Sage at a Fork in the Road
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.
Sage Hits a Milestone
Today Sage North America announced the 25th anniversary edition of ACT!, the contact management software.
What were you doing for a living 25 years ago? That would be 1987 and I can remember vividly. I was selling software for a company whose offerings ran on DEC VAX and PDP-11 mini-computers. We had a fax machine, VT-100 terminals on everyone’s desks and we were thinking about getting a phone system. Remember those pink message slips?
The VAX was the primary development machine and it hosted all the people in the company for things like word processing and spreadsheets. My company had been founded by a smart programmer which meant the VAX was his and we just lived on it. Whenever he wanted to compile a program the lights dimmed, screens froze and we went out for coffee.
I saw an ad for ACT! in an in-flight magazine next to some ads for steaks flash frozen in the mid-west and rushed to your door. As a sales guy, the load of paper on my desk and in my briefcase was killing me. I’d experimented with keeping data in a spreadsheet but it seemed like more work than it was worth. I’d also recently taken a relational data base course and dreamed of a simple database that could track my contacts and remind me when to call them again. I’d gotten far enough to convince my SE to write something like it. I almost got fired for using precious resources in such a profligate way too. Good thing I was crushing my numbers at the time.
Ah, the good old days. I looked at the ad with longing but knew that our CEO would never let a PC into the building and ACT! ran on DOS so all I could do was look and wonder when I’d be able to get my hands on it.
Twenty-five years is a very long time in this industry and it is a testament to ACT! and Sage and Pat Sullivan who invented it that ACT! remains relevant. Sullivan got it mostly right when he built the first version and Sage continues to keep it relevant for a large and loyal customer base that needs just what ACT! delivers. Congratulations to Sage.
Sage Charts Its Course
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.
Sage ACT! Turns 25
Seems like ACT! has been around forever. Actually, it’s just 25 years and while that’s an eternity in software, kudos to Sage for keeping the technology up to date with improvements like social and mobile access. The company has released a short video commemorating the milestone.
Today’s ACT! is a far cry from the product I first used in the 1980s running on DOS. I remember reading an ad for it in an in-flight magazine and thinking, this is it! Back in the day, there was no such thing as SFA or CRM and contact managers like ACT! and Goldmine were amazing. They ran on your desktop and soon your laptop computer and they became places where everything you knew about a deal was stored. No more lists, spreadsheets, and legal pads with cryptic notes and scribbled phone numbers.
Sure, CRM would follow with even more functionality but for many organizations and individuals, a copy of ACT! and a laptop were about all you really needed (add Word, PowerPoint and Excel or if you’re a geezer like me Word Perfect, Harvard Graphics and Lotus to complete the ensemble).
ACT! has a remarkably loyal user base and over three million deployments. And while most of those deployments are for individuals, a growing cadre of businesses — tens of thousands, actually — are now using the technology to support sales workgroups.
ACT! has prospered despite all this competition because it fits a big niche that demands simplicity, economy and that keeps up with the times. So, good on you SageACT! and happy birthday.
Sage Charts a New Future with Continuity, SaaS, Conected Services
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.