Sage’s first Cloud offering
At Sage Insights, Sage North America’s annual partner conference being held this week in Denver, the company announced its first cloud based CRM product. This is a significant event for the company for a couple of reasons. First, until this point Sage did not have any cloud offerings and second Sage sells through a partner channel which sometimes lags over adoption issues. In this case, over 50 partners are participating in a pilot program for Sage SalesLogix which is an indication, perhaps, of the interest in the partner community.
The offering is hosted on the Amazon Elastic Compute Cloud™ (EC2™) infrastructure which gives partners the chance to sell a hosted offering without most of the deployment issues that would be associated with a conversion to a SaaS offering. According to the press release this offering will be available in June at $65 per seat. Most of the attributes of the conventional SalesLogix offering will be maintained because the deployment will be single tenant. For instance the architecture maintains segregation of company data and control over update release cycles.
This is a big deal for Sage and its partners. For several years the partner community appeared to be lagging the general market in acceptance of the cloud model but recent economic conditions may have convinced some to take the chance. Partners that offer SalesLogix as a cloud-based service will be able to offer a lower total cost of ownership solution and the possibility of additional connected services such as Sage’s email marketing service and other services in the pipeline.
This announcement needed to happen and it is another manifestation of Sue Swenson’s leadership as she tries to update all aspects of the company and products.
Sage Insights 10
Sage Software, North America convened its annual partner meeting, Insights, in Denver today. The meeting is Sage’s chance to speak directly with all of its partners and resellers about the business and its myriad product lines, to educate and to listen to their issues and concerns. It will also be the partners’ chance to receive recognition for sales performance in each of their markets.
Sage has always had a distinct business model, preferring to sell through a partner channel rather than direct and the approach has worked well. For a company with so many ERP and CRM products aimed at the small business and small enterprise markets, it may be the only sensible approach.
This year, the third under the leadership of Susan Swenson, I expect to see many new approaches and changes to the business models that govern the relationships with partners. I don’t expect fundamental changes — the company is not about to scrap the partner model at a time when competitors are discovering it. But I expect Sage will make good on strategies enumerated in its product roadmaps by more fully embracing cloud computing and other new ideas.
Sage had come in for criticism for not making a more emphatic push into cloud computing, for instance, sooner. But the fact of the matter is that it can only move as fast as its partner community. The partners’ proximity to customers has reliably brought back information from the field the information that the end customers Sage’s partners deal with were simply not ready for cloud computing.
I have two observations here. First, cloud computing does not carry the same urgency for ERP that it has for front office applications. Sales people might be on the road frequently and need the flexibility that the cloud offers but the people in accounting are not similarly challenged. On the other hand, and secondly, cloud computing’s cost advantage resulting in better total cost of ownership has put it on many companies’ agendas in the recession.
As a result, this edition of Insights should have a distinct flavoring of cloud computing as the partners come to understand that the path to providing their customers with a better cost profile, goes through a cloud.
The business model change issue is always big when a vendor has to consider moving from being a pure on-premises provider to a SaaS or cloud provider. I think Sage has done its homework and comes into the conference with a set of proposals and programs for its partners that will help them begin the transition. Nonetheless, the details matter and we will all be reading tea leaves later today at Sue Swenson’s keynote.
Sage, Amazon go to market
Who ever said Monday is a slow news day?
Sage North America, vendor of SalesLogix and many other ERP and CRM products aimed at the SMB market, announced a partnership with Amazon today. Sage said its cloud strategy will involve hosting its SalesLogix CRM product on Amazon’s EC2 cloud infrastructure.
The announcement puts Sage clearly into the cloud computing discussion along with Microsoft and many other vendors utilizing the Internet as a transport mechanism for hosted software. EC2 will host SalesLogix software for those customers who need CRM functionality but who do not have in-house IT operations. The move potentially saves Sage customers significant annual costs as they leverage IT resources and labor from the cloud.
This solution is similar to Microsoft’s approach and, for the customer base that Sage addresses, makes good sense. Leveraging EC2 gives Sage customers the ability to access a familiar set of applications with greater convenience and better cost characteristics than conventional on-premise applications.
To strengthen its position in the cloud, Sage should now announce additional capabilities such as integrating other cloud-based applications into its solution set. Perhaps additional announcements will be made in the run up to Sage Insights, the company’s annual meeting with its business partners to be held later this month in Denver.
Sage evolves on-demand services
A long time ago I wrote a white paper about how on-demand technology would change business. The paper covered all of the ideas you’d expect including lowering costs and improving access to on-demand applications. But there was another part of the paper that speculated that if technology was that easy to come by then the next thing to look for was enhanced service based on the technology.
In other words, technology access would cease being a gating factor in executing business processes. Replacing technology as a gating factor would be having the smarts to use it optimally. I envisioned that service companies that had operated more or less locally would, or at least could, become national or global by selling their expertise based on the on-demand technology. The computer and telephone enabled public relations firms to become national in scope, but a bit more is required for a marketing services company or a design company for example.
It has taken a long time and it seems what happened first and what I had not fully foreseen was the globalization of applications based on platform technologies. Right now, Salesforce appears to be the most successful practitioner of that art. But now we appear to be at the beginning of an era when business services will become global or at least national based on the consolidated expertise of some organizations.
Judging by some of Sage Software’s recent actions, that globalization might be taking off at the SMB end of the spectrum. Recently, Sage announced new marketing services for its ACT! customers. The first service will be email marketing available on-demand. Now this may not seem to be a very big move since there are many independent email marketing providers already on the market like Constant Contact, ExactTarget, VerticalResponse and many others (you get 36 million hits on Google).
But don’t lose sight of the bigger picture. With a three million user installed base in North America that has many marketing needs beyond email, Sage is poised to build a services engine that could eventually rival its software business. This would be a very smart end run around the company’s own business model limitations. To be precise, Sage sells its products exclusively through a reseller channel. The resellers deliver product, customization and advice leaving slim pickings for Sage beyond the license revenue.
The primary way Sage grows in this model is through product sales and by recruiting new partners. But no market is infinite and the market of resellers is relatively small compared to the market of end users. You see where I am going. There is nothing prohibiting Sage from offering services based on the products it makes and the installations that its partners effect. As a matter of fact, offering this kind of service, which only makes the end customer more productive, should drive demand for the products themselves. Looks like a smart and virtuous circle to me as well as a new kind of on-demand service.
I believe the era we are entering will be constraining for many companies in several ways, not the least of which is transportation. As fuel prices resume their rise with the recovery, companies will need to find ways to take travel costs out of their value propositions. That should mean a need to enhanced marketing as in, how can we use marketing rather than face time to close more deals?
The answer to that question goes beyond email marketing and probably beyond the meager efforts that so many SMB companies now use to sell their products. Centralizing key services that can be delivered at scale via the Internet will enable SMB’s to continue to compete in select markets against larger competitors. It is also a growth market and who doesn’t like that?
Summits and a synthesis
Summit must be the secular name our species came up with when we decided that certain business meetings had to have the same weight as religious conversions. I am not trying to be contentious by using this vaguely religious metaphor so please consider me a radical centrist. But after a few months of vendor meetings for the analyst community in which each took us to the mountaintop to survey — via PowerPoint — their future visions for the valley below, I am almost all summitted out.
The religious reference struck me yesterday at SAP’s, very good, analyst summit in Boston because, like some religious conversions, there seems to be a necessary pain component intended to make the conversion stick. In most analyst summit meetings the pain comes from sitting still for many hours of the aforementioned PowerPoint presentations.
So, what did I learn? Well, lots though I am a CRM guy and much of what was proffered were visions of a broader valley. The biggest impression I came away with was intramural since, having been to Oracle Open World and Dreamforce, I am in a mood to compare, contrast, synthesize and perhaps even prescribe.
Put everything I saw at these and other conclaves into a food processor, run it on high until something resembling peanut butter forms and the result, to me, looks like this. SaaS computing has won the battle, maybe even the war, but the victory is not enough to secure a homogeneous peace. Translation: SaaS is important and the future of software, but there are multiple reasons why it will not reign supreme, not for a while at least.
A few weeks back, I noted that there are still some 6,600 mainframe computers not only in existence but in use and it will be some time before the population dwindles to the point that, like the B-24, there is a small handful of them capable of doing what they do. The same is likely for premise-based enterprise software.
It’s not that on-demand technologies can’t do everything that the premise-based products can, rather it is that the premise-based solution vendors have examined alternatives and decided that retrofitting their wares with some of the best benefits of SaaS is enough for the moment. It is also because customers of some application types are not ecstatic about sending their applications to the cloud.
Such has been the messaging that SAP, Oracle, Microsoft and Sage have been selling for some time now and it has legs. No doubt this is vendor-generated paradigm extension. Most important to this strategy has been the effort to retrofit their products with some of the popular attributes of SaaS.
For a long time things like better TCO, near-instant deployment and great configurability characteristics were the exclusive province of on-demand solutions. But much of that has changed so that now enterprises that that once looked longingly at SaaS solutions have some reason to put more gas in the old car and drive a while longer.
That was a strong message I got from SAP — no they don’t and won’t offer every product on-demand but they can still deliver on the hot button customer issues, to a degree. I am still puzzled by the customer who said he has sixteen instances of an SAP system and that he schedules updates and maintenance for all of them. The SaaS-ist in me says, why?
To be sure, I don’t see any new applications coming to market that have not been conceived to be SaaS and that marks an interesting point in software evolution. It’s quite possible that we are witnessing the bifurcation of the software business and that a part of the business will be on-premise well into the future. That part will continue to diminish as a percentage of all software, especially as platforms like Force.com with its more than 800 applications continue to expand.
Perhaps this even means that, for a while, new applications will be smaller and focused on market segments rather than the all encompassing front and back office systems that have occupied our attention for the last couple of decades. For example, Twitter and Facebook have huge numbers of subscribers but they are not nearly as complex as an ERP system.
So my conclusion, after a lot of airports and hotel rooms and as the circulation returns to my backside, is that we’ve achieved a kind of status quo between premise-based solutions and the cloud. The frontier will keep moving to the clouds but there is life in the old paradigm. And I suspect this will be a good thing as we turn some of our attention from software wars to the substantive questions of how we do business after the bubble and crash, as liquidity remains a serious challenge and, in the wake of Copenhagen, in a world more acutely conscious of sustainability.
