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November 25, 2010

‘Europe is more interested in open source’: Q&A with Larry Augustin, SugarCRM CEO

CBR talks to the boss of open source CRM vendor SugarCRM about cloud, competitors and why Europe is a better market for that business model


Let’s start with an overview of SugarCRM.
The company was founded in 2004 with a team of three people, all with lots of CRM experience. They saw an opportunity to do CRM in a different way – with open source and we’re now the leading open source CRM software company. We have over 700,000 end users, including pay and free users. My understanding is that has around two million, which I think puts a bit of perspective on it, especially for a company that is relatively young compared to the likes of and Siebel.

In terms of commercial growth we’ve done very well as well. In Q3 we grew 57% over the same quarter last year. We’ve been growing north of 50% for four quarters now.

Are you profitable?
We’re private so we don’t disclose the absolute numbers. We’re very close to being profitable, we’ve been cash flow positive for the last two months and expect that to continue. We’ve raised just over $46m in VC. We have over 6,000 paying customers. We’re very strong in Europe, and I think Europe aligns very well to us as a business. In the last six months we have grown from three people in Europe to almost 20.

Why is the business so strong here?
Europe has a better affinity for open source, it’s more interested in it than the US so there is a natural pull to us. I don’t think we get quite the same level of acceptance of the open source business model in the US as we do in Europe, it’s very widely accepted in Europe. You often see mandates where an open source solution must be considered. That works for us well.

Why do you think that’s not the case in the States?
That’s a broader question about the attitude toward open source in the US compared to Europe. I think Europe is more mature in its open source attitude; they see it as a way to help gain control. They can take the software in a particular direction that they choose if they need to.

That’s more important to companies in Europe than the US because of history, politics and it’s also related to the software industry. For example, many of the big software vendors are US-based companies and if you’re in the US you’re likely to buy from a US firm. In Europe you’re likely to buy from a company in another country. There’s more of a desire to say, "can I bring that local?" and open source lets people think they’re doing that. We have a local feel in terms of how we deliver the product and how customers control it.

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How does that delivery model look?
We enable our resellers to host the product locally for their customers. We’re a native web-based application; to the end user we look like a SaaS offering, regardless of how or where the software is actually running.

You mentioned you have 6,000 paying customers. What’s the ratio between paying and not?
It’s about 1 in 10 that pay. I think that’s a pretty good ratio. Most that have a free and paid offering tend to run at less than that ratio. If you’re a big sales organisation you want to be on the paying version of the product, you want the support.

What are the big buzzes you’re seeing in CRM at the moment from your customers?
Social CRM is the big one. For those on older systems, ones that weren’t built with the Internet in mind, the question they are asking is, "how do I reach out to the broader world through the Internet?".

We have worked very hard to be an Internet-connected CRM option. We have integration with LinkedIn for example, we have the notion of status updates and feeds within the product. We have a generic capability to embed a frame that can create views to Facebook, Twitter, LinkedIn or any other social media service.

Let’s talk about your competitors – the likes of Sage, – what separates you from them?
Well, let’s start with Sage. I think, frankly, we just have a better product. We have a great feature set, we’re easy to customise and extend and are deliverable via a SaaS model or on-premise. I think the Sage products are a little dated, they’ve only just started to figure out how to deliver a web-based SaaS product, they’ve just stuck their toe in the water.

From a product standpoint we’re a lot more like, they’re big on the social side. They’re definitely a SaaS company whereas I wouldn’t put Sage in that category. Where we differ from is that we do allow the customer to run it on their own cloud infrastructure, on-premise. As a result of that we have flexibility of deployment model and service level that can never deliver. also began in the days when people were uncomfortable with web-based applications. As a result they did their best to look like a 1990’s desktop application. They wanted to eliminate the sense that they were in the web. We’ve gone for a different type of user. We want our users to know that we’re a web-based application, they are are comfortable with the web. So we do our best to look like a Web 2.0 app.

Did you see the recent war of words between Oracle and over what cloud actually is? What did you make of it?
That’s really interesting. I don’t think of as cloud computing. It’s odd; on one side they are a SaaS provider of a particular app and on the other hand they want to be an Internet service provider selling infrastructure on the Internet. I don’t know that those two are compatible. They’re not really good at being an infrastructure provider, although they push that quite heavily. I’m not sure they get or understand cloud computing. Oracle is going to deliver private cloud infrastructure and I think that will become more common.

With all the consolidation in the IT industry do you think independent CRM vendors will remain so or will they all be snapped up by larger enterprise application firms?
CRM itself is a very large market segment and I think – and shows this – we can grow to a $1bn plus company.

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