Sage Analyst Day 2011: Not your Older Brother’s Sage - Part 3

Part 1 of this series analyzed the transformative events during the last few years at Sage Group, Plc (LSE: SGE) and its Sage North America subsidiary. These changes have led to its analyst day in Boston in February 2011, where Sage took a giant leap towards clarifying its position in the market. The analyst day started with Sage Group’s CEO Guy Berruyer’s and the outgoing Sage North America’s CEO Sue Swenson’s reports on their respective companies' current state of affairs.

Part 2 talked about the subsequent presentation by Himanshu Palsule, Executive Vice President of Product Strategy and Marketing of Sage North America’s Business Solutions, on Sage North America’s strategic “Extend, Connect, Grow” framework and related Web strategy. In this presentation, Sage espoused somewhat differing cloud computing approaches for the small business and core mid-market segments.

But how do Sage customers and partners fit within the “Extend, Connect, Grow” strategic pillars?

Nothing but Extraordinary Customer Experience (ECE)

Dennis Frahmann, Executive VP for Corporate Marketing, then took the stage to talk about Sage North America’s customer experience strategy. The tagline of the presentation was: “Extraordinary Customer Experience is becoming who we are and how we win.” Indeed, 58 times per second is how often there is a Sage-customer touch-point (over 150 million touch-points per month), and Sage would like to make each one count.

Frahmann outlined the Sage Brand Promise intent, which starts with Sage’s strong belief that the Sage Experience should be extraordinary. Extraordinary Customer Experience (ECE) is the way Sage will win in the market, and that is the company’s solemnly declared state of mind. ECE is about the following:

  • Doing the basics really well and seeking out opportunities to go above and beyond

  • Creating an experience that customers feel compelled to share with others

  • Creating a memory, a lasting impression, that leaves customers feeling fantastic about Sage

To be sure, these statements initially struck me as mere platitudes and the fodder that can be often found in many other vendors’ marketing material and “slideware.” Yet, despite these promises and bragging by most IT vendors, who on earth really thinks that his/her general customer experience is positive today? The reputation of the technology industry is not great at all, and I for one dread calling my Internet service provider (ISP) about any support issue.

But on second thought, Sage has no other choice but to gain competitive advantage via innovative customer experience drives. As said in Part 1, Sage is not a technology trailblazer and its global recognition and marketing spend cannot match those of Oracle, Microsoft Dynamics, SAP, or even Sage’s revenue and growth depend in large part on the number of its active customers, the average revenue they generate, and the length of time these enterprises stay with the vendor.

To that end, Sage reported that renewal rates were rising in 2010, and the Net Promoter Scores (NPS, explained in Part 2) were improving on average across 22 products that the vendor measures. In addition, the average revenue per customer was reportedly trending positive throughout 2010. An extraordinary customer experience entails everything – people, product, and processes, and it requires getting the basics right first. It is more about making improvements to thousands of operational details than about espousing big grandiose ideas.

The traditional “status quo” state of affairs in the market is that an enterprise resource planning (ERP) or accounting product is a commodity whereby customers use less than 20 percent of available features. Today’s business model is still software license focused by vendors, although customers prefer value-adding services. Even more, the typical user experience is “out of the box” – i.e., not personalized and not always relevant.

Therefore, Sage’s view is that customer intelligence can deliver relevant and personalized experiences, thus creating a meaningful connection to the brand and offering. This approach is expected to transform a perceived commodity offering to a differentiated service driving customer loyalty.

The Sage Advisor Technology in Action

Sage acknowledges that processes and infrastructure are key enablers for customer experience. To that end, Sage Advisor Technology, a brand new online monitoring product (similar in its idea to the OnStar collision detection system for some luxury cars), was demoed to show a few examples of how it could provide relevant and personalized advice to individual customers. The product uses a rules engine, data mining, and performance tracking to provide advice to end-users (also somewhat similar to Microsoft Office’s Help Assistant), including the suggestions to, say, download new functionality.

Sage’s Advisor Technology has over one billion current customer intelligence data points available on Sage Peachtree customers in terms of usage tracking, experience blueprinting, company business statistics, error messages, and help topic frequency. In addition, over 500 data points about a user’s environment and product version are collected on a regular basis with the customer’s permission. With this info, either a live Sage support employee, a virtual assistant, Advisor-generated messages and/or in-product chat provide the following benefits to customers:

  • Deliver relevant advice on additional features the customer should be using

  • Proactively warn the customer when something is wrong

  • Seamlessly deliver updates and help the customer discover new capabilities

  • Help the customer when the Advisor senses the customer needs assistance

  • Show the user company how other similar businesses use the product

  • Advise the company on other relevant topics to help it run its business

  • Understand the actual customer’ needs, without assuming that all customers have the same issues

For their part, Sage partners might also benefit as the Advisor could help them understand how their customers are using a particular Sage product. The tool could also advise them on personal training or service opportunities for each customer, and alert them if it detects risks for one of their customers. Currently offered to Peachtree customers only, this idea and solution will likely be rolled out to other Sage products.

For its part, Sage should benefit from saving its mature desktop products from commoditization by ensuring that they have a personal connection to the user. Moreover, while Sage can sell more of its modules (that the Advisor might recommend), customers should realize true value of the offering as the usage level increases.

Last but not least, as ECE can be delivered in a mass scale manner (while remaining personal and relevant to each customer), it should provide a foundation for Sage to become a ‘trusted advisor’ to its customers. For more opinions on Sage’s customer experience focus, see the favorable blog posts from Cindy Jutras, Jeff Ashcroft of Constellation Research Group, and ZDNet’s Brian Sommer, and a (customarily) skeptical one from Dennis Howlett.

In his blog post, Denis Pombriant believes that a further advantage of this tool for Sage is that it opens up a line of communication between the vendor and the end customer that is not filtered through the partner. While this can be a delicate matter (of circumventing the partner), as long as the services provided are not competitive, there should be no objection by either party (customer and/or partner). Moreover, the direct line of communication provides Sage with the ability to know and communicate with its customers better than in a model that requires all communication to be filtered through a partner.

Nurture Thy Resellers (as well)

Tom Miller, VP of Channel Management of Sage North America, concluded the morning session with a presentation on Sage North America’s partner ecosystem. Sage’s connected services (explained in Part 2) and ECE means that Sage need not be the only vendor in the mix, and Sage’s partner ecosystem is growing up around this model. In 2010, there were 1,200 new partner applications, 110 new partner authorizations, 176 new product certifications, 300 new partner employees dedicated to Sage solutions, and over 200 new partners.

This ecosystem provides a way for non-technical business services vendors to access a huge market opportunity and for Sage (or any other vendor for that matter), to add value to customers. Having spent a sizeable time at former Great Plains Software and Microsoft Dynamics afterwards, Miller has brought credibility to Sage’s partner commitment.

Sage’s resellers are generally smaller companies (as compared to other vendors’ channels) that add value through consulting, customization, and building long-term relationships that drip revenue into the bucket rather than pour it out. But Sage (as well as its competitors) must strike a balance between being welcoming to partners of all size and expertise (i.e., the “bigger tent” approach, without overly “nickel-ing & dime-ing” partners with fees, certifications, lead kickbacks, etc.) and also vetting the third party's quality of delivery to end-customers.

As previously hinted, partners are part and parcel of ECE, and Sage rewards the partners that excel at ECE. After conducting a recent survey (as part of Sage’s customer loyalty program) on what the single largest influence on customers’ purchase was, the results were as follows:

  • Accountant recommendation – 31 percent

  • Reseller recommendation – 25 percent

  • Customer recommendation – 10 percent

  • Used the product/company before – 10 product

  • The Sage product itself – 24 percent

The imperative for Sage is to improve existing products in functionality and user experience and grow the Sage footprint within each account. Implicit in this approach is a prime directive to improve the customer experience wherever possible, and here partners pay a crucial role.

Accounting/ERP and customer relationship management (CRM) products have more staying power together than either alone, according to the company's experience. Thus, logically, one part of Sage’s strategy is to grow a number of joint accounts. But that requires multiple talents and expertise in its partner base and the cooperation between partners in passing leads.

In 2010, via the all-encompassing Sage Partner Advantage program, the vendor invested significantly in its channel partners, in terms of helping these companies grow the business, earn rewards, build knowledge (get trained), and hiring talent. For example, the HireAssist and Fast Track for Growth partner programs drove over US$20 million in new license revenue generated by program participants, which translated into 30 percent increase in new licenses and higher partner satisfaction for 665 participating partners.

Put in the light of Sage’s three-pillar “Enrich, Connect, and Grow” strategy in terms of partners, Enrich would refer to the partners’ focus on delivering an ECE, while Connect would refer to supporting and rewarding partners for selling connected (Web-based software) services.

Growing and increasing the profitability of business software providers will depend on increasing the vendor's footprint. But there is a practical limit on how much new software a customer might buy or lease, and this is especially true in the small and medium enterprises (SME) market, where the number of users per customer entity is low.

To that end, the Grow pillar refers to enabling partners to drive new business. Sage’s connected business services as well as existing and upcoming online solutions might come in handy here as a “green field” play that offers greater growth prospects.

Concluding Remarks

In many ways, the more things change the more they remain same: Sage still has a possibly unwieldy plethora of products, but the vendor is coming to terms with the need to refresh and unify its product lines (many of which were quite aged) while embracing cloud computing and "software plus services." The giant has also put together a plausible future direction for its partners and customers, which should cause minimal disturbance for them, and that direction was hard to discern before.

Look for a separate article that will analyze the afternoon breakout sessions from Sage’s Analyst Day 2001. Until then, dear readers, what are your reactions and opinions for Sage’s new charter? Your comments, thoughts, suggestions, or individual experiences with Sage and its individual products (or product combinations) are more than welcome.
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