Sage’s Cloud Reboot: Five Opportunities (One Challenge)

With ~13,000 employees world-wide, 300 directly in Australia, and “responsibility” for paying 10% of the Australian workforce via sub-brand MicroPay, Sage remains a great unknown to many organisations despite its 25 year history in this region. Much of this could be attributed to a tired channel and complete absence from the cloud accounting hyper-mania of recent years.

Today Sage are rebooting, and while their disruption (or disrupted) days are still ahead of them, I tend to take a glass-half full approach to companies that provide transparent guidance on turnaround agendas. I believe it is possible to leapfrog through innovation if they can take action. And as one of their own corporate videos stated: “…intention is a good place to start, taking action is much more important…”.

Unisys’ successful 3-year resurrection over 2008-10 is a case in point for legacy vendor reinvention. So with history on its side, and with both the business of ERP innovation and ERP procurement being long games, active participation from both the Sage ecosystem and their customers can see Sage achieve its goals. And of course it will take some time.

But don’t look at this as unbridled optimism. It comes with caveats in the form of the following five opportunities. Progressive performance against these over the coming 12- and 24-months is all that is required to see how committed Sage are to a different future…

Opportunity 1: The Functional Stack
Sage provides solutions at three buyer levels (startup, mid-market and enterprise), to three distinct user groups (startups, accountants and finance directors), and across multiple functional areas (finance, customer relationship management, human capital management and payroll).

This diversity calls out their historical acquisition strategy as being highly curious when you think about applying Porter’s Five Forces model against all those potential markets to ensure ongoing relativity, growth and competitive positioning. In this context it is not surprising how little brand awareness they have in Australia in 2017 given the scarcity of historical marketing investment. In the very least, one persons view of Sage can be completely different to another.

On the flip side, their very broad portfolio has the ability to explicitly place them in a lot of buyer choice sets.  Today they already compete on some days and in some ways with everyone from MYOB, Xero, and even Accelo and Dapulse (for small practice management), through to Epicor, Greentree, Netsuite, Empower, TechnologyOne, SAP, Oracle, and increasingly into the future, Workday.

Given no apparent intention to rationalise their markets or products, I expect that client migration to new products and services, and land-and-expand strategies in new customers, to become key growth initiatives. They can compete but will need all 300 staff in country, rowing in the same direction, to the beat of a new corporate drum, to do it.

Opportunity 2: The Development Platform
The over-arching solution architecture for a company with a solution portfolio with several hundred products and SKUs is always going to be complicated. Sage’s portfolio is every bit complicated and does not yet look like an integrated, orderly brand portfolio.

Architecturally with the big push into contemporary social, mobile, analytics/data and cloud (SMAC), a great front end CX is one thing but deciding how best to optimise the use of AWS (Sage One and X3), Azure (Sage One), Force (Sage Live, Sage People), transitioning or leveraging their own data centres, and supporting their customer’s server-heavy businesses to do the same is something completely different and will require special attention. Aside from the challenges presented by technical diversity, the opportunity cost of not being able to fully leverage a single, large public cloud relationship would be a lost strategic opportunity at this juncture.

But more than that, while large, the company is not really large enough for Sage CRM (on-premise) to not be seen as a competitive distraction to the burgeoning Salesforce.com relationship. Even if it remains a product to sell to non-finance Sage customers, why pursue a two-pronged CRM strategy? As Australian Managing Director Alan Osrin has said, the holy grail in ERP is the integration of Finance and CRM. This is because of the ability to see an end-to-end view of a customer from interaction through transaction and back to interaction. That’s achievable with Salesforce but I’m not sure with Sage CRM (see Opportunity 4).

Furthermore, an investment in Salesforce.com for a single product would seem like an over-capitalised investment in R&D capability for a team already segmented across so many technology back-ends. A half educated guess might suggest that architecturally Sage will consolidate on Force plus another (like much of the market). Though this is more than just a hygiene issue it’s one they need to sort out sooner rather than later.

Opportunity 3: The Partner Ecosystem
With the platform now established its possible we’ll see more Salesforce partners, successful in their own right, now enter the Sage partner ecosystem. 1) because there’re only so many partners in this part of the world and 2) if I was Sage this is where I would be looking because it compliments and not dilutes the existing strategic investment. But this is not a given. Salesforce and Netsuite et.al. are close business partners with increasingly integrated partner ecosystems. Staking a claim as a financial partner of choice at this stage of Cloud Accounting etc. will be more challenging than a few years ago.

Opportunity 4: The Install Base
Sage proudly support a “no end of life” policy on all their products with their customers. In a turn-around growth strategy that policy, in binary form, has no place and must go. Grand-fathering legacy products with legacy customers will simply be an anchor to the momentum and direction of other programs within the reboot strategy. Other aquisitive-driven software companies – like CA Technologies and Infor – have always gone through portfolio rationalisation and at some point Sage will too. No noise about it yet but its bankable if they are to succeed.

Furthermore, in the absence of their own strategic imperatives for change, Sage channel partners need to be able to provide customers with a burning platform for growth and innovation. That’s not mercenary software licensing, that’s just business as usual. Kill the “no end of life” policy or it will kill Sage install by competitive attrition.

Opportunity 5: The Integration Platform
Sage’s growth through acquisition has not only resulted in product diversity but diversity in the code- and database environments. At a practical level for customers that means how well solutions like X3 and People will ultimately work together. The proposed answer is Sage Integration Cloud which at this stage I’m assuming is a mixture of a traditional middleware platform (like Infor ION), and a modern API PaaS platform (like Jitterbit). Hopefully the latter but need to see more here. For now, the tweet below sums this up.

Challenge: Partner and Channel Management
Sage employees sell some products directly to customers but by-and-large Sage is a partner driven company. That’s ok. But it does mean that you, the end-user customer, gets its “Sage Experience” through a distributor of one or more of the Sage solutions within the overall portfolio.

Furthermore, that means that the functional and technical expertise of the distributor company’s staff, and not the knowledge and excellence of the Sage staff become the benchmark for implementation and service quality. This is one of the biggest challenges that software providers attempt to solve via partner programs involving training, pre-sales support through workshops, marketing and sales materials (like proposal decks), and marketing development funds.

More often than not, your average channel partners don’t have very deep pockets, or large channel partners do but are too over-utilisation driven to undertake appropriate consultant training, let alone continuing professional development to keep up with the myriad of changes rolled out infinitum by companies the size and complexity of Sage. Add to that an environment of strategic change within the portfolio and the challenge becomes expontential. Then add new partners into the mix at the rate of one a week and not only is this a further incendiary catalyst but it places limitations on the availability of scarce resourcing in the market (both trainers and consultants to train). The bottom-line is that good training and CPD is paramount to ensure customers get whats on the Sage label, or what they see at events like Sage Summit.

To go full circle, this is required across Sage’s complex multi-product-multi-market-multi-solution portfolio: from the 7500 accountants of which 800+ are Sage Certified Advisors (after completion of a 45-minute multiple choice test), through to X3 training which should, but does not, involve multiple weeks and multiple projects of dedicated training to achieve. Sage will say it is the partner’s responsibility, the partner will say they have done what they can within the scope of Sage’s accreditation and partner agreement model, and the customer will enjoy the results.

While I didn’t get a sense that Sage has an unhappy channel, I also didn’t get a sense of an enthusiastic, exuberant, engaged channel as exists elsewhere in the competitive ecosystem. They know what’s happening with the born-in-the-cloud bunch and are probably watching the clock.

To address the channel challenge in support of the company’s broader growth strategy Sage have appointed a highly energised Partner and Channel Management team including EVP Alan Laing, and local manager Natalie Chrara.

  • Update 25th July 2017: Sage announces the acquisition of Intacct, a leading North American provider of cloud financial management solutions. Intacct was recently named a Visionary by Gartner in its inaugural Magic Quadrant for Cloud Financial Management Suites for Mid-Size, Large and Global Enterprises (June 2017).