Start-up

The New Sage: Who and What Is It? Where Is It Going?

Early in his opening keynote for Sage Summit 2016, CEO Stephen Kelly announced, “Our real purpose is to champion the ambitions of entrepreneurs.” This sentiment goes well beyond the development and delivery of software products. Mr. Kelly himself is a business ambassador to the Prime Minister of the United Kingdom, representing the interests of small and midsize businesses to governments, in global markets, at colleges and universities, and on the political front as well. He has pledged to bring Sage’s products to the cloud and more innovation to the products. And he has declared that Sage is “The only company providing your digital heartbeat from Start-up to Scale-up to Enterprise.” [These are the new monikers for the markets in which Sage plays, replacing references such as “small” and “mid-size.”]

But, having grown through acquisition, Sage faces some challenges, not the least of which is the sheer number of products it owns, many of which are based on older technology and run exclusively on premise. I’ve never done a specific count, but based on a quote from Mr. Kelly presented in a Diginomica article by Stuart Lauchlan back in May after a mid-year earnings call,

“Our historic, federated and fragmented and de-centralized business model meant that we couldn’t fully leverage the scale and the global reach for the benefit of our customers or ourselves. In fact, it was actually hindering our ability to grow.

Our acquisition-led growth strategy compounded the internal fragmentation and complexity. And this fragmentation I’ve shared with some of you before in terms of 270 different products, 73 different code bases, over 150 different sales compensation plans, 139 sites, 105 databases from management accounting, 21 different CRM systems. I could go on and on.”

Wow! That’s a heck of a lot to consider. But Mr. Kelly seems up to the challenge. Make no mistake: This is a new Sage. Over the past year there has been a changing of the guard, with many departures, and many more new faces. But more to the point, Sage has re-architected its positioning. This started a year ago when Mr. Kelly declared Sage would no longer sell ERP, noting the acronym should really stand for expense, regret and pain. This year that sentiment persisted.

Throughout the keynotes, we heard reference to “accounting, payroll and payments,” but never “ERP.” Couple this with the heavy dose of “entrepreneurship” and you walk away thinking Sage is the place to be for small businesses in need of an accounting solution. With enormous installed bases from acquired products like Peachtree, AccPac and Simply Accounting, you might say, of course they are.

But what about all those “enterprise” customers running Sage 100, Sage 300 and Sage X3 where the founder of the business has long since exited? I found myself wanting to be their champion amidst all the accolades for the entrepreneurs in the audience. These enterprises need more than accounting, payroll and payments. They need to manage the complete system of record of the business, including orders and/or contracts. Fortunately the Sage products formerly known as ERP do just that.

And I felt for the partners who sell these products into the ERP market. When a new prospect wants to buy a new ERP solution, with this new positioning and the declaration that ERP is dead, will they even give Sage a look? Precise percentages might vary, but experts today estimate 60% to 70% of the evaluation process happens before a single vendor is ever contacted. Will those in the market for a new ERP system ever find Sage? The answer is maybe – but not necessarily because of Sage’s efforts, but rather because others still hang on to that label.

As I wrote last year, I have never been a big fan of the “ERP is dead” mentality. To my way of thinking, although the acronym itself has lost a lot of its meaning over the years, ERP is a convenient label. While early ERP solutions were fraught with problems, and indeed some of those problems persist today, calling it something else doesn’t fix it.

Based on my conversation this year with Mr. Kelly I understand his intent. This statement was his way of sparking some controversy, something Sage had previously been unwilling to do. However, based on how vigorously some of his Sage colleagues have defended this stance, I worry a little that the spark has become a flame that continues to burn at Sage. This is not only troublesome for existing ERP customers and partners, but also for those start-ups that will eventually scale up and become full-fledged enterprises. If Sage wants to continue to provide the “digital heartbeat” for these growing companies, it needs to provide a logical path forward that doesn’t require any steps back.

Sage provides different products for different stages of company growth. Early on, startups might run Sage One or the newer Sage Live (built on the Salesforce platform, which allows it to take advantage of many of the cloud, mobile and social capabilities inherent in the platform). But as the company starts to scale, perhaps it makes a move to Sage 50c, the Sage product most recently enhanced with integration to Microsoft Office 365. Or it might go to Sage 100, Sage 300 or skip right on up to Sage X3.

But Sage itself admits that it needs to catch up in terms of new features and technology. To its credit, Sage is not satisfied with just catching up, but wants to leapfrog its competition. But will all products along the path have some of the nifty new features inherited from the Salesforce platform or added to Sage Live? An example of this leapfrog effect was seen in a demonstration that linked Sage Live to TomTom WebFleet to record mileage as an expense in Sage Live without any human intervention whatsoever. In the future it will be possible to record billable hours this way using a Siri-like conversation to “start the clock.”

Another leapfrog moment on stage was the introduction of Pegg, an accounting chatbot that can take input from Slack and Facebook Messenger (for now, others to come) to report expenses using natural language English. Pegg combines a natural language interface with machine learning and intelligence to potentially do much more. Sage even describes it as a “personal trainer” for your business, but I suspect it needs to mature a lot before that really happens.

But what happens to this innovation when the customer outgrows Sage Live? Does it too get carried forward? Does the integration to Office 365 carry forward? Can you bring Pegg along or your TomTom? When you look at all the different paths forward, you start to realize the devil is indeed in the details. And all the permutations can be daunting.

This potential complexity is the reason why I think the most important Sage Summit announcement of all was the Sage Integration Cloud. During the keynote, we watched Nick Goode, EVP of Product Management integrate Sage One with Expensify in just a few minutes and a few clicks. As Nick said on stage, “No code, no fuss, no maintenance, no techy skills required.”

It was so incredibly simple, you knew there had to be something more to it than met the eye. And there is. This is built on Cloud Elements, an API Integration Platform for application providers. And the author of the “add-on” product (in this case Expensify) has to do some work in order to allow customers to connect it this easily. The level of preparatory effort will depend a lot on the technology and architecture of the solution(s). But Cloud Elements has created a Sage Hub, which means in connecting it to one Sage product, it connects to all (relevant) Sage products.

This is incredibly important for those on older Sage products, particularly as Mr. Kelly reinforced a commitment he made to customers at last year’s Sage Summit:

  • No forced migration.
  • No end of life for any Sage products.
  • If you love your current Sage solution, whether it is desktop or cloud, Sage will support your continued use of it.
  • When you are ready to move to cloud, full mobility and real-time accounting, then Sage is ready to take you there.

Sage is essentially promising never to “sunset” a product. Sage is not the only company making this promise. Infor, which also grew through acquisition and faces similar challenges, makes a similar promise, although Infor is also clear on saying it provides no real innovation to these non-strategic products. That’s the difference. I sense that Sage is (or should be) going down this “no innovation beyond compliance” path, but has not been as forthcoming with that statement. But both Infor and Sage continue to support a very broad and diverse portfolio.

On the surface this might seem quite noble of both Sage and Infor, or perhaps simply the right thing to do. But is it? Do they actually do a disservice to these customers by making it too easy to simply stay where they are and continue to be severely limited by this old technology? We understand the fear of disruption of ripping out an existing solution and replacing it, but in reality this fear and these older solutions are holding these customers hostage.

In order to make it less easy to stay put, Sage will most definitely use the carrot and not the stick. And the Sage Integration Cloud could be a very appetizing carrot. By offering some add-on components that might help these customers emerge out of the dark ages, Sage could “show them the light” (so to speak) and get them hooked on the opportunities newer technology provides. But in order for these customers to make a giant leap to a newer cloud product, with mobile and social capabilities built in, they will need to drag these new components along with them. That is the role the Sage Integration Cloud can play.

And it will also serve to make the Sage solution much more than “accounting, payroll and payments.” Sounds a lot more like ERP (and more) to me. This whole positioning exercise sort of reminds me of when Prince changed his name to a symbol. Everyone simply started calling him “the artist formerly known as Prince.” Ultimately (and fortunately) Prince went back to just being Prince, only better than ever. I am still hoping Sage might come full circle too.

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