SugarCRM CEO Change: An Open Source Setback?
When SugarCRM announced co-founder John Roberts’ (pictured) exit last week, some folks viewed the news in a vacuum — wondering what’s right (and wrong) with the open source CRM provider. But The VAR Guy is looking at the bigger open source picture and he sees some reasons for concern.
First, let’s zoom in on SugarCRM. After Sun Microsystems acquired MySQL (the open source database) for $1 billion in January 2008, some folks (including The VAR Guy) assumed SugarCRM was the open source company best positioned to launch an initial public offering (when financial markets permitted).
SugarCRM founder John Roberts sounded pretty darn upbeat in this June 2008 podcast with The VAR Guy’s sister site, MSPmentor. And many employees praised Roberts. But if things were so sweet at SugarCRM, why did two top employees head off to GroundWork Open Source and Pentaho, respectfully, in 2008? And why is founder Roberts leaving now?
Not even Matt Asay, a SugarCRM advisor, has immediate answers.
The Bigger Picture
Although the open source industry remains full of promise for solutions providers (see The VAR Guy’s Open Source 50 report for details), there are signs of trouble across the open source landscape.
Consider the following anecdotes:
- GroundWork Open Source and SugarCRM have been busy cutting prices and/or introducing lower-cost options.
- And now, SugarCRM CEO Roberts has resigned, with no long-term successor in place. An angel investor, Larry Augistin, is serving as a short-term CEO until Roberts’ long-term replacement can be found.
- Meanwhile, venture capitalists appear to be consolidating their open source investments. Two recent examples include the mergers of XAware with Sparxent, and SpringSource acquiring Hyperic. Are venture capitalists losing faith in some of their open source investments? Or are they worried financial markets won’t recover anytime soon to support IPO exit strategies?
Alas, Red Hat remains the only pure open source company that’s publicly held and consistently profitable. What does that say about the broader open source industry? Is the recession purely to blame?
Or is Roberts’ resignation from SugarCRM a sign of larger challenges for the open source business model?
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Nice to see The VAR Guy no longer drinks SugarCRM’s Kool Aid. They’re a great company but you’re on the mark when you describe bigger issues at hand here. Other than Red Hat do we really know if any commercial open source providers are profitable?
Frankie Says: Thanks for the note. The VAR Guy expects some news from a few other open source companies on the channel front this week.
Does that mean open source companies are generating profits? Not necessarily. But progress, nonetheless, will be announced soon. And once SugarCRM names a long-term CEO, our resident blogger will get a reality check from that company…
MGI Research shares the VAR Guy’s view that 2009 will be a tough year for open source companies. In the end, it’s about profits, and open source companies do themselves a disservice by not marketing a tangible ROI or credible TCO model.
When a company grows as fast as Sugar has, since Sugar became profitable so quickly, there is often a need for a different type of Management style / CEO.
The skills required to lead a startup into profitability vs. the skills to lead and grow a company the the next stage in the companies life cycle are two different skill sets. Not all managers possess both. The software world is full of examples of CEO’s being changed to accommodate rapid growth.
Add in the horrible economy and you have a recipe for management change
John who?: True, companies often need to change management as they shift from one business stage to the next. But clearly, SugarCRM had deeper issues.
The fact that the company named an interim CEO suggests that Roberts and the board did not see eye to eye, and their was no real succession plan in place…
The acting CEO has a ton of experience. And The VAR Guy believes SugarCRM’s brand and market position remain sound.
But if this change merely involved moving the company from one business stage to the next, the transition would not have involved Roberts leaving in silence with zero statements from him to the media.
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