Partners Say SugarCRM Is Listening And Channel Efforts Are Back On Track

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By Rick Whiting
April 22, 2013    11:20 AM ET

SugarCRM channel partners feel reassured the CRM application vendor is committed to the channel after the company agreed to a number of partner requests, including the introduction of a channel-neutral compensation plan for SugarCRM sales representatives and clearer engagement rules between the company and its partners.

The reassurance comes after what partners described as a turbulent, months-long period for fast-growing SugarCRM in which partners questioned the company's commitment to the channel and their role in its go-to-market strategy. Those questions were heightened in February when SugarCRM dismissed its entire channel management team, as well as other sales and marketing executives.

"It's been a tough time for the partners," said Geoffrey Mobisson, executive vice president of sales and marketing at Levementum, a Chandler, Ariz.-based solution provider that's one of SugarCRM's biggest partners with about $3 million in annual SugarCRM-related sales. Noting that Levementum has a lot invested in SugarCRM, he said his company "was terribly concerned about our exposure" should the vendor turn away from the channel.

"I would say that for the last six months there have been question marks for us," said Jim Ward, president of BrainSell Technologies, also a SugarCRM partner, referring to recent difficulties between the company and its partners.

SugarCRM partners contacted for this story declined to offer many details about the problems between the vendor and its partners. Mobisson, Ward and others will only say that through the latter part of 2012 and early this year the vendor's direction left partners questioning their future with the company.

Ward said the company made "internal changes" that hinted at diminished channel commitment and "a lack of coordinated messaging going into the market." He noted that SugarCRM has "a multipronged distribution model" that includes the channel, direct sales, inside sales and Web sales. The company also offers a free, open-source "community" edition.

Mobisson attributed many of the difficulties to SugarCRM's growing pains. Founded in 2004, Cupertino, Calif.-based SugarCRM has been growing at a rapid pace and in recent years has become a significant player in the highly competitive, but fragmented CRM application market. The privately held company doesn't disclose sales figures.

"What you have here is a company that's growing up, that's passed the adolescent stage," Mobisson said. While SugarCRM once focused heavily on sales through the channel to SMB customers, there's been more emphasis on sales to larger customers recently and the company brought in new managers to help meet those goals, he said, choosing his words carefully.

The growing friction came to a head in February when SugarCRM dismissed a number of channel executives including Jeff Campbell, senior vice president of worldwide channels and midmarket sales; Del Ross, vice president of channel and midmarket sales (Americas); Doug Erickson, vice president of channel sales and midmarket (Asia-Pacific); Bruce Sinclair, vice president of worldwide channel enablement; and other channel managers and inside channel resources.

In an interview with CRN shortly after, Ross said SugarCRM was "really going to a more direct model" under the guidance of recently hired executives with more experience with direct sales to large companies.

But SugarCRM executives at the time, including CEO Larry Augustin and Glenn Cross, executive vice president of worldwide field operations, attributed the departures to a broader overhaul of the company's sales operations. The goal, Augustin and Cross said in an interview with CRN, was to streamline sales operations and put more field sales representatives' "feet on the street" -- including people who worked with channel partners.

Partners' concerns continued to simmer through the weeks leading up to this month's SugarCon customer and partner conference in New York. That included a meeting between company executives and the partner advisory board, which Ward chairs and Mobisson sits on, to hash out a number of partner requests including a channel-neutral compensation policy for SugarCRM's sales representatives.

In an interview before SugarCon, Cross acknowledged that the company is focusing more on its larger, more successful partners that go beyond simple fulfillment to provide more value around the vendor's applications or that invest in specific verticals. He cited cases of some resellers with low investment in SugarCRM that in the past have undercut other partners on price.

Cross said SugarCRM would reward high-value partners with more sales leads and better margins. "The more you sell, the more we can reward you. The larger the revenue stream, the more we can give back," he said. "We are 100 percent focused on partners. Partners are the future for us."

He also noted that as SugarCRM has added cloud computing options to its offerings, some partners have had difficulty adjusting to the new model -- a change that's created friction between other software vendors and their partners.

Ward, Mobisson and other partners said they were pleasantly surprised when SugarCRM executives agreed to virtually all of their requests, including the channel-neutral compensation plan and clearer rules of engagement between partners and SugarCRM sales reps.

Another partner who asked not to be identified said regional SugarCRM sales reps and managers can now count channel sales toward meeting their sales goals.

Mobisson said other granted requests, which he declined to detail, will result in increased profitability -- around 10 percent to 20 percent -- for partners and incentives for partners to prospect for new customers. Cross said SugarCRM has promised to invest more in improving its partner portal and to provide more joint marketing opportunities and market development resources.

"They agreed to all the things we requested," Ward said, adding that the results of the partner-SugarCRM executive meetings at the conference "suggest they are finally doubling down on the partner channel, which is very motivating for a partner like us."

"They figured out that the business partners bring a lot of value to the table," said Anthony Castle, executive vice president of sales and marketing at Plus Consulting, a Pittsburgh-based solution provider that works with SugarCRM, SalesLogix, Microsoft (NSDQ:MSFT) Dynamics CRM and applications. "I think they want to be a channel-friendly organization."

Castle gets the sense SugarCRM's preference is to work with fewer partners that bring more to the table and provide them with high-quality sales leads. "I think they would be happy to work with a handful of partners in each region that are doing quality work."

"I think everyone's generally excited about the new model," said Heidi Tucker, vice president of global alliances at InsideView, a SugarCRM ISV partner that develops prospect and customer intelligence applications that run with SugarCRM's software. She attended SugarCon and said the partners she spoke to were upbeat on the SugerCRM relationship.

"They began to show some real empathy," Mobisson said. "SugarCRM clearly heard the partner community." He said company executives would have to "continue to demonstrate empathy for the partner community" and execute on their commitments.

Solution providers involved in the meetings said partners, in reciprocation, agreed to measures that make them more accountable to quantifiable performance benchmarks.

Ward said he's pleased with the direction the relationship with SugarCRM has taken. "When the vendor relationship [with partners] is one of good, solid, open, honest communication, you can really build revenue with that."

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