Murdok chats with SugarCRM CEO John Roberts about customer relationship management software, two of the biggest names in open source, and the shockingly simple reason why SugarCRM is wired, Salesforce.com is tired, and Siebel has expired.
By David Utter. Customer relationship management, known best as CRM in the acronym-filled world of business, describes a way of organizing information about a company’s knowledge of a given customer. People working in sales probably use CRM the most, as they seek to manage a customer relationship to a profitable state.
The CRM industry has went through three phases. First, there were client/server applications, a space where Siebel got its start. But client/server apps demand a level of support from an enterprise, and frequently require in-house staff to sustain the model.
As more businesses, particularly small and medium sized ones, began to find a need for CRM, there was not a need to bring it in-house. A hosted application, like Salesforce.com, made more sense to these firms.
Now the market may be tipping back toward the in-house model, but not with a product built on a proprietary platform. Open source, long in the news associated with Linux, drives the development of a broad swath of software products. Some of those products reside in the CRM space.
And one of those CRM products is called Sugar.
For John Roberts and his co-founders Cliff Oram and Jacob Taylor, many years of CRM development in Silicon Valley prepared them to break away from their firms and throw up a shingle in front of a Cupertino office.
They would build the next great CRM application. “We wanted to build more features and make the product faster,” said Mr. Roberts. And so, they started to code.
“We thought we were going to write a J2EE app,” said Mr. Roberts. But they soon saw the potential held by a different technology; that would be the web scripting language PHP. “We wanted an environment and a framework that was able to generate superfast user interfaces.”
J2EE fell by the wayside, burning away like snow crystals at sunrise, and PHP became the new standard. That change received a boost as the Sugar crew became chummy with some developers new to the Valley. They arrived from Israel to form Zend Technologies, with two PHP architects on board along with a gentleman named Doron Gerstel.
Sugar soon began using Zend’s PHP IDEs to build their application. Bits of code became applications, the applications became a suite, and Sugar was slowly becoming a desired download from SourceForge.net.
As the project began to grow in capability and scope, more people in the open source community began to recognize Sugar as a top open source project. One person who noticed Sugar already had a significant reputation in open source: Larry Augustin.
Mr. Roberts said they had hoped to get Mr. Augustin to be a member of their board of directors; that proved an easy task, as Mr. Augustin took steps to ensure he could indeed accept that invitation. Mr. Gerstel did likewise, providing the nascent firm with access to a couple of remarkable members of the open source field.
“Having Larry and Doron on the board has worked out really well,” said Mr. Roberts, who likens board meetings to participating in a think tank. It sounds like a very enviable think tank.
Sugar has been built as an enterprise capable CRM application. While users of the open source SugarCRM will find it supports 5-20 users very well, enterprises of 500 users and upward will find the features of the Professional version very desirable.
Mr. Roberts cites successes Sugar has had in migrating customers from competing offerings by Salesforce.com. While he acknowledges that product was great for a while, he also notes its limitations as it has aged and remains locked in to a proprietary API.
Products like Salesforce.com and Siebel have become bloated with features that few users actually use. Sugar brings a more focused, more robust product to market. A couple of hundred customers have went with Sugar’s Professional version, and Mr. Roberts sounds like someone who expects that number to grow.
That belief parallels one held by other entrepreneurs who have spoken to Murdok, at length and with great passion about their projects. The competition has become stifled. P&L statements and financials show those companies spending 60 to 70 percent or more of revenues on sales and marketing.
“Why can’t you spend that money on engineering?” Mr. Roberts asks.
Why, indeed. How can the Siebels of the world endure when the vast majority of their revenue stream serves only to try and seine for new customers out of the economy?
Should we read more into Siebel’s aggressive pricing of a hosted CRM model, as it is faced with small 5-20 person firms possibly opting to go Sugar’s open source route instead? And can Sugar continue to pull Salesforce.com clients into its fold?
The market will decide just how much it wants to sweeten its CRM capabilities with Sugar over time.
David Utter is a staff writer for Murdok covering technology and business. Email him here.
