SugarCRM has landed a $20 million venture investment round, designed to boost international expansion by the maker of open-source customer relationship management software, the company said Thursday.
Taking the lead on the funding was New Enterprise Associates, with existing investors Draper Fisher Jurvetson and Walden International joining in. That brings SugarCRM's total funding to $46 million.
The company plans to use the funds for not only research and development, but also increasing its global footprint--particularly in Europe and Asia.
SugarCRM, founded in 2004, released its Sugar 5.0 software in December. To date, the company has racked up over 4 million downloads of its commercial open-source CRM goodies and counts more than 60,000 community members.
With its infusion of funds, SugarCRM will have more leeway as it heads down the path toward an IPO within the next two years. But with the recent industry consolidation--case in point being Sun Microsystems' planned $1 billion merger with MySQL--SugarCRM may find that option just as tasty.
SugarCRM is pulling out both barrels in Japan, announcing today that it has signed an agreement with Softbank Technology to distribute SugarCRM solutions in Japan, including as an ASP/hosted service.
This is exciting news, as relationships are key to cracking the conservative Japanese market, and Softbank Technology (along with existing partner CareBrains) is a great channel into Japan.
But the real news is in who SugarCRM beat to get Softbank's nod:
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Applications company SugarCRM intends to file to become a public company within two years, said CEO John Roberts.
SugarCRM launched three years ago in what Roberts said was an "experiment" to use an open-source business model to create high-quality customer relationship management applications. The company on Monday released a beta of Sugar 5.0, a major update to its application suite.
Since its launch, SugarCRM has funded its growth largely from revenue, rather than the $26 million in venture funding it raised, he said.
"Now we're at a point where we're acquiring customers extremely fast," Roberts said. "We've gone from 'we hope to (go public)' to 'we absolutely are on track.'"
Roberts anticipates that the company, which now has 125 employees, can grow to $100 million in yearly revenue in the next couple of years.
The open-source business model, which had not been tried in packaged applications before SugarCRM launched, is what has allowed the company to grow so rapidly and to focus on making quality software, he said.
Doing software engineering in the open, where outsiders can view the source code, has improved the product development process, Roberts said.
Selling is easier, too. Because the company makes a low-end version available for free, most of its customers are already very familiar with the product and don't require a costly sales and marketing process, he said.
Roberts said that SugarCRM's approach can be replicated by other companies. Database company MySQL has said that it intends to go public, and middleware provider JBoss was sold to Red Hat for $420 million. Last week, XenSource, which has built its commercial product on top of an open-source hypervisor, was bought by Citrix for $500 million.
Traidtional software companies spend too much on marketing and sales and not enough on research and development, Roberts argued.
"I came to Silicon Valley to write great software. But we saw this disconnect in enterprise software companies," he said.
Enhancements to Sugar 5.0 focus on making the application foundation more robust and appropriate for large-scale deployments. A final version is slated for release by the end of September or in early October. It will be released under the General Public License version 3.0.
New features include an Ajax e-mail client that is closely integrated with the applications and a revamped on-demand version. On-demand installations account for 40 percent of SugarCRM's customers.
The new version also includes a Module Builder that lets business users visually create and share their own application add-ons.
Update: this blog incorrectly represented Compiere's position on the GPLv3, which the company has not yet announced. That paragraph has been deleted.
SugarCRM intends to adopt the General Public License version 3 for a forthcoming update of its open-source applications.
Sugar Community Edition 5.0, scheduled to go into beta in a few weeks and be released in September of this year, will use GPLv3, the company said on Wednesday. Its current products use either the Mozilla Public License (MPL) or the very similar Microsoft Community License (Ms-CL), according to SugarCRM CEO John Roberts.
One of the advantages of the GPLv3 is it makes it easier for people to share code from different GPL-controlled open-source projects, Roberts said. At the same time, SugarCRM is able to offer customers of its Professional edition a typical commercial license, where people can see the product's source code but cannot distribute it, he added.
"My hope is that it becomes a global standard," Roberts said.
The company's decision to use the GPLv3 is an endorsement for the latest edition of the most commonly used open-source and free software license.
Finalized in late June, GPLv3 places tougher restrictions on software patents and a provision to prevent "patent protection" deals like the one between Microsoft and Novell. During its development, it drew criticisms from high-profile open-source participants, including developers of the Linux kernel.
But since its release, open-source projects have started to voice plans to adopt it.
Sun Chief Executive Jonathan Schwartz has said he hopes GPLv3 can be Sun's unifying open-source software license, but so far the company hasn't released its two highest-profile open-source sofware projects, Java and OpenSolaris, under GPLv3.
Open-source database company MySQL has said it will wait to see how the license is received before deciding whether to move its open-source database of the same name from GPLv2 to GPLv3.
Some important projects are moving to GPLv3 with their next versions. Among them are Samba, used to share files over Windows networks, and the
--CNET News.com's Stephen Shankland contributed to this report.
Ian Howells, Alfresco's chief marketing officer, did some analysis of the company's customer and user community, and I found the results interesting. I've been hearing rumblings for some time that Windows increasingly serves as a great evaluation platform for open source, 
but most companies use Linux when they're serious and want to go into production. Ian's data confirmed this, and more. (Zmanda has published data that corroborates our findings.)
First of all, the Alfresco data shows that Windows is plays a healthy role in the open source ecosystem. (In the graph, Windows = green, and Linux = blue, in case you can't see it well.) We have plenty of companies going into production with open-source Alfresco sitting on top of closed-source Windows. From my work with SugarCRM, JasperSoft and others, I know the same holds true for them. I don't suspect that this is going to change anytime soon.
Windows plays a large role because it's the OS sitting on the most desktops. But when customers are serious about production, the majority favor Linux. Again, I think you'd find very similar results were you to talk with MuleSource, Funambol, SugarCRM, etc.
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Competitors were quick to respond to Microsoft's latest plans for hosted CRM.
Microsoft's pricing was clearly aimed squarely at Salesforce.com, which was quick to dismiss Microsoft's entry into the market, noting that the company has been talking about its plans for sometime without actually releasing the product.
"I think that Microsoft has announced this service more often than Roger Federer has won Wimbledon," Bruce Francis, Salesforce VP of corporate strategy, said in a statement.
Another rival, SugarCRM, took issue with the notion that rivals don't offer the option of moving from a hosted to an on-premise model, saying that it offers just that choice.
"SugarCRM has been providing the ability for customers to swap deployments from on-demand to on-site and vice versa since December 2004, and we have had dozens of customers who took advantage of this," Tara Spalding, SugarCRM's vice president of corporate marketing, said in an e-mail.
Glyn Moody has an excellent article in Redmond Magazine on open source and interoperability. As it turns out, sometimes it takes Microsoft to notify the open-source community that for all the great things we've done, we sometimes fall short. One area that open source had traditionally failed in was in stitching together an end-to-end solution, as Nick McGrath (a friend and a wonderful person) suggests:
Of all the accusations Microsoft has leveled over the years against open source, perhaps the least contentious is that it lacks the tight integration offered by Microsoft's own products. As Nick McGrath, director of platform strategy for Microsoft in the United Kingdom, puts it: "One of the problems I've seen with open-source software is it doesn't take on board some of the issues that customers have around interoperability and integration. Open-source projects tend to offer a very specific point solution."
This statement has become less true over time, though it's still the case that there is no one open-source vendor providing seamless interoperability between disparate pieces of enterprise software (in the way that Oracle and Microsoft do or attempt to do). My bet is on Red Hat to become that company over time, but in the meantime, we're not there yet.
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