When you get to a fork in the road, take it that’s what Yogi Berra once said and convoluted as it might seem, it’s wise advice. This wisdom encompassed Sage’s announcement today that it was selling off two of its front office CRM solutions, ACT! and SalesLogix to Swiftpage.
According to the press release announcing the sale, “Swiftpage provides digital marketing service solutions for micro and small businesses and, as an existing ACT! and SalesLogix partner providing integrated E-marketing services, is well positioned to advance these products. Sage remains committed to CRM via its global Sage CRM solution and will continue product investments to ensure it meets the needs of our SMB customers.” You can access the full press release here.
Good. I really mean that.
ACT! and SalesLogix have a big presence and loyal customers — more than 2.5 million for ACT! alone. But they’ve become non-core to the business. They’ll do well with a new sponsor as the press release intimated: “Swiftpage has partnered with Sage for years, and knows our products and customers well. With access to new technology and resources, it can deliver even more innovative, and integrated, products and services that help small and medium sized businesses convert prospects, retain customers and grow.”
Swiftpage is responsible for the Sage E-Marketing connected service, and Sage will maintain a 16.1% stake in the new ACT/SalesLogix operations, so the relationship will continue.
Mergers and acquisitions happen all the time in business. Sage knows this rather well as a company that has grown by acquisition. This move makes sense because it acknowledges that the market has changed since these acquisitions took place and because it enables the company to better focus on clear market realities in the CRM market.
Sage has had too many CRM solutions and the situation had become increasingly obvious over the last few years. Sage’s attempts to rationalize how the three solutions fitted into an overall market strategy, which included integration with its numerous accounting systems, was at times strained. Unlike its accounting packages, many of which address specialized markets like construction, manufacturing and real estate management, the CRM strategy was more based on company size and in the highly scalable SaaS age, that segmentation didn’t work so well. It also saddled Sage with three code sets that needed to be maintained and upgraded, an expensive proposition over time.
So with this divestiture the company gains simplicity in the form of one code set and market reach because the remaining product, Sage CRM is already SaaS based and capable of being installed in a variety of situations including cloud and on-premises, a tactic taken by all of the major software vendors except Salesforce.com.
Over the last few years, the CRM market has become inundated with new best of breed offerings that leverage social techniques like crowdsourcing and other social products like Twitter, LinkedIn and Facebook. Social techniques are proliferating in solution areas like marketing and service but also they have opened up many new niches where companies like GetSatisfaction, HubSpot and Awareness play.
But Sage had missed some of the social revolution focusing its attention instead on its Partners and SMB customer base and the front to back office business processes that they care most about. Nonetheless, as social has penetrated deeper into the front office, SMB’s have taken up the social challenge and Sage has needed an answer. With a single product and a robust API set the company will now accelerate in this critical area.
Sage’s response to market challenges in general have to go through its sales and implementation partners. It’s a diverse and competent group but each wants and needs different things and this reality drives multiple competing demands of its three CRM maintenance groups.
So, in one stroke, Sage realized some of the value in its ACT! and SalesLogix brands while enabling itself to better focus on core CRM in a way that I do not believe will be dilutive of its strengths. And as far as the partners are concerned, CRM was always a specialized offering for them; their primary focus has been ERP. While many carried a CRM product, more often when a partner found a CRM opportunity embedded in an ERP need, the partner had to bring in a CRM specialist partner. So the simplicity of one CRM product will be welcome.
So, I think this is all good for Sage. It must have been a tough decision especially because it will mean employees and likely some partners changing allegiances but that’s business. Moving forward with Sage CRM the company can unhesitatingly launch a multi-pronged on-premise, on-demand, cloud services campaign without worrying about which partners in the other product lines will be adversely affected. Let the innovation begin.
For a little background, remember that Sage grew by acquisition, one product and its development and marketing team at a time. By last year, Sage had become the Babel of the software industry with a mix of products, mostly ERP, with different code bases and even file systems. Notice I said file systems and not databases because some products were, and still are, running on flat files.
When a company rebrands it can either be interpreted as a positive and forceful thing or it can be seen as something else. The idea last year was to replace a product name with a unique Sage brand name containing a number like Sage 50 for instance.
Since Sage has multiple overlapping products, tongues began to wag. Would ACT! become known as Sage CRM 101, for example? We didn’t know. To many of us, the rebranding resembled chair rearrangement on the deck of the Titanic.
But fast-forward a year and things have worked out. The rebranding was not an isolated exercise and the company has asserted itself by identifying products that are core to its mission and those that are not. Non-core products, which tend to run stand-alone, are not destined for the dustbin but they are being treated differently than the core products, which can be combined in an integrated solution.
Sage has three CRM-ish products, ACT!, SalesLogix and SageCRM. ACT! is CRM-ish because it is billed as a contact manager, not specifically SFA. SalesLogix is an older CRM product built for a Windows client-server world that has received many upgrades and SageCRM is a SaaS product that can also be installed on-premise. And the winner is? Well, there are no winners and no losers. But if you want Sage’s most modern (and I didn’t say feature rich though that is a debating point) CRM you’ll want to go with SageCRM because it is the one that is “core” and will receive the lion’s share of development dollars and integration support with ERP going forward.
The old Sage approach was to sprinkle development dollars across the whole portfolio sometimes paying different brands to reinvent the wheel. That was necessary because each product had a constituency (read reseller network) brought along in the acquisition. While some resellers carry multiple products, many just focus on one or two products on which they base their business and this is key.
So all this preamble was needed to say that one of the biggest areas of re-thinking for Sage is not about any single product but about its go to market strategy and its resellers. Sage doesn’t sell direct and over time, its resellers may have gained the upper hand in driving product development and enhancement for their pet products regardless of the overall good of Sage. It’s human nature. As Sage tries to rationalize its product set and brands, it is slimming down the number of code bases it has to support while trying to bring along its partners — a non-trivial task.
Nonetheless, Sage has to deal with (and has begun the process over the last few years) a marketplace that demands social, mobile, analytic and real time solutions. And it’s core/non-core strategy is focused on freeing up the resources needed to give the partners products with the ability to compete in the years ahead.
Does everyone like this strategy? What do you think? But more importantly it’s working. During Houillon’s keynote, they showed a powerful video of customers using Sage products from the iPad driven customer meeting to the back office do-we-have-it-in-stock query, to placing the order and billing. It looked very cool and was especially impressive because the technology was focused on the SMB market with the clear message that almost any business can afford to work this way and this is how it will be done in the years ahead.
Partners that have become successful writing programs for reports or managing systems or just running cable might bristle but there aren’t many of them. Most understand there are major changes happening in the industry and the name of the game is “adapt”. Most worry about driving enough revenue from continuing operations because they are accustomed to the license and services model. I would only suggest that there is an important difference between revenue and profit and everyone would be well served to revisit that distinction.
There is a raft of new thinking about ideas like churn, monthly recurring revenue, deferred revenue and other things that are common to the subscription economy. The information is out there and I have to believe that the more progressive partners are doing everything they can to learn about it. For now it was good to see a CEO like Houillon use words like “tough love” to give the troops the idea that the path has been set and they aren’t going back.
Perhaps the most interesting CRM development to come out of Denver this week was Sage’s unveiling of its SaaS or cloud offering. But now that the initial hoopla has died down (mine included) it’s time to take a more measured look at what is being delivered.
As I mentioned in an earlier post on my blog the announcement means that Sage is offering a hosted version of SalesLogix but not one that has been re-architected to take advantage of multi-tenancy. The company still legitimately claims a better total cost of ownership profile for SalesLogix because the arrangement off-loads from the partner the need to support a physical installation and from the customer, the cost of most infrastructure. The usual configuration and modification cycle remains the same however.
So is this good or not? I say both.
First, let’s ‘fess up, this is not SaaS or cloud computing, except in the broadest possible definition you can imagine. Amazon’s EC2 compute services, which delivers infrastructure as a service (IaaS), provides the cloud aspect. It’s really ASP or application service provider, a model that waned away in the last decade for competitive reasons. ASP is back because the applications are no longer client-server and thus have lower server overhead; that single change should make the model much more competitive.
Sage is betting that this change is enough to help its partners battle against NetSuite, Salesforce and RightNow (and others) by enabling them to check off the SaaS box in any bake-off and that’s a good point. In fact, in briefings with SVP Larry Ritter and EVP and GM Joe Bergera that scenario came up. Sage partners can continue the discussion about CRM and business issues with prospects once they’re past the SaaS beauty pageant and for them it’s a good thing.
Sage’s secret sauce has always been its partners. The channel may be hard to administer at times but one thing you have to admit is that partners get right into the shoes of their customers in ways that software sales people simply cannot. No wonder then that most SaaS companies are trying to breathe life into a channel solution. Microsoft has sold through a channel for a long time, NetSuite is building one and even Salesforce has its version with its AppExchange developers who sell seats as a matter of course.
Sage’s strategy from here is to enable a hybridized approach to its solutions by offering the choice to customers over core CRM functions but increasingly to also offer complementary SaaS solutions that leverage customer data wherever it happens to reside. That may represent an optimum for this business model, at least for now.
On the other hand, though, Sage seems to be taking its time bringing out complementary solutions and appears to regard that as its domain. It would be better if the company opened up this space to more competition and contribution from partners and ISVs. A more open approach would enable Sage to stock its catalog faster and make the promise a reality sooner. The company’s statement so far is that it’s going for quality over quantity but I have a mild disagreement here. I think it’s better to look for quality by letting a thousand flowers bloom and picking the best, rather than by over controlling the process.
SalesLogix in the cloud takes the company a long way to delivering lower cost solutions but Sage still has work to do. Its customers represent a market very much oriented toward operational efficiency as opposed to, say, customer intimacy. It needs to deliver low cost, easy to implement and deliver solutions, a quest that never ends. Now that infrastructure has been dealt with Sage can focus more attention on business processes and vertical deployments, which is always on its roadmap.
So to net it out, Sage was the odd man out in the hosted services derby but that changed this week because Sage is now in the hosted services game. It’s a solution that might seem odd to a SaaS purist, but it fits the special circumstances of a channel operation. I think we need a new name to distinguish multi-tenant SaaS and cloud computing from solutions that simply use IaaS, something that is assertive rather than pejorative. ASP anyone?
A lot happened at Insights, the Sage partner meeting held in Nashville earlier this month, though not necessarily at the press release level. I was there and got a sense of change happening. It was the first anniversary of new CEO Sue Swenson coming on board and our first opportunity to see the imprint she is making on the company. Last year Swenson had been with the company for only a matter of weeks and as CEO could only talk about the future. With a year behind her some results are apparent but the expectation is that there is a lot of work ahead.
The big takeaway I got from attending Insights was of a slumbering giant was waking up. I was a bit surprised but also happy to see Sage embracing social networking in ACT!. Twitter and Facebook integration are on the agenda followed by other social media. As social media continues to increase in popularity you can bet more CRM vendors will take it on. My big question is how will Sage partners deal with it?
One of Swenson’s early moves was to bring in a new CTO, Montasim Najeeb. He’s taking a hard look at products, architectures and all the things that go into making whole products. Importantly, he’s a technology guy with business street cred. His resume reads like a mini-biography of Silicon Valley with senior positions in product and product strategy for such companies as Oracle, PeopleSoft and WebMD.
One of Najeeb’s challenges, which I think he acknowledged in his keynote is reviewing at a product portfolio that grew by acquisition and now looks like the Noah’s Ark of accounting and front office software. Noah had it easy by comparison — he could keep things apart. But in this era, companies are looking for economies that come from consolidation and part of Najeeb’s job is to modernize products and rationalize the portfolio while balancing the needs of the partners who sell the products. As G.H.W. Bush might have said it — Tough job. Gotta get it done. Wouldn’t be prudent not to.
Another new face in the executive ranks is Jodi Uecker-Rust President, Sage Business Solutions. She was previously corporate vice president of Business Solutions with Microsoft and COO of Great Plains Software. That’s a good background in this space. Uecker-Rust has a lot on her plate and will be working closely with Najeeb, I think.
The portfolio strategy left the company with many products that were and are architecturally distinct. The overhead associated with managing so many code sets must be pretty big. At some point, a prudent manager needs to take inventory and begin a consolidation process and that’s been over due at Sage.
One reason consolidation has not taken place, I think, is the way Sage goes to market. The company sells through a reseller channel. The model has some definite strengths and Sage is not the only company in the market to employ it. There’s no question though that an indirect channel adds complexity to decision-making. You can’t change a product too much, regardless of how beneficial the change might be, if the partners are not behind you. Not surprisingly, the company made multiple gestures of support to the partners and tried to reassure everyone that any changes moving forward would be net positive.
All that being said, the CRM/front office applications seem to be in good shape. Last year the company announced a multi-year plan (the 2010 strategy) to rationalize the CRM products, making ACT! work better with SalesLogix and incorporating new Web technologies. So far all that seems on track. I think there’s more work to be done relating to Web-based applications and no one debates that.
The next one to three years will be important for Sage. The company needs to make progress on some product upgrade and migration issues that, in truth, are over due. The good news isn’t hard to find though. Swenson appears to be making some good moves and tough calls and the partner channel is global and energized.