM sales were partner-driven – and into the midmarket. The problem was that SugarCRM needed at least in their view at that time (and mine to be honest) partners who knew how to sell to the enterprise. Selling to the enterprise is a different animal than selling to the midmarket. But the sweet spot was still the middle of the midmarket that the current partner network was selling to. So how did you recruit enterprise partners without getting the other partners upset? The answer was, you didn’t. The partners got upset and at times rather openly. So SugarCRM had to begin to transform the model again to both assuage the uncertainty in the channel and at the same time be prepared with the skills to sell into the enterprise.
While they have a comprehensive program with 300 channel partners responsible for 70% of their quarterly revenue, the program remains a bit uncertain as the changes continue. However, that said, they are settling in a great deal now and clarifying their sales model to handle both the sweet spot midmarket and the larger enterprise market. So mostly Check.
The real strength of SugarCRM lies in its platform. I’m not here to discuss the details of the most recent iteration Sugar 7.0 but suffice to say it may be one of the most comprehensive and flexible CRM platforms in the market. It is customizable down to the object and at the same time has as an application all the basic functions you need for CRM deployments especially the sales and marketing tools. To deal with the customer service component, not their strong suit, they have integrations with Zendesk, Verint’s KANA, and Get Satisfaction among others.
What adds to the power of their platform is their messaging. They are focused around a theme of “CRM for one” – in effect. It is “putting the I in CRM” (they actually what they are presenting iCRM which is both a bit confusing, isn’t it Apple users, and a bit too cutely pat). But the concept is clear. CRM systems are used by people. Each person has a different outcome they are looking for. This employee user (it is a company centric message actually) needs to have a system that can be personalized to them so that the customer-facing work that they do is supported and enabled by that system. SugarCRM 7.0 by being so customizable is that system. The message and the product are extraordinarily well aligned.
What a lot of analysts I speak with are hearing is that SugarCRM is increasingly mentioned as a player in deals in the mid-market and even now at the enterprise. Good for them.
But of course, like any company, they still have ground to cover to have an optimal impact in 2014 and beyond.
What they have to do
- Marketing needs to be seriously escalated despite the good messaging – While I like the messaging (with the caveat around iCRM, which I am not a fan of) around the one user approach because of its alignment with the product platform, they desperately need to ramp up their marketing efforts. Since Nick Halsey and they parted company two years ago, their marketing fell flat on its face. There was some improvement over the past six months but not enough to give SugarCRM the market reach it could have. Their listing in the Watchlist of press visibility over the release of Sugar 7.0 was not all that impressive and could have been far more extensive, especially by comparison to other players of like size and scope in their Watchlist submission.
- Pick up the thought leadership pace – Martin Schneider, Sugar’s Chief Evangelist, is a thought leader in his own right. He is one of the best people to drive content at SugarCRM. Let him do that. At the moment, there is a trickle coming out of SugarCRM which is in part a waste of Martin’s prodigious talents, but more importantly, something SugarCRM needs to do to continue on the roll it’s been on for two years. They are pre-IPO it seems. Mindshare is going to be important as those who impact a future public stock price begin to take a serious look at the company as well as its future customers. There is some pre-IPO buzz (Sugar’s words) and that is a good thing. But time to turn buzz into something more substantial. It’s not a matter of starting with SugarCRM; they are churning out some content. But the pace has to increase. Bring back “CRM Outsiders,” which was perhaps the first CRM vendor blog that had thought leadership level credibility.
- Formalize an analyst relations program – Martin, being a former analyst at The 451 Group, knows the analyst world and the analysts. But especially in a pre-IPO phase, their inputs are going to be more important than ever. Don’t make the mistake that another CRM Watchlist winner made and go into a heads down ignoring of analysts. There’s no evidence of that occurring but one never knows what this phase will bring. SugarCRM has a very good relationship with a substantial group of analysts and treat them with respect and get the input they are looking for. Their annual shindig, SugarCon, has a analyst session or two that for the most part has been effective. But it’s time to formalize a program with someone fully engaged and responsible for it. They have reached that level.
- More emphasis on their platform quality – Don’t get me wrong. I love their CRM for one messaging but unlike SAP who has to dial back the HANA messaging, SugarCRM needs to escalate the platform awareness too. They have a kickass platform that technologically is among the most solid and advanced out there with not a lot of waste in it. It is a product that is built on all contemporary standards. Talk about it more. Build the case study library with customer stories about the uses of the platform. It’s a great story. Tell it.
SugarCRM is one of those companies that has, especially in the last 3 years or so, become an increasing part of the industry’s consciousness. It has an impact beyond its size, but its size is increasing too. They are making a bet with their CRM for one approach but it’s a good bet and one that opens up a market to much bigger opportunity for them. They have to juggle all this with the IBM side enterprise efforts they are making and are interested in. Can they do it in 2014 and beyond? They won the Watchlist again this year didn’t they?
Okay, that’s it for the Suites. Winners all.
Next up: The Customer Engagement Quartet: Medallia, Moxie, Thunderhead, Totango. All different instruments.