SugarCRM: The Next Big SaaS IPO?

Even amid a questionable economy, John Roberts (pictured) sounds upbeat. As CEO of SugarCRM, Roberts leads one of Silicon Valley’s fastest-growing open source software providers. But that’s not all. SugarCRM also offers its software as a service (SaaS).

Smart move. As this site has pointed out before, the worlds of open source, managed services and SaaS are converging. And for good reason: Customers and their solutions providers increasingly want open options with predictable pricing and low acquisition costs. “The new rules of the industry are no proprietary code and no lock-in techniques,” said Roberts during a phone chat with me on January 16. Those trends and SugarCRM’s market opportunities should allow the company to launch an initial public offering within two years, he added.

Our conversation focused mostly on Sun Microsystems’ $1 billion acquisition of MySQL — the leading open source database provider. MySQL was widely expected to launch an initial public offering (IPO) later this year.

But with Sun now guiding MySQL’s future, most pundits think SugarCRM will be the first open source application provider to launch an IPO. Roberts doesn’t argue that point. He expects SugarCRM to launch an IPO within two years.

According to our sister site, TheVARGuy.com, SugarCRM’s annual revenue was about $15 million in 2007, cash flow was positive and company insiders have written blueprints that will march SugarCRM as quickly as possible to $25 million.

The MSP Opportunity

For managed service providers, the SaaS and open source markets represent multiple opportunities. Start-ups line Untangle are promoting open source security solutions into the MSP space. And MSP platform providers have developed new ways to help MSPs manage SaaS environments, notes Level Platforms CEO Peter Sandiford.

Even venture capitalists are getting into the act. The latest example: eVapt Inc., which provides management software for SaaS environments, has attracted seed round funding from Applied Reasoning, LLC.

SaaS providers can use eVapt’s software to create pricing packages and contracts, correlate customer usage and automate back office operations.

At some point in the next two years, SugarCRM hopes to attract Wall Street’s attention by launching its IPO. In the meantime, plenty of MSPs are pumping their own money into SaaS and open source solutions of their own.