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Enterprise

Navigating a Startup’s Awkward Teenage Years

The $23.2 billion market for sales software is ripe for consolidation. Five big players—Salesforce.com, SAP, Oracle, Microsoft and IBM—dominate the market, but about half is controlled by a slew of smaller companies.

Perhaps the most prominent of those smaller players is Cupertino-based SugarCRM, whose rapid growth in the past few years could make it a target. Since CEO Larry Augustin took the helm at the unflashy Salesforce.com competitor in 2009, revenue has expanded nearly ten times to almost $100 million, thanks in part to his winning IBM and Apple as major customers. In terms of profitability, it is operating at close to breakeven. (It generated positive cash flow in 2013 but not last year).

The one problem: With a value likely over half a billion dollars, SugarCRM is a little too large to be an easy target for a corporate suitor with competing technology. The only plausible sale path would be if an outlier like the forthcoming Hewlett-Packard Enterprise unit decides it wants to jump headfirst into software.

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“I’m not sure that the emphasis on growth at all costs is encouraging people to make the right long-term business decisions,” Mr. Augustin said.