VENDOR WATCH
Poised to Pounce on IPO: Q&A With SugarCRM CEO John Roberts

Around the time when Software as a Service (SaaS) was pre-empting the on-premise vendors, SugarCRM burst onto the CRM scene with its own disruptive business mode: open source for CRM.

The build-it-yourself model wasn't for everybody, of course -- or so many thought at the time. As SugarCRM continues to refine its code and product lineup, it is attracting more and more customers that once would have opted for a packaged or SaaS product.

Now SugarCRM is waiting for the financial system to right itself so that it can enter the next stage of its corporate development: going public. CRM Buyer spoke with CEO John Roberts about its plans.

CRM Buyer: How is SugarCRM weathering the economic downturn?

John Roberts: We are feeling bullish. We had a strong Q1 -- a record growth quarter for us, and in spite of the economy, our business is strong, healthy and growing. We were concerned in Q3 and Q4 and watching for some kind of affect. So Q1 was an interesting test. Right now I am feeling we will be that one in 10 or two in 10 companies that grows in recessions.

CRM: What are some of the cost-cutting measures you've taken?

JR: We haven't taken that many. We are always optimizing the business -- we have done that from day one. But we have not done anything in particular cost-cutting-wise -- in fact, we are doing the opposite. We are investing heavily in our Europe and Asia headquarters in Munich and Shanghai, for instance.

CRM: How can your products help your customers' bottom lines in the near term?

JR: We live in an environment where CRM systems are overpriced. They are overpriced combined with a lack of flexibility. So for us, as the premier open source CRM vendor, we provide the best price and most flexibility. Our application takes costs out of the business and gives a competitive advantage; it doesn't [push] customers into one-size-fits-all.

CRM: What are some of the bright spots for your company right now?

JR: Over the last four years we have built a global network that we are continuing to expand. That is paying off for us now, as we are seeing a huge adoption of our on-demand systems.

CRM: How will your company look a year from now?

JR: This economic crisis has been similar to the test that the Treasury Department is giving to banks: Vendors are asking themselves whether they really have a revenue stream from customers that like you and support you. I think we will be bigger and stronger, not just despite of but also because of the crash.

CRM: There was talk of SugarCRM going public at one point. Are you still planning that?

JR: I would like to see the IPO market come back to life at some point. But yes, we are still planning for an IPO. Actually, it has been a goal from day one. But it is one thing to have a goal like that but realize you have to start off with venture capital and so on. It is something else to realize you have the financial foundation to become a public company within your grasp. That is usually a stage that takes years and years to get to. It is a big validation for us.

CRM: I think you will be one of the few open source companies to go public.

JR: Yes I think you are right. Outside of Red Hat (NYSE: RHT), most open source companies wind up being acquired. An IPO is also good news for the CRM industry, which has had about 20 IPOs in the last 20 years. We represent the latest generation.

CRM: You talked about expanding overseas. Are you stepping up hiring as well?

JR: Yes, but I can't give a specific headcount. We are building on the sales team in both international offices, hiring engineers and so on. It is less about headcount targets and more about having the right infrastructure in place.

CRM: I think you are due for a product upgrade soon, correct? Can you tell me more about that?

JR: We will be making significant announcements about new products within two weeks. But I can't share any details with you now -- sorry.