The anti-marketing of SugarCRM

Dan Farber: SugarCRM CEO John Roberts suggests that has marketed its way to stardom with a product that's inferior to his own company's open source CRM software. Spending on marketing adds cost to products, but doesn't make them unholy.

COMMENTARY -- "Software is bought, not sold." That's the credo of John Roberts, co-founder and CEO of open source CRM software start-up SugarCRM.

Roberts asks, "Why can't the best product win, rather than who spends the most on marketing and sales?" He boasts about never having made a face-to-face sales call. "We have disruptive business model because our focus is on building a great product, not on marketing." His anti-marketing stance and talk about disruptive models sounds a bit like, well, marketing.

Roberts is inferring that has marketed its way to stardom with a product that's inferior to SugarCRM. It sounds more like a 3 for 1 marketing attempt: 1) Rationalize a lack of funds for marketing and sales, 2) tweak competitors, and 3) stimulate a viral marketing effect. Fundamentally, it's not credible. Spending on marketing adds cost to products, but doesn't make them unholy. CEO Marc Benioff won't dispute the notion that his marketing prowess helped catapult the company he founded in 1999 to stardom and a market cap of $1.4 billion. The company currently claims a user base of 214,000 subscribers among 13,300 companies. On the product quality side, just bested its competitors in an InfoWorld evaluation of four hosted enterprise CRM applications.

Robert said that in the seven months since the venture-funded SugarCRM project got underway, the company has 2,000 paying users for the commercial edition, Sugar Professional, and more than 100,000 downloads of the open source code. Rather than trumpeting the anti-marketing message, Roberts should be talking about how open source software has a compelling price/value proposition, just as Benioff came up with differentiator over the last several years with his "No Software"--referring to software-as-a-service, hosted applications--attack on the conventional software sales model.

In contrast to and other proprietary CRM software, Roberts said that SugarCRM is a completely open environment, and developers can use any tools they want. That's true, but many users--especially among the smaller companies that don't have the support staff or budget for a "proper" CRM solution--just want an inexpensive, plug-and-play solution. How about that for a marketing message?

Indeed, open source software such as Linux, Firefox, MySQL, JBoss, Apache, and are challenging the status quo. Developers can inspect code and mess with it (as long as they are compliant with the various open source license schemes). The economics of "free" software allow for lower pricing of commercial-grade software distributions. Similar to MySQL, the SugarCRM team writes most of the code, but a community of about 200 developers contributes to the open source project, Roberts said. Benioff and company have also built a developer community (Sforce) around the platform. Roberts called Sforce is a "band-aid," and that is "hiding behind APIs" and "marketing a weakness."

He has a point that is focused on extending its proprietary platform, but Sforce is based on using open standards, like Web services, to facilitate integration. But isn't SugarCRM driving the bulk of the Sugar platform development (85 percent, according to Roberts). Other companies can create distributions, but a few companies who lead the pack end up driving the development agenda. Just look at how Red Hat influences the direction of Linux distributions in the U.S.

SugarCRM is a free download, and it contains 85 percent of the code in Sugar Professional, which is $239 per user per year and uses the Mozilla Public License. The annual fee includes premium forums; updates and patches; day-time technical support by e-mail or phone; and commercially licensed Sugar extensions and templates. SugarCRM is also available as a hosted application for $39.95 (why not $40, to be transparent?) per user per month, with a minimum of three months and five users. Professional starts at $65 per user per month, and the company also offers Enterprise and Team editions.

One of the benefits of an open source stack is that you can take your data and application via a perpetual license with you if you decide to switch; with, you only get your data. In addition, SugarCRM is available with a stand-alone server appliance, starting at $4,995.

I talked to one of SugarCRM's customers, Daniel Smith, IT director at Music Mountain Water Company in Birmingham, AL. "I was just beginning to play around with LAMP applications and saw the product on SourceForge," Smith said. "I went with the Pro, on-demand version because I didn't have time--I'm a one person IT shop--to implement it myself. We had it up and running [for five users] in one day."

SugarCRM has some bigger installations, but the implicit message is simplicity and lower cost. It's not strictly an open source versus proprietary software or hosted versus on-premises battle, although that is part of the price/value equation. Many companies just want to get their work done and don't care if they have access to the code. Some companies don't want their data outside their firewalls. In the end, it's about having choices and more pricing transparency, which is difficult to obtain given the nature of software. Whether the price is $65 or $40, open source or closed source, you need to find the solution that works best for the environment rather than fixate on a single approach.

You can write to me at If you're looking for my commentaries on other IT topics, check out my blog Between the Lines.


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