Sage and Salesforce Do the Expected
Sage and Salesforce put on a love fest on Tuesday to announce their partnership in which Sage has developed Sage Life, a product to enable small companies to connect their “customer, accounting, payroll and finance data into one system, accessible from any device, anywhere,” according to the press release. The wording leaves it unclear if the customer data is held in Salesforce’s traditional CRM or if it refers more broadly to ERP data. Sage Life will be out later this year and will likely be shown to the public at Sage Summit, a user meeting in New Orleans in July.
The shared press conference between CEOs Stephen Kelly of Sage and Marc Benioff, Salesforce, shed no new light on the continuing controversy over whether Salesforce was being pursued by a third party as an acquisition. For all we know Salesforce is or is not being pursued by an anonymous third party but certainly all of the likely contenders—i.e. vendors who can afford such an acquisition—have demurred when asked.
The fireside chat was held at a restaurant not far from Salesforce headquarters in San Francisco. Even if this was not the acquisition announcement many had expected, it was still certainly a news-worthy event. Sage is the second largest software company in Europe behind only SAP and the vast majority of its customers—85% according to Kelly—are still users of on-premise computing solutions to run their small businesses. This should be seen as a significant opportunity for both companies.
For Sage it is a significant upsell opportunity, albeit one that will go through its resellers. The danger for Sage is that its partners or customers will abandon the brand in favor of other cloud solutions such as NetSuite, FinancialForce, or other cloud solutions. On the other hand, Sage’s huge installed base represents a large community of potential users of Salesforce’s platform, Salesforce1 upon which Sage Life and any future products would be based.
Kelly was careful to note that he regards Sage customers as customers for life and that he wants to be their supplier into the future. It was his way of telling them that while cloud computing is the future of the industry, Sage would not be twisting arms to get its customers to upgrade. This is both good business and fine logic because it will take time to educate and motivate Sage’s existing partners to make the switch.
Still Sage Life offers many modernizations that Sage customers might gravitate towards such as its ability, thanks to Salesforce1 to integrate collaboration, social, and an array of other apps on a single handheld device. Significantly, Kelly said that the new application and its underpinnings is as important as the introduction of the iPhone for his customers.
Benioff had no comment when asked about potential acquisition rumors, a position which he, as the CEO of a publicly traded company must take to keep from running afoul of the SEC and Justice Department. Nonetheless, Benioff’s demeanor and business casual dress suggested that this meeting would not produce the kind of news some had expected. When asked specifically about Microsoft, a company once rumored to be a suitor, Benioff praised CEO Satya Nadella as an, “Incredible partner,” for his openness and the mutual effort to get the two software giants working together over the last year.
Benioff noted that Nadella’s Microsoft, is the “old Microsoft” that would reach out to software development partners to help them incorporate its products—such as office, Azure, Outlook—deep into their own to provide users with a well integrated experience. This is a posture that Nadella has taken with other software companies including NetSuite just last week in making a joint announcement during SuiteWorld. Some had seen this as a flirtation that would precede acquiring Salesforce but they were likely reading too much into the gesture.
At the same time, there was no mention of a Salesforce purchase of a minority interest in Sage, from time to time Salesforce has taken a minority position in other software companies; but not today. Others, like me, had expected this to be part of the announcement. For the most part the Q&A centered around relatively safe topics such as the need to treat customers well, the powerful combination of Sage and Salesforce in the market, and Kelly’s coming effort to transition Sage’s business model to reflect the recurring revenue aspect of cloud and subscription models.
It will be interesting to see if Sage Life is only the first of multiple cloud offerings based on the Salesforce1 Platform, or a one off. A lot depends on being able to convince partners that the time to get to the cloud is here, even for them. Failure is not an option for this transition and if the current partner base fails to seize the moment, Sage may have to consider either new recruits or a different business model.