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SugarCRM's new CEO on open source CRM and cloud computing

Open source luminary Larry Augustin -- the new CEO at SugarCRM while the company looks for a permanent replacement for John Roberts -- discusses the CRM market and cloud computing.

Nearly three months ago, John Roberts, one of the founders of SugarCRM, a commercial open source CRM vendor, stepped down as CEO. Larry Augustin, a former venture capitalist and one of the driving forces behind while he was chairman of VA Software, stepped in to replace him. sat down with Augustin to discuss his plans while he serves as interim CEO and to get his perspective (as a longtime open source evangelist) on the CRM market. What are your goals in this interim period as SugarCRM's CEO?

Larry Augustin
Larry Augustin, SugarCRM CEO

Larry Augustin: Increase our focus on our customers, continue to support the very strong developer and open source community and continue to drive the business along those directions. I think we've got a great customer base here. We have a product that people love. I think that's witnessed by the developer, open source traction we have. We're going to continue to leverage that.

We're also going to continue to develop our strategy for the cloud. I think one of the things that's interesting about SugarCRM -- and I don't think people always get this -- Sugar is a Web-based product that you can run on a server locally at the customer, or it can be run by a hosting provider, or a VAR in the channel, or it can be hosted by our own data centers back at Sugar. Most of the industry is used to this notion that you have an application that sits on the desktop or else you've got an application that's out there as a SaaS provider on one multi-tenant instance.

At Sugar, we're something in between that. We have a Web-based app that can run maybe in the cloud, but the cloud here can be in the customer's data center, it can be a third-party cloud or it can be our own data center at Sugar, and that kind of flexibility is a big differentiator and something we're going to focus on.

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Get tips and best practices for implementing open source CRM Are you seeing some appetite for customers running applications in their own private cloud or on a provider like Amazon? How does that break down in your customer base?

Augustin: Yes, very significantly. Something over two-thirds of our customer base run SugarCRM either in a hosting provider or on their own systems. In fact, we recently announced a version of the community edition available as an Amazon machine image. I think you get some sense of where we're going with some of this, which is to make it easy for people to deploy and use SugarCRM in whatever environment makes sense to them.

We have customers like Athena Health that moved from SaaS to on-premise in their own cloud because of the additional integration flexibility we can give them. Does open source lend itself to cloud computing?

Augustin: It's a great fit. One of the great advantages to open source is you have access to the code.

Most people don't modify the code -- but having access to it gives them the ability to create integrations and understand what's happening at a level you don't have if it's a SaaS-only model or a proprietary closed-source system you're running locally. So that plays very well into the open source model.

My friend Martin Mikos, the CEO at MySQL, had a great analogy. Having the source code is like having the airbag in the car. You want it there and it's there if you need it, but you're not sure if you ever really want to have to use it. There's been a lot more attention paid these days to maintenance and support, even by customers that use proprietary enterprise software. Has that affected you at all?

Augustin: I think the industry is moving to a model where the customers realize that the value in software is not in that first acquisition of the software but in the ongoing maintenance and support and relationship with the vendor. A number of companies have done this well, and a number have not. It's not the initial acquisition of the software where the cost is, it's in the ongoing maintenance and support. Thus we have this subscription model where the customer pays annually for that support and those services along the lines of what you traditionally got in the software world as maintenance.

What I like about that model is that customers get ongoing value for ongoing maintenance and support. In the open source world, if you're not delivering that value as a vendor, the customer has the ability to go elsewhere. That creates a very good balance between the customer and the vendor of that software.

I'd like to use Microsoft as a contrary example. If you look at what Microsoft does with Windows: They have this model that was the right business model for the '80s, but the world of software has changed. Much of the software has become commoditized. What's important is not the selling of new software but maintenance and continued support of what people have. Microsoft with Windows has this business model where they require people to buy a new version every four to five years. They don't make money unless someone comes along and buys a new version of Windows.

People don't necessarily want a new version. What they want is the continuing maintenance and support of what they have. We've seen this now with Vista and Windows 7. Microsoft sells the new version, but on the desktop they're giving away Microsoft updates. The open source model would reverse that. They say what you need to do is give away the operating system up front and charge for the ongoing maintenance and support. I'm glad you brought that up. You're announcing that SugarCRM Community Edition is going up on the Microsoft Web platform. Can you talk about that and how the open source community views that step?

Augustin: Microsoft has always been a strong platform in the open source community. Most people find it kind of odd when they look at it at first, but what you have to realize [is that] Microsoft runs a lot of systems out there.

At Sugar CRM, a significant portion -- I'd say about half the business -- is on Windows as well, so it is a significant platform. Microsoft recognizes that open source in general is an important part of their software vendor ecosystem for applications. They've put together an application installer platform, and we are part of that program, so people that are now running on Microsoft OSes can easily install applications like Sugar CRM via the Microsoft installer for open source.

I think it's a great fit for the technology and, as I said, we have a significant amount of usage on that platform. It makes a lot of sense. You certainly have a long history in the world of open source. What's your take on the CRM market since you've jumped into it in the past two and a half months?

Augustin: I think you've got a number of old-line vendors with technology that is probably not up to date with the Web and the leading edge of what's going on with Internet applications. You've got some older vendors -- the Oracle Siebel solutions of the world -- that I sort of think of as big heavyweight software in large installations in the enterprise that … has some interesting applications. They would like to move down market, but because of where those applications have come from, it's very difficult.

This is a theme open source has pursued well, which is the notion that applications that were once the purview of just the Fortune 1000 companies are being recreated in a lightweight, easier-to-use, less expensive framework and made available to a broad mass of small and medium businesses. I really feel Sugar is doing that in the CRM space.

At the same time, on the other end of that spectrum of the market are SaaS vendors, this pure hosted SaaS model like; and they're also, I think, trying to bring CRM down to a broader market. I think there are a lot of similarities between SaaS and open source in that regard. I think the difference is [that] a broad chunk of the market wants the flexibility that they can't get out of SaaS. At SugarCRM, we can sort of fill that need in the market. We can provide the customers the flexibility they want via the open source application and provide them with a fast, lightweight, easy-to-use product and let them deploy that in the mode that they like, and really bring CRM to a broad range of people to whom it was not accessible before.

To hear the entire interview with Larry Augustin, including a bonus material with his take on VMware's acquisition of SpringSource, download or listen to the audio file.

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