SugarCRM seeing success in shift to enterprise market

SugarCRM has essentially restructured its whole business model, shifting from an open source model with a freemium component and an SMB focus, to a clearly enterprise-focused strategy. While they have recruited new partners for that space, most of their Elite Partners are long-time partners who have made the transition with them.

Clint Oram Sugar

Clint Oram, SugarCRM’s co-founder, CTO and de facto channel chief

Cupertino CA-based SugarCRM, which started out life in 2004 as an SMB-focused open source vendor who had a CRM product, has completely reshaped its business model in the last five years. Following an initiative with IBM which began in 2011, the company shifted its focus to the enterprise market, where it has had success. Its’ Sugar Enterprise offering just saw growth of over 50 per cent year over year.

“SugarCRM is doing fantastic these days, and is growing faster than ever before,” said Clint Oram, SugarCRM’s co-founder and CTO, although he acknowledged his job description has evolved with the company.

“I’m more the co-founder these days than the CTO, and the days of me writing code are a little past,” he said. “I also run channels here at SugarCRM, and my focus today is more on working with customers and partners to grow the business.”

“Our success reflects the shift of our target customer over the last few years,” Oram said. “When we started originally, we were very much an open source, ‘try before you buy,’ model, although we did have subscription billing, which of course is commonplace now but was still a new concept in 2004.” They had a free version of their product alongside the paid version.

Experience demonstrated that this strategy had a major flaw in the CRM market.

“The problem with the freemium model is that it attracted customers who are looking for free,” Oram said. “As a technologist, I believe you believe that you build the best technology through open source, but as a businessman, it is hard to be really successful through a freemium model.”

The evolution of the company really began when IBM came to them in 2011 and became a customer — ironically finding them through open source.

“That really started our shift from an open source company that did CRM, to a CRM company that did open source,  to a CRM company period,” Oram said. “We moved from selling to smaller businesses looking for a freemium onramp, to enterprises looking for quality solutions.” The most recent product version had no free open source version

Oram stressed that the solution itself is enterprise grade, and that they are one of five vendors in the upper right section of Gartner’s magic quadrant upper right. He said the success of their value proposition against these larger competitors — Salesforce, Microsoft, Oracle and SAP — is whether the customer is looking for a best of breed solution or compatibility with a larger solutions platform.

“All these other vendors are really platform vendors, which may not give the best solution for driving a particular company’s CRM strategy,” he said. “The platform approach is fine for things like accounting, but CRM typically looks for the best specific solution.”

Oram also thinks that SugarCRM delivers a better customer experience than some competitors.

“It’s amazing to me how in CRM there is a legacy of arrogant vendors who treat their customers as ATM machines rather than partners,” he said. “We are a better partner.”

Today, about two-thirds of SugarCRM’s customers purchase through the SaaS model. Of the third that don’t, most are managed in partner-hosted clouds. There are a small number of on-prem locations, with very large customers who want to do everything behind the firewall.

SugarCRM has also transformed its own partner channel as it has moved more upmarket. The channel does about two thirds of their business. They have approximately 230 partners globally, 60 of whom are in North America, and with the strongest growth in numbers recently being in Latin America.

“I have been charged with altering the partner ecosystem to address the enterprise, and we have added 45 partners in the last half-year,” Oram said. “However, while we have lost some SMB-focused partners who simply resold us, our core group of top performing partners have been with us 10 plus years and have evolved with us. Our 23 Elite partners are not a typical reseller channel, selling seats to cookie cutter customers. They have always been solution providers with an integrated front office solutions suite, and embedded themselves deeply with customers.”

One of their Elite Partners is Canadian. Montreal-based Solutions Metrix is a focused CRM specialist.

Oram said they have also been adjusting their channel program in accordance with the enterprise push.

“We have a channel program based on recurring revenue, which has up to 30 per cent margin on renewal, which we increased last year, and 40 per cent on first acquisition of a customer.”