connected services

  • July 14, 2011
  • Something interesting is happening at Sage but it looks like the company isn’t ready to tell its whole story.  That’s a challenge if you happen to be hosting a combined partner and user group meeting which Sage did this week in Washington.  The company’s annual get together had its share of announcements and keynotes and the new CEO, Pascal Houillon, did a good job of introducing himself to the assembled masses.  He made several announcements too but I think some of the importance of Sage Summit happened between the lines.

    Houillon introduced important new directions for the company in line with its global parent.  That last bit, about the global parent, is important.  We think of North America as the center of the world but there are other parts and not all software companies hail from here.  While Sage North America (to use its full name) might be the biggest part of that empire, the parent organization still calls the shots and some of what was announced has already been rolled out elsewhere, specifically the rebranding, which I will get to.

    Sage is embracing three important directions and while some were discussed before, the global company’s momentum is now clearly behind them.  They include cloud computing, Sage Connected Services and a rebranding effort.  Then there’s what’s between the lines.

    Many of these changes have been in the offing and Sage’s commitment to them mirrors what much of the rest of the industry has been doing.  Because Sage sells exclusively through a partner channel and primarily to the SMB market, change has been relatively slow in coming though.  Part of the tardiness may come from Sage’s channel resistance and some from reticence emanating from overseas; regardless, the message I got was that change has arrived in the form of cloud computing, connected services and rebranding.

    Cloud computing

    Major CRM product announcements were relatively sparse at the conference in part because at least one, the 2012 release of the iconic ACT! product will happen in August as is traditional.  Last Friday the company announced SalesLogix Advanced Analytics, an analytics package that will enable SalesLogix users to crunch customer data and derive the benefits of better customer centric information and that counts as an announcement.

    So does the company’s announced commitment to cloud computing.  Sage already offers and SalesLogix Cloud edition so its credentials have already been established in cloud computing.  But where as the message to partners last year was more  like you have a choice, this year though choice is still a prominent idea, the clear direction of the future is cloud and partners are being advised to adapt their business models.  The unofficial talk I heard was that the company will introduce a cloud orientation that is more substantial in the next twelve months or so and this is where reading tea leaves becomes important.  More after we talk about rebranding.

    Connected Services

    Perhaps the most concrete and interesting part of Sage’s announcements is what it is doing in connected services.  Here the company deserves kudos for inventing something that none of its competition does quite the same way.  A company like Sage is the logical choice to create connected services given its large partner channel in the SMB space.

    Briefly, connected services was announced last year and this year the company has delivered some solutions including e-Marketing for Sage CRM, a solution for ACT!, SageCRM(.com) and SalesLogix.  Sage also introduced Business Information Services in conjunction with Hoovers as well as some others.

    The idea behind connected services is that the customer uses specialized functionality when needed such as when developing a marketing campaign.  The approach has two benefits.  First it saves the customer from having to buy or subscribe to software that it may not use frequently enough to justify paying for full time.  Second, the service comes with that other kind of service — real people who are experts and who can add value to the effort.

    Other cloud schemes may enable a user to access specialty software but that happens in a more conventional setting where the customer makes a purchase.  This is progress.  While other vendors continue to offer a plethora of software through online stores, the idea of connected services replete with professional services deserves consideration.

    Sage says they intend to roll out a raft of connected services, many developed by partners but CEO Houillon assures all that they won’t rush the process and that they’ll take the time to ensure reliability of the offerings.  While I can empathize with the sentiment, I think the company needs to understand that speed to market and reliability assurance need not be polar opposites.  In this market it is essential for a vendor to have both and Sage needs to put some giddyup on this idea while it is unique to their offerings.


    The Sage self perception is that the corporate brand, Sage, is not strong enough.  Customers of products like Timberline and SalesLogix think of themselves as customers of those brands rather than of products from the parent organization.  This should not come as a surprise given that the company has grown by acquisition.  Many customers may remember buying their solutions from another vendor so the brand association is understandable.

    Trouble comes when a Timberline user decides it needs CRM and a Sage partner has to go through a lengthy justification of, say, SalesLogix as a reliable product from the same company.  In other circumstances an incumbent vendor might have the poll position for CRM but Sage says that doesn’t happen enough and the company’s answer is to deemphasize the brand names and attempt to build up Sage.

    I am not sure of the wisdom of this approach especially considering that the strategy is to replace the brand names with numbers.  The naming scheme was not discussed but the idea is that Timberline, for example, might become Sage Accounting 300 or whatever.  Accountants might warm to the idea of numbers but I am not sure about losing all the Timberline brand equity.  I am told that this approach is being implemented in other parts of the Sage empire with great success but you can put me down as a skeptic.

    In my humble opinion, if Sage wants to build up its corporate brand that’s what it should do.  Messing with the other brand names seems like an attempt to solve the wrong problem but I am just reporting here.  The rebranding will take place over the course of the next 12 to 18 months and we need to take a wait and see attitude.  Some partners I’ve heard from like the idea and others don’t.  Sardonic rumormongers have suggested ACT!’s name be changed to Sage CRM 101 (LOL!).   We’ll see.

    The future

    To help partners adjust their business models to cloud computing and selling more and different business services, Sage Partner VP Tom Miller told us about one of the many education courses that Sage is offering its partners.  Called The Firm of the Future, the week-long course helps partners through a process that examines current and future business models and helps them build a plan to move forward.  Sage has always been education heavy offering partners lots of courses to help them succeed in business and The Firm of the Future is another in that line.  It’s a good thing in theory and many partners will benefit from it.

    My analysis

    Migrating to a cloud computing business model is complex and challenging for both Sage and its partner network.  While cloud computing can be accomplished with little re-architecting simply by making applications available on cloud infrastructure, this is a great opportunity for Sage to go further.  Most other vendors in the front and back office have developed products based on a single code set that can be deployed on premise or as SaaS and they offer a choice of single or multi-tenant models.  I think this is where Sage is headed or where it should be headed.

    The company now has many separate products based on different platforms, which it must enhance and upgrade individually.  While this is certainly possible it has a cost that a company with similar numbers of products and a more consistent code set doesn’t have to deal with.  As Sage contemplates its move to the cloud and in light of the effort at rebranding, I think it makes sense to expect more news from the vendor about consolidating its technology.  This is my analysis and I can’t find a Sage executive to give credence to my idea so don’t bet the mortgage money on this as a prediction.

    Nonetheless, if Sage wants to be more competitive and improve its brand position, it has to do more than change names.  Rebranding without some more fundamental effort to rationalize the product lines doesn’t make much sense and perhaps that’s what simplified product names is suggesting.  If Sage wants to present itself as a family of related products under one roof, they need to go for greater commonality among products.  To me this position is very interesting.  Partners may worry about their future and that’s understandable.  But no one should expect to hold everything constant forever.

    Cloud computing has been around for a long time and Sage and its partners have taken a conservative position regarding change.  The surest way to survive and prosper will be for partners to embrace change.  Even though all the pieces may not be in place yet, Sage has painted a reasonably complete picture of its future and it’s time for the partners to step up.

    Published: 11 years ago

    Sage took a major step in clarifying its position in the market when it hosted an analyst day in Boston last week.  The company has been around for a long time and has been one of the higher revenue generators for many years thanks to an assortment of products that span the front and back offices of SMB companies.  But the company grew through aggressive acquisition and that left it with a hodgepodge of products and a weakly defined strategy.

    A few years ago Sage had multiple overlapping accounting and CRM systems with weak integration and the product-line suffered in comparison to newer, cloud computing offerings from upstart competitors.  The company still has challenges ahead of it but in the last few years — a period that overlaps nicely with the leadership of North America CEO, Sue Swensen — the company has begun to put its house in order.

    Analysts had been treated to glimpses of a product strategy turnaround before, but last week’s meeting in Boston was by far the most cohesive delivery of Sage’s core strategy yet.  The company must have thought so too because in attendance were three high ranking executives including Guy Berruyer, Sage Group CEO, Swensen, CEO North America and her designated successor Pascal Houillon who will officially take over stewardship of the North American operation later this year when Swensen retires.

    Sage still has a plethora of products and even now speaks of returning to an acquisitions strategy when the time is right.  But the company is coming to terms with a need to refresh an aging product line and embracing cloud computing on terms that will cause minimal disturbance for its only channel to the marketplace — resellers.

    The last point is not made lightly.  Resellers are generally small companies that add value through consulting, customization and building long-term relationships that drip revenue into the bucket rather than pouring it.  Sage’s partners are not all technical vendors.  Accountants, auditors, bookkeepers and others who advise small businesses recommend many Sage products around the world.

    So there is little surprise that Sage’s strategy retains a three-tier character — cloud computing for the smallest, most cost conscious, new arrivals, a hybrid approach for the broad middle and updated traditional products for established businesses that want continuity and few surprises.  This is progress and it mirrors what many other vendors with large user populations — Microsoft and Oracle for example — have done.  There is no use in thinking about converting every conventional customer to the cloud in a short time and these vendors have done their best to support and, where possible, future-proof their customers.

    In line with all this, Sage added better definition to its customer for life strategy. Accounting and CRM are more sticky than either alone according to the company’s experience so, logically, one part of its strategy is to grow accounts.  But that requires multiple talents in its partner base or the alternative, cooperation between partners.

    Beyond delivery modes, Sage has a three part strategy to address the market.  Two parts of the approach should not surprise anyone.  Improve existing products in functionality and user experience and grow the Sage footprint within each account.  Implicit is this approach is a prime directive to improve the customer experience wherever possible.  So far all of this would be standard for almost any business software vendor.

    The third leg of the stool demands closer examination.  Sage began selling what it calls connected services a while ago and those services are the nucleus of a potential new vendor model that connects partners and customers as well as offering potential new profitability.

    Connected services can be anything and generally, these services constitute either things that Sage can do in bulk that its end customers spend disproportionate amounts of time getting right or highly specialized services that require outside expertise.  Some of the offerings include employee benefit services, legal assistance and tax compliance as well as more quotidian things like shopping cart, payment and backup services.  These go beyond software and make the whole offering stickier.  Other vendors should consider this approach.

    The thing about connected services is that Sage need not be the only vendor in the mix and an ecosystem is growing up around the model.  This ecosystem provides a way for non-technical business services vendors to access a big market and for Sage, or any vendor, to add value.  The model can and should provide a tollgate for vendors too presumably because they provide the service of vetting the third party’s work quality.

    This ecosystem most closely approximates the AppExchange form Salesforce but unlike the AppExchange, the Sage ecosystem is open to non-technical service providers.  A further advantage of this model for Sage is that it opens up a line of communication between it and the end customer that may not always be filtered through the partner.  While this can be a delicate matter, as long as the services provided are not competitive there should be no objection.

    However, the open 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.

    In the era ahead, increasing profitability in business software companies will depend on increasing the vendor’s footprint.  But there is a practical limit on how much software a customer might buy or lease and this is especially true in the SMB market where the number of users per customer entity is low.  Connected business services is more of a green field and offers greater growth prospects.

    Finally, connected services is a smart way to educate customers — even reluctant ones — about the realities and benefits of cloud computing so that at some point in the future a move to the cloud might seem less daunting.

    In many ways Sage has not changed much.  It still has roughly the same constellation of products but it has come to terms with the cloud and put together a future direction for its partners and customers that was hard to see before.

    The company will return to its acquisitions model because that is in its DNA.  But future acquisitions will probably have a cloud flavor and they will likely further drive Sage in the general direction of the cloud.  Very little, if any, of this approach was envisioned in “The Innovator’s Dilemma,” but if Clay Christenson writes a new edition I could see this as a chapter.

    Published: 12 years ago