The open source solution is available in on-site and hosted editions—and the recently-introduced Data Center Edition allows ISPs to offer their own hosted versions of the software to their end users.

by Jeff Goldman [June 11, 2008]

SugarCRM was founded in 2004 by John Roberts, Jacob Taylor, and Clint Oram, all of whom had previously spent their careers developing proprietary enterprise CRM applications. "We started to question the whole proprietary method of writing software in secret and using software as an artificial tool to lock people into proprietary on demand and on-site services," says Roberts, now the company's CEO.

Open source, Roberts says, seemed like a much better way to go. "We saw open source gaining a lot of momentum… and we felt that the enterprise CRM industry was just as appropriate to open source as the lower layers of the stack," he says. "So we quit our jobs in 2004 and founded the Sugar open source project."

And since then, he says, things have worked out pretty well. "Today we have about 160 employees, and over 3,000 paying customers in over 30 countries," Roberts says. "We've raised over $46 million in venture capital, and the Sugar open source project has grown to one of the largest open source business application projects on the planet today—and it's continuing to grow."

Roberts says they called the company and the project Sugar in an effort to avoid what he calls the "ultra-serious" feel of most business applications. "We chose a more friendly name that I think cuts to the chase in terms of what these applications are about, which is taking care of customers and making money," he says. "'Sugar' seemed like the most appropriate word to us."

Commercial open source
The company itself, Robert says, makes its money both through support contracts and by offering hosted services. "We've always believed that the customer should make the decision to better reflect what meets their business requirements, whether it's on-site or on demand—and that's why we support both options," he says. "The software is the same either way, and you can actually move back and forth between them."

At the same time, Roberts says there are tens of thousands of installations that are simply using the open source solution—and that's fine with him. "By proving to companies that we can help them grow their revenues faster or take care of their customers better, hopefully we're earning the right to some of their professional business down the road," he says. "That's been our strategy from day one."

Chris Harrick, SugarCRM's vice president of product and corporate marketing, says the company's relationships with its resellers have been key to its continued growth. "A lot of our most active community members are actually partners out there reselling Sugar in the field," he says. "That's really helped us expand globally in a very short period of time—without opening 15 or 20 offices around the globe."

Still, Harrick says, many of those partners have faced some key challenges as hosted services become increasingly popular. "With software as a service, they were being disintermediated to some extent if they were partnering with some of the proprietary on demand vendors, because they didn't really get to touch the software. They didn't have control over tailoring the service to customer requirements," he says.

The data center edition
In response, SugarCRM last month launched Sugar DCE (Data Center Edition). "It's systems management software for managing multiple instance of SugarCRM that was developed in house to manage our own on demand environments," Harrick says. "We saw that it would give partners more control over service delivery to their customers."

Sugar DCE also allows resellers to modify the offering as needed to meet their customers' specific needs. "We see a lot of our partners customizing and adding value to Sugar by translating it, or by making a manufacturing vertical or a retail vertical," Harrick says. "With Sugar Data Center Edition, they can clone those instances and go to market much more rapidly to their customer segments."

As Roberts points out, the solution has been thoroughly tested. "We've been running it in house for over two years ourselves on our on demand operation before releasing it. The last part, this last six or eight months, has been about doing the user interface on top of it so that it's just really intuitive, but the core system architecture has been written over the last couple of years," he says.

Harrick adds that the pricing for Sugar DCE is extremely reasonable. "We're talking $5,000, $10,000, $15,000 per year for partners to use this, depending on their number of users and their number of customers," he says. "We think that the ability for them to be able to sell the on demand services is going to make them much more effective—and that's really where the revenue opportunity is."

Putting the customer in control
Still, it's not just about reseller opportunities—Harrick says the CRM software itself is very attractive for ISPs to use for their own operations. "We have about 150 partners around the globe, and I think every one of them actually uses Sugar to manage their own customer relationships," he says. "And we're announcing new partnerships with a lot of frequency."

Ultimately, though, Roberts says it's SugarCRM's unique business model that makes the company stand out. "Today, who do we really compete against?" he says. "It's Salesforce.com, Microsoft, Oracle. And we're actually taking those guys by storm, because we're just focusing on a different set of values: great software, great on-demand services, being open with what you do, and really putting the customer in control—and then betting that you can earn your keep by creating value year after year."

—End