Sage Analyst Day 2011: Not Your Older Brother’s Sage - Part 1

I often wonder how well-known is the fact that the Newcastle upon Tyne (UK)-based Sage Group, Plc (LSE: SGE) is a leading global provider of business management software and services to over 6.3 million small and midsize enterprises (SMEs) worldwide. After over 25 years in existence and with 13,400 employees worldwide, Sage reported US$2.24 billion in revenue in 2010, and the vendor touts its 28,000 business partners and 40,000 accountants’ club members.

For its part, the Sage North America subsidiary (formerly also known as Best Software in the early 2000s) has 4,000 employees and supports more than 3.2 million customers in the United States (US) and Canada (with customers in every state and province) with enterprise applications and services that cover accounting, enterprise resource planning (ERP)customer relationship management (CRM), payment processing, human resources (HR) and payroll. In addition to providing horizontal products, Sage North America caters to the specialized needs of the healthcare, nonprofit, manufacturing, and construction & real estate industries.

The North American subsidiary had US$850 million in revenues in 2010, and has 5,000 business partners and 20,000 accountants in its network. Other Sage units are Sage North Europe, Sage South Europe, and Sage AAMEA (serving Australia, Asia, the Middle East, and Africa).

I have been following the company for over a decade both directly and via the formerly independent companies that Sage has meanwhile acquired, such as Accpac, Softline, ABRA HRMS, SalesLogix, and Adonix. For my related research on Sage (and Best Software) in the early 2000s, see my previous articles entitled “Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions?” and “Is 'Sage' Wiser And Better Than 'Best'?” 

Sage: Preserving What Works while Transitioning

For the last several years Sage has been a company in a transition of a sort. Some key tenets of Sage’s modus operandi (MO) have remained invariable, such as the following:

  • Achieving profitable (US$570 million profit in 2010) and cash generating growth (in large part via acquisitions)

  • A commitment to providing an extraordinary customer service (via a local focus and reach of its partners and subsidiaries)

  • Being a trusted brand in some regions

  • A “big tent” nurturing approach to its partners

Sage's partners are not all necessarily technical providers and wizards. Certified public (or chartered) accountants (CPAs), auditors, bookkeepers, and similar influencers who advise small businesses recommend many Sage products around the world. The company has never been regarded as a technology trailblazer and innovator, but even if that perception wasn’t necessarily true, Sage has not been overly forthcoming with a consistent message to market observers.

With its entry-level solutions for small businesses (e.g., Sage Simply Accounting in Canada and Sage Peachtree in the US) and upward migration options (e.g., Sage ERP MAS 90, Sage ERP Accpac, and Sage ERP X3, as those companies expand and grow) as well as via endorsements by many accounting associations, Sage had been able to “suck the air out of the room” for Microsoft Dynamics, SYSPRO, Epicor Software, and Exact Software, whose offerings start only with mid-market solutions. Over 80 percent of Sage customers are small businesses with fewer than 25 employees, with 16 percent being lower mid-market businesses with 25 – 500 employees (and only a few percentiles of upper mid-market companies with up to 5,000 employees).

In contrast, Intuit has yet to come up with solutions for mid-market and larger enterprises, once its small customers outgrow QuickBooks. For its part, Microsoft has all but abandoned its lackluster Small Business Accounting product.

Catch the Customer in Its Infancy

The Sage Peachtree lineup, which consists of the First Accounting, Pro Accounting, Complete Accounting, Premium Accounting, and Quantum editions, are easy-to-use accounting products with strong audits and controls. In addition to accounting, the product line has inventory management and job costing capabilities as well as business insight through customizable dashboards and business intelligence (BI) tools.

For its part, the Sage Simply Accounting lineup, which includes the First Step, Pro, Premium, Premium with Payroll, and Enterprise editions, is the undisputed market leader in Canada. Similar to Sage Peachtree, the fellow Canadian product is an easy to use accounting system with strong audits and controls, and with additional project management and inventory management capabilities.

The product line is fully bilingual (either English + French or English + Spanish combinations) with multi-currency international capabilities, which has brought about a new marketing opportunity: Hispanic bilingual businesses in the United States (US). The US Hispanic-owned population is estimated at about three million small businesses that have been growing three times faster than other small businesses in the US. Sage is initially planning to more aggressively market the product in the following four US states with large populations of Hispanic small businesses: California, New York, Florida, and Texas (but the product is available in any other state, for that matter).

Bridging the Gap to ERP

While on the surface it might be a Sage Peachtree (or Simply Accounting) instance at a small business, with a familiar interface and seamless data conversion to Sage ERP MAS 90 (or Sage ERP Accpac), at the core it is a “Lite ERP” system. As said earlier, these inexpensive accounting products have light manufacturing capabilities, are scalable (that reportedly outperform Intuit QuickBooks Enterprise by more than twofold). They also feature advanced security, BI features, and customizable order process workflow.

In addition, Sage has been delivering good customer experiences via its US- and Canada-based technical support with high customer satisfaction scores.  Dedicated account management is also available as needed (there is account management for Sage Accountant Network [SAN] members, and also some account management for customers).

Here is a concrete example of how Sage can keep customers for life in the construction sector: a small business can start with the Sage Peachtree Premium for Construction edition, which has the capabilities such as change order processing, progress billing, retainage management, and construction reporting. As the customer grows and needs more functionality, next steps would be the faster and more scalable Sage Peachtree Quantum, with production management and workflow tracking, and the Sage Master Builder offering that handles construction job costing, payroll, estimating.

Then, Sage Timberline Office offers advanced project management, job costing, and document management. Finally, Sage Timberline Enterprise offers advanced service management, agreement management, and Microsoft SQL Server as a popular database platform.

What Has Changed Lately at Sage?

In addition to the economic slump that has hardly spared anyone, Sage has been (or at least appeared to be) plagued for the last few years by a number of other factors, which have resulted with a number of top executives’ departures (including the long-serving Group CEO Paul Walker, and Ron Verni and his lieutenants in North America) and a new management team in place. For one, the lack of a coherent global ERP offering and strategy seems to have limited the company’s appeal in some markets, and competitors with a more global message and more simplified (less overlapping and more integrated) product offerings have pounced on the opportunity. In fact, the list of all available Sage North America’s products (see image below) resembles Mendeleev’s periodic table of chemical elements (let alone the list of the entire Sage Group’s offerings).


Moreover, its stronghold in the small business space seems to have been attacked and chipped away by a number of multi-tenant on-demand startup providers, such as NetSuite,, Intuit QuickBooks Online, KashFlow, and even SAP Business ByDesign. A similar situation has been evident on the CRM side with true multi-tenant software as a service (SaaS) offerings by, NetSuite, Microsoft Dynamics CRM, SugarCRM, and Oracle CRM On-Demand, to name only some. Both of these market segments have proven to be amenable to low capital expenditure (Capex) SaaS deployments, and Sage seems to have been quite late to the game (despite its hosted CRM solution, Sage CRM Online, coming from former Accpac’s acquisition of eWare in the early 2000s).

Sage under Siege (in the late 2000s)

To make things worse, the company’s SaaS accounting attempts with the SageLive and Sage Payments offerings in the UK have had their share of missteps and security issues, which have been exploited by both Sage’s competitors and duly noted by market observers. Sage’s global brand recognition remains an issue too, as even often acknowledged by Sage’s executives, who have no problem explaining to anyone in Europe what Sage is and what they do for living, which is quite different in the US (including the immigration officers at border posts). Indeed, outside Europe, many individual Sage products, e.g., Peachtree, Pastel, or Accpac have much more recognition on their own.

Additional negative publicity came from a major partner, MIS Group, abruptly going out of business in 2009, which gave an opening to competitors to prey on its possibly stranded customers and other dismayed Sage partners. While this was an isolated occurrence (and not really a pattern) beyond Sage’s control, it has been talked about as a “teachable moment” and a cautionary tale for quite a while.

In fact, Sage immediately contacted every one of MIS customers and managed a well-orchestrated transition for them to new partners and serviced them directly from Sage in the interim. Other partners were true collaborators with Sage to ensure every customer was well taken care of.

Moreover, during the mid-to-late 2000s period of restructuring and high turnover of senior executives at the Sage Group and its subsidiaries, Sage has admittedly briefly taken its eye off the customer and partner satisfaction ball, and is now in a catch-up and reset mode. The company is now back to its aforementioned focus on extraordinary customer service.

The Current State of Affairs

Sage took a giant leap to clarify its position in the market when, after nine long years, it hosted an analyst day in Boston in February 2011. I concur with Denis Pombriant’s assertions in his recent blog post that Sage still has the aforementioned challenges ahead of it, but in the last few years -- a period that coincides with the leadership of the soon-to-retire Sage North America’s CEO Sue Swenson -- the company has begun to put its ducks in a row.

Analysts had been treated to glimpses of a new unified ERP product strategy before, such as during the launch of Sage ERP X3 (formerly Adonix X3) as the global ERP platform in 2007 and 2008 (see my article entitled “A Traditional "Local Touch" Leader Espouses a More Global Vision”) and the launch of Sage SalesLogix Cloud at the Sage Insights 2010 partner conference, but the Sage Analyst Day 2011 in Boston was by far the most cohesive delivery of Sage's core strategy yet. Sage must have sensed the urgency to explain itself to analysts and bloggers, because in attendance were three of the highest-ranking Sage executives, including Guy Berruyer, the newly appointed Sage Group CEO; Sue Swenson, the outgoing CEO, North America; and her designated successor, Pascal Houillon, who came from Sage France and will officially take over the stewardship of the North American subsidiary later this year when Swenson retires.

Berruyer started the day with a summary on the company’s 2010 results and the company’ priorities going forward. The outlined priorities were as follows:

  1. Improving organic revenue growth

  2. Improving profit margins in the medium term

  3. Further developing Sage’s Web strategy

  4. Re-engaging in acquisition opportunities

Swenson then continued along similar lines about the North American subsidiary. As could be seen from both leaders’ presentations, Sage remains passionate about its customers and has been expanding connected (cloud-based software) services and online solutions to provide choice to its customers.

Sage thus believes that it is set to grow in the future. The company will likely return to its acquisitions model because that is in its DNA. But future acquisitions will probably have a “cloud” texture, and be of a less blockbuster nature.

Part 2 of this series will analyze the subsequent morning session that explained Sage North America’s strategic three-pillar framework dubbed “Enrich, Connect, Grow” that was first espoused at Sage Insights 2010. All subsequent sessions on Sage’s partner strategy and individual product lines were aligned with this strategy. In the meantime, your comments, thoughts, suggestions, or individual experiences with Sage and its individual products (or product combinations) are more than welcome.
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