SugarCRM: No sweet jokes, please, but it really is...

Well, I just finished attending SugarCRM's SugarCon 2012 as a (paid) speaker and I continue to be impressed.  Note I didn't say I am impressed. I said I continue to be impressed with SugarCRM, year after year, time after time.  I've attended probably 4 SugarCons in a row and each year they do something that surprises me, delights me and at the same makes me realize that they are here to stay.

A Bit of History

Several years ago - three to be exact, I had some real doubts about SugarCRM though I liked them - as I always had.  They had decided to move from a direct sales to a channel sales model; they were lagging a bit when it came to their outreach to the influencer community, which, like it or not, is something you have to do to get to the "next level" whatever that may be at any given time; they hadn't really refined their marketing message, so it became unclear what they wanted to do as they evolved.  They were making some progress with the integration of some social and mobile capabilities into their platform - some - but that was about it. They had gotten somewhat...lifeless.  They were also locked into small and midsized businesses as their targets, but had aspirations to go further - but no apparent plans.  Additionally, they kept emphasizing their open source roots as their key, not just "a" differentiator.

To me, then, reality was something else.  At least as I read it, Open Source was a culture and a license, not a differentiator to the larger enterprises who were more interested in what the technology could do for them, not how it was constructed or delivered. The IT departments cared because they needed to understand how to deliver the system, so, of course, they needed to know its architecture and the code behind it in some instances.  But the world was changing and business decision makers were beginning to make IT decisions and it was reaching the point that, as Gartner analyst Laura McLellan pointed out last year, CMOs will have larger IT budgets than CIOs by 2017. So Open Source as something up front as a differentiator, to me, at least, wasn't really the topic.

So I worried. Because I've been a fan of the SugarCRM platform for years, noting its incredible configurability from almost the day I "met" it, I wanted this company to succeed. I remembered nostalgically that when I was introduced to SugarCRM at the 2005 Gartner CRM conference (it was still called that back in those ancient days), there was this (now-defunct) product called Carousel CRM which was technically competing with SugarCRM which was built on the SugarCRM platform - which I thought was ironically cool.

But, here we are 3 years later, into 2012, and not only have they emerged from the transition to the new model with flying colors but also, their numbers are exceptional. Here are a few that will give you an idea of what the hell I'm talking about.  Their revenue growth quarter over quarter:

1. 58% from Q2 in 2011 to
2. 69% in Q3 2011 to
3. 92% in Q4 2011 to
4. 118% in Q1 of this year

All of this after the last quarter of 2010, when they turned cash flow positive.

And -to cap it off, they recently announced $33 million in equity and debt in a Round E financing.

Nice job, SugarCRM.

Okay, since my fears are no longer anything of consequence, I'm going to get into a look at what they are doing and talking about and what I'm thinking on that subject.  But before I get into this kind of weeds, I'm going to discuss SugarCon 2012 the conference, something that you may have noticed if you bother reading my stuff, I do every time I attend a vendor conference.  Talk about the conference, that is, not SugarCon 2012. Ha.

SugarCon 2012

Conferences are tricky things.  Each company that produces a major - for them - conference, has to take into account the mistakes of the last conference, the venue of the conference, the feedback from the attendees, the amount of money they have to spend, the different nature of the people they have to attend to, and the quality of the content being provided. They have to come up with a budget that has compromises built in and a long term perspective framing it. They have to identify what they see will be the lasting impact of the conference before it even starts.

Thing is that these conferences, as I noted in my discussion of Microsoft Convergence, leave lasting impressions.  What that means is that even if I don't remember the theme of SugarCon 2012, I'll remember whether I liked it, kind of what was exciting, who I saw and will have stories.  That will impact my impression of the company as one of their customers or prospects.

The company has to put on its best face, but one that reflects its culture well, because what happens at a conference can set standards for what someone will expect of their interactions with the company.  If the conference is dull, they are going to think the company is dull. If the conference is a bits and bytes engineering thing, they will think the company spends its life in the technology weeds. Ad infinitum, ad nauseum.

Rest easy, SugarCRM. You and your Sugas (their slightly cutesy name for their staff) did a great job in general and a great job for the analysts/influencers there - which of course, given all human self-interest, means me among them.

Before I begin I want to give a shout out to the two Kellys, Sugas, who in one capacity or another drove the event.  That would be Kelly Hanson who operated as the floor and speaker manager and saved our butts more than once and Kelly Vail, who ran the whole event - rather brilliantly I might add.  The former was omnipresent. The latter omniscient.  They made this work right down to the littlest of details.

The conference organizers took care of the event with a relaxed, always engaging, enjoyable ambiance.  That was done in several ways - the food which was very, very good; and there were always places you could sit to eat without overcrowding.  It was done by the staff paying solicitous attention to everyone - be you an influencer, a partner, a customer, a prospect, or the boyfriend of one of the staff (e.g. birthday song at dinner). It was done with relentless good cheer and no apparent sign of frustration.  Problems were jumped on and solved immediately. The parties were a bit crowded but they were notably energetic though (I'm so glad) not frenetic.

All in all, with some really well thought out processes and some quick thinking and great planning, they were able to smooth the edges of the conference where it needed smoothing and sharpen the edges where they needed sharpening.

Also HUGE kudos on this one to the senior management of SugarCRM in particular CEO Larry Augustin; CMO Nick Halsey; and CTO Clint Oram who were circulating constantly and everywhere all the time. If you're putting on a conference, don't underestimate the value of senior management among the populace. I don't see that enough at the bigger conferences or even the smaller ones. While senior management is at the conferences, their appearances are usually regimented and fully scheduled - very little organic wandering.  Not the case here.

As far as the analysts go, let me just tell you one story.

About 4 years ago, Oracle. at OpenWorld, wisely came up with the idea of making sure that the influencers had tables to write on and power strips for their laptops.  Seems simple enough right?  But up to then no one had even thought it through enough to realize that analysts, bloggers and others who are perfectly happy to live blog or tweet an event, couldn't do that if they ran their batteries all the way down.

Duh.

But this remained a persistent problem even up to and including this year.  The influencers got front row seats but front row seats without power and with bad connectivity and with putting laptops on their, ugh, laps, kind of tipped the balance to "tweeting this thing is going to be too much of a pain in the ass."

Well, here's what SugarCRM did, after listening to influencers. They had front row plush couches and chairs with power and a personalized laptop tray with a foam bottom that fit knees for each influencer.   Which, along with decent and easy access internet connectivity, made it easy to tweet and easy to write and because there was power, over a LONG time.

Smart.

I'm going to say one more thing about the conference because I thought it was really  very cool, but they made influencer baseball cards that look like baseball cards, not meme cards.   Chris Bucholtz, who you might know as a significant influencer in his own right, came up with the idea.

Awesome.

Okay, now the part that you've all been waiting for - or that I've been waiting to write at least. What is the story with SugarCRM and where are they going? And is it in the right direction?

Thinking about SugarCRM

I'm something of a home theater geek. I love great audio, great video and the environment that a full-bore media center can provide. There's a lot of sexy stuff involved in home theater too - when you are sitting on a superb leather couch that you can sink into with a great single malt in your hand, watching a HD movie with sound that kicks butt in every possible way.  Ubër cool.

But there is a lot of stuff going on under the covers that tweaks the quality of the movie you are watching and the sound that you hear.  One of the most important and always flying under the radar is the power conditioner.  The idea is that it takes the large amounts of electricity that are surging through the wiring of these complex arrays of equipment and captures and then distributes it in the way that is needed to keep the whole system running at not only maximum efficiency but it also provides the technological underpinnings of what's needed to see the best picture possible. Meaning it's the foundation for that amazing chill experience.

Why the analogy?

Because, SugarCRM is a power conditioner for companies looking to use CRM.  That is a high compliment.

Doesn't sound that exciting though, does it?

Wrong again...or is this the first time you've been wrong? Kidding.

What makes SugarCRM as good as they are is, first and foremost, they have a very good product.  I didn't tell that anecdote in the history part for no reason. This is a highly configurable, deeply customizable platform that surprises people more often than not with its completeness. I was speaking with one of the influencers at the conference and he indicated how he had done a deep dive into the platform and was surprised at all the social functionality that he found embedded in it (though, I don't think its table stakes yet in that area).  I heard this story about something or another, not always social, time and time again at the conference - 4 times to be precise. "I was surprised that it...." from a couple of partners, a customer and the aforementioned influencer.  In one sense this is excellent because the level of functionality is on par with the trends that business are adopting e.g. mobile.  On the other hand, I have to wonder why that isn't an obvious fact and why more than one person tells me that they are "surprised."  Perhaps Sugar has to speak up about the some of the details of the platform rather than just keep it general around "flexibility." Perhaps.

Additionally, while the SugarCRM platform doesn't have a beautiful interface it has a reasonably nice looking almost intuitive and easily navigable one.  Which is still a plus, because the user experience rests at the center of software failure and success.  You can have all the functionality you want but if no one knows how to find it or when they do, how to use it, then it really doesn't matter what's in it, does it?  But SugarCRM has more or less handled this, though hopefully, we'll see much more of this UX improvement in the next iterations.

The changes in their new release SugarCRM 6.5 aren't dramatic. Some tweaks on the brightness/contrast of the user interface; dependent dropdowns which are contextual dropdowns that change other dropdowns depending on which dropdowns you chose - kind of geeky smart and useful.  I could go on but that's not the point really.

What is the point is that no matter how dramatic or nondescript their releases, they remain absolutely laser focused on CRM.  That is entirely refreshing because the other significant players in the industry are either moving away from an exclusive focus or they never had an exclusive focus.  That lets them build their ecosystem around a CRM product that focuses, as a good CRM product should, on sales, marketing and customer service.  This also allows them an unusual benefit - an interesting way to market size.

They don't see their target market as small business, mid-sized businesses (an historic sweet spot for them) or the enterprise per se, but the individual user. Which, according to their CEO Larry Augustin gives them a HUGE market. I love the concept though of course, it is a bit of an artifice, because where those individual users work will determine the needs that they have - and that could be a small business, midsized business or an enterprise.  But it's still a very good way to put it, because it also helps message around the idea of "we can help you do your job better" - if SugarCRM choose to do that jobs-based messaging.

(A parenthetical aside: At the conference, in a vote of some of the influencers who were there, Larry was voted the nicest CEO in the CRM world, with some kudos to Zach Nelson at NetSuite and Louis Tetu at Coveo. But Larry was the biggest vote getter.)

Their product is developed, distributed and sold through a partner ecosystem that is now 400 VARs and 30,000 registered developers.  Because it is open source that provides the developers with source code and some support, these developers are quite actively not only improving the platform but building products that are being registered on the fairly young SugarExchange - over a hundred products at this point.  There are also over one thousand projects underway that are on SugarForge - their open source development/collaboration community.

But, everything they are doing with developers and their other partners, pales when it comes to one key partnership deal. This is the one that fits the Tom Cruise/Rene Zellweger Jerry Maguire model - "you complete me" for Sugar. For those of you who have paid no attention to all the CRM press this has gotten, that would be their relationship with IBM.

This is something that I've been thrilled about for them and for IBM since its announcement about a year and a half ago.  Its been a great match since then with the two companies in go-to-market situations, building the joint technology integrations that are needed between Lotus collaboration products like Connections and SugarCRM which means, all in all, a social business software product suite.  In fact, to fuel this relationship, SugarCRM just signed a deal with national distributer Ingram Micro that will give SugarCRM access to IBM VARs who are enabled through IM.  This allows SugarCRM and IBM to create bundles of Sugar/IBM products that IM can get to the VARs.

IBM also clearly recognizes how important SugarCRM is to them.  So much so, they announced at the conference (more inadvertently I think) and officially in a press release that, after 15 years, they have replaced all 67,000 seats of Siebel they had been  using with SugarCRM. That is a spectacular announcement for SugarCRM because of two things:

1.      It shows the depth of the commitment of IBM to the relationship and, more importantly,

2.      It shows that SugarCRM can scale to at least 67,000 seats in a single deployment, meaning they are enterprise ready.   Not a trivial matter.

Their messaging is interesting and evolutionary. It takes the continuous "open" theme and extends it to "Open Cloud" and "Open Ecosystem." That pretty much reflects what I was saying about them last year. They are transitioning from the technical open source message they have historically used as a differentiator to the broader "we are an open company in many ways."   For example, their idea of Open Cloud simply means that they can deliver SugarCRM anyway you want it.  Want it on a private cloud? Done. Via the public cloud? Done.  SugarCRM on demand? Done.  On site (as they call on premises)? Done.

They've made a big deal over the Open Cloud as a capability that lets you have your data where you want it.  It is an appropriate focus, because the biggest albatross around the cloud and SaaS has been the myth that your data was unsafe on someone else's servers.  By providing cloud deployments that allowed you to leave your data on your own servers nonetheless, this removes the mythical albatross.

However, I wouldn't trumpet it much. When salesforce.com announced DRO - the data residency option - last August at Dreamforce 2011 - which goes to the heart of the same thing - it was great and new.  Now with SAP on board with a similar thing, Oracle on the march etc.  this is just table stakes. It solves a problem that was in the mind of the beholder, not an actual technical security issue.  It was still a problem,  because the companies who were considering solutions of one kind or another thought it was, but it was a straw dog. But that straw dog has no straw bark any more technically. They have a choice. SugarCRM is just one of the players there now. Its not a huge differentiator but should be mentioned.

Look, frankly, they aren't going to achieve the explosiveness of salesforce.com or become the size of Oracle any time soon.  They aren't wired that way when it comes to sizing or how they market.  But they are consistently improving their product and they have turned the corner on their sales model, making the conversion from direct sales to channel sales complete. Not only that they have an absolutely solid management team and a vision that can be accomplished in conjunction with IBM as a strategic partner.

What do they lack?  The product lacks native analytics of any significance. They are missing some of the required social components in their applications and services - with community and social listening/analytics less than table stakes. But they are providing what customers want for the most part.  The IBM partnership is so tight the combination of SugarCRM  and IBM social components as shown by Nigel Beck in his keynote last Monday morning, provides a powerful  platform.

This is a company built for the long haul - not something that three years ago I would have said. I've always liked them and rooted for them, but now, I admire them because they have actually carried out a reasonable, practical strategy for growth and have grown in the bargain. That makes them unusual and also a short list choice for a practitioner looking for a CRM solution that they want to keep for a long while.

Sweet.