Six implications of IBM’s replacement of Siebel with SugarCRM

April was quite a month for SugarCRM. It announced a further $33 million in funding, the release of the latest version of its CRM software, first quarter revenues up 118%, a shake-up of its reseller channel, and, to cap it all, at the SugarCon convention IBM appeared to let slip that it was replacing its 67,000 user Siebel implementation with, you guessed it, SugarCRM.

While the details of the replacement of Siebel seem to be shrouded in non-disclosure agreements, and until the details are known we won’t know the full implications, on the surface at least it would appear to have some interesting ramifications for the CRM market:

• It gives SugarCRM instant credibility as player in the enterprise space, and we can expect to see them represented in bigger and bigger deals.

• It will give Salesforce.com and Microsoft something to think about, as there now seems to be a clear number three in a CRM mid-market that was becoming something of a two horse race – (and perhaps not a good time for Microsoft to be hiking its prices up in the UK).

• It suggests Oracle, specifically, will have a real fight on their hands defending their Siebel installed base, and, how much pressure generally the enterprise CRM vendors are under from the CRM mid-market vendors.

• It will provide encouragement for new, existing, and potential entrants to the CRM market that there are opportunities to emulate Sugar’s progress.

• It suggests that as SugarCRM starts to move up the food chain new gaps will open up at the entry-level in the CRM market.

• It shows the CRM market is a lot more nuanced than the cloud (new technology) versus on premise (old technology) depiction we frequently see – my understanding is that the SugarCRM deployment at IBM is on-premise rather than SaaS.

While there’s danger in reading too much into IBM’s apparent decision, which may have more to do with competitive strategy than IT strategy, it could none the less represent SugarCRM’s coming of age as a force in the market – and greater competition can only be good for buyers and users of CRM technology.