Sage News and Discussion

Please archive this post so I can do an 'I told you so' of the century I just thought of something. Maybe I'm a conspiracy theorist, but there is the possibility that Sage was genius (for them, sux for us).: They just pushed all clients up to 21% maintenance minimum. We think 'hurumph', just watch how many clients drop maintenance on them (I just had 2 do so already). After all, most clients aren't seeing much value since so little is changing with the product. Fast forward 1 year. Windows 8 ships and say MAS90 (that's what I'm calling it for now) is no longer compatible for some reason... Ooops, look at all you fools that dropped maintenance.. But, the oh so nice Sage is feeling generous and benign so you rather than pay that big bad, 50% off discount spread to get back on maintenance (which we'll never see again because of this and it will be the old 100% + ""penalties"", you merely just switch to subscription for a mere 25% or so of the cost to get back onto traditional maintenance (cough...per year...cough). And you know damn well the minute MAS90 becomes incompatible with Windows 8 Sage's INSIDE SALESFORCE will be raining down on the orphans like a ton of led while us lemmings are running around with our hair on fire billing 15 minute increments fixing error 47's for them since they dropped maintenance and don't have support. Now since 90% of us ain't gonna be making the quarterly number, the inside sales folks take them onto subscription and we all get jack squat. This is all Sage's way of having to put very little R&D into the software but avoid any and all attrition and actually grow annual revenues substantially.

PLUS, now virtually all these subscription clients will be on ""Gold"" support (Sage will only mention the -$10 off silver option if they truly fear a client loss) and you now will get zero support revenue from your entire client base. Now that all support calls go through Sage, the 'closeness' of the relationship with 'your' client (not any more folks) has now dwindled substantially. And if any of you have employees and aren't 1 man bands, this relationship with the client is truly over because clients have already become far less loyal to a var. There ain't no way they are going to pay you much for what sage is forcing them to pay for. You can take your value pricing and 'just take on the 'good' clients' attitude and shove it because there won't be enough clients overall to survive. Add to that, the final flailing cardiac arrest moments of the majority of small clueless var's who decide to drop to $100/hour to make their monthly mortgage and health insurance payment and this business is now going to melt down over the next few years.

Can I make an addition -- I commented on this elsewhere but I believe Sage's end game truly is the 1/90/0 requirement. I can easily see Sage adopting the following across all their product lines/categories: - One new sale a quarter and - 90% renewal rate or you get 0% commission on any maintenance Think about how much money they'll rake in when/if this change happens in 2 years and their consultants who keep customers happy but are not generating one new sale a quarter find they no longer receive a penny of commission. I believe broader future change to the partner compensation model is what this new subscription announcement is about.

Sage has officially just fired the first broadside in the final publisher industry push to wipe out all but the most productive high volume selling var's. They don't need us minions selling into small geographic niches. They know many of these products are 'dead.' They know that overall the growth rate of Net new names has shrunken dramatically and will likely never come back without a revolution in technology of which nothing is currently even on the horizon. If they lost 90% of us, that might only impact their revenue 20%, but this move doubles their annual revenue (like when they first went to maintenance from per upgrade pricing). Mission accomplished. They keep their direct salesforce to sell where there is still signs of life in net new names (X3) and keep a 'wink wink' policy in place to keep the better X3 var's happy to sell into geographies Direct can't and will happily waive the quarterly deal to those of them they feel they still need. Sage now carpet bombs the existing clients with 'connected services' so that instead of $110/month for mas90, for a mere extra $10/month/user you can have sales tax, and for another $10/month you can have payroll tax filing etc, etc. Honestly, this is F--cking SHEAR GENIUS on their part. They know only a controlled percentage of companies will switch off MAS90 due to the pain of switching.

Switching costs will keep most on Sage -- until they start to look. Then the issue will be whether there's an upgrade path. I think Sage probably has some research into how long they think a customer will remain locked into Sage on-premises and it's probably a lot longer than we'd imagine.

@WayneSchulz there is no 'partner compensation model.' This is the END of the partner. Might take 3-5 years, but its over for 90% of us. Even the mighty blytheco's and DSD will have to totally ratchet up their spend on marketing and sales and service to ensure 90% renewal rate. They will literally have to constantly poll all customers and immediately fire any who are considering either dropping maintenance or subscription because if they fall below the 90% threshold, their entire cash flow spigot will immediately shut off after a 3 month grace and could bankrupt any of these big guys within 60 days . This might be 5-10years down the road as this change happens but they are screwed

@WayneSchulz Exactly. And I bet over the next 3 years, a substantially number of the bigger 'mature' players copy this model. Microsoft has been pushing all larger customers (non-erp) into their 'software assurance' which is essentially buying 3 years of subscription at a time. Only difference is software doesn't stop working. Once all the big boys like SAP & Microsoft do this, and the SAAS guy's are already here but will copy the 'you better sell units or you lose all your revenue stream' policy all that will be left is the crappy little mom & pop software publishers selling $10k soup to nuts software based on Access over their internet via their 1990's Frontpage developed websites. Now fast forward 15 years after they have decimated our industry, they may realize they still need folks like us to switch companies from company A's subscription to theirs (like Satellite vs. cable). They may create a model for somebody to make a living again, but we'll be long gone.

Also, they realize the many of us owners are not that far out from retirement and social security (ha ,, if that will be around) . The amount of blood exiting will not nearly be replenished by the amount coming in. They have also just wiped out almost all value that the Blytheco's or DSD's had in their business beyond any IP they have developed.

I'd suggest that one of the competitor's will be smart for a few years and stick to the current model and offer all sorts of carrots for MAS var's to switch to them and maybe even build a conversion utility. This will chink away at some percentage of clients and a material percentage of var's (sage wants to lose us anyway) and 5 to 10 years down the road, that company will just do the same. If you ask me, SAP Business One would be the perfect product to attack the Sage channel. Same price points, similar functionality, very refreshing looking to existing clients, not too complex like Dynamics or Epicor,

So now that I'm Mr. Doom & Gloom conspiracy theorist, does anybody see how I could be totally wrong on this and that there is some scenario where this all ends well for us and Sage as loving partners?

Only thing I could think of, is after the fallout, the survivors will substantially raise rates or force an annual fee to do business and eek out a small living and everybody else will be gone. But since these products are all on 'maintenance mode' how much work is there to do future upgrades? Considering MAS upgrades are now measured in hours to a few days, where's the model here? What services are you going to sell them? A few guys could build a niche business in scripting, ecommerce etc, but most of us are toast. Guess I don't have to care about Obama's 'tax the rich' policy because non of us are going to be 'rich' making $200k/year. Hell, maybe I can get in line for some of those entitlements.

Time for a new Meeting of the Minds and not leave the conference until we come up with a new business/organization to survive into the future... Doing nothing and bitching here is the beginning of the end.

Mark - I'm up for a meeting - I think we should first schedule it on a conference call with a tightly controlled agenda. I'm not looking to rehash Sage's decision making or rationale. We could start with: Premise: You make zero on renewals. Design the business model that includes Sage or not. Assume any other software publisher eventually comes to the same requirements (zero margin on maintenance) so simply finding a ""less evil"" publisher should not be a suitable option.

@WayneSchulz I'm with you. Switching to a more 'normal' publisher like SAP or Microsoft is only a band-aid. We have to assume, like when SOTA did this in 1996 by going to maintenance, this is going to become the norm for all in 5 years. It might be a band-aid worth considering for a bridge period but a bandaid.

I've been eying up business intelligence. At first I thought these publishers would all build it in, but so far, everything I've seen sucks. The vertical BI guys are impressive, like Qlikview or Tableau. The problem is their margins haven't been attractive enough (averaging 25%). What if we approached them as a large group and requested a higher margin by offering them access to us to marketing to our huge joint client base. It's ideas like this I'm thinking about

I think it's critical that we get our shit in gear - quick. I've been stumping for expanding this group to include heavy marketing elements to counter Sage's insanity. I would want that on the agenda. Maybe more folks will see the value in that now? No one is safe with that bullshit 90% requirement. As @MarkChinsky stated above, even the big companies will have problems. In fact, the bigger companies will have more problems because they have more dead wood / marginal accounts due to their marketing efforts and inheriting those accounts from other resellers. Sage is creating a schizophrenic channel - internal and external. The one area that I disagree with Mark is that I don't think there is genius going on here. I think it is heavy-handed moves by leaders (Pascal and Joe) that simply do not understand a channel sales model and do not understand their current product sets and do not understand the current customer base.

@PeterWolf I'm not saying I like what they are doing, or that it is 'nice', but if we all flew the coop tomorrow, but they execute on this they gain more revenue, than they do if they didn't do this and kept us around.

@MarkChinsky - You are a believer in free markets - things don't happen like that. They have pigs that they think they can put lipstick on and sell as prom dates. You can't do that direct / over the web. They probably drool over the Salesforce.com model but guess what? They had / have a sexy product. Sage doesn't.

@PeterWolf So what would you suggest instead of a free market in this case? The government come in and tell Sage they can't cut var's out of the equation?

On thing that I disagree with Sage about is they repeatedly say they think Salesforce.com is only a pricing model. I think they could not be more wrong. I think what Salesforce.com represents is zero effort config, maintenance and synchronization. Sage is whistling past the graveyard if they think pricing is the cure all. More I think about the subscription pricing the more I think it's financing for win backs and sub 5 user deals. Don't see how others will do the math (provided there are lower priced options) and select subscription.

@WayneSchulz This is just a first step. In 12 to 24 months they will only offer subscription... It helps cusion the financial cash flow blow and allows them, their systems and prospects to start to adjust to the concept.

Agree though I think they will grandfather in existing users to continue paying on the old model -- until such a time as an Excel spreadsheet in Irvine tells them that flipping the switching and changing the grandfathered people to subscription will not be a draw on cash. Also don't rule out a sale or acquisition in the midst of all these plans which could change Sage's outlook.

I truly don't think any of their plans include anything beyond 12 months. My guess is these guys were put in place to get results - now. If they don't, they will either be gone or will revert to a more aggresive tact which they will make up at the time. Absolutely reactionary managment, driven totally by next quarters results. Personally, I think it is a hail mary and they will not hit their targets.

+1 Mike -- I do think these guys are here on a mission to boost top line revenue to 5% or more growth (which is in line with the other operating entities). Long term I do not see this being a good path for Sage any more than kicking all the CPAS out of the channel so they could go recommend QuickBooks was a good move.

I believe that when Sage jiggled tier initially they made a grave mistake in not accounting for the number of partner mergers that would happen.

Amen @MikeFitzgerald - it seems like the inmates are running the asylum. Some of these plans are sooooo close to being good. I can't figure out why they can't tie them down to make a win-win-win for Sage, customers and channel. They keep coming up with lose-lose-lose.

I don't disagree with any of the comments here about the recent Sage insanity vis--vis the channel but I do think the Mark's basic premise of assuming that when Windows 8 comes out, it will cause a mass requirement of ERP upgrades may be a false premise. I've tried to play that ""it's a new operating system so you're gonna have no choice but to upgrade your ERP or you'll be dead"" card numerous times, and on plenty of occasions it's fallen flat because it just hasn't been accurate. It's amazing how succeeding versions of Windows frequently manage to successfully run earlier versions of software that were designed for earlier OS versions. Heck, I know someone on Win7 who's running a standalone version of Accpac for DOS, for goodness sake (it's an archive copy, not live, but it works fine)! Plus, while Win8's release will probably result in the quick demise of WinXP, it's safe to say that Win7 is gonna continue to be around, and available, for quite a few years afterwards either thru official or unofficial channels. Believe me, I wish I could use the ""new OS won't run your old version of ERP"" as a requirement to renew maintenance more frequently, but you can't argue with the technical facts.. at least as I've experienced them.

I believe this is the first one that will be 64 bit only. That alone will break a lot of older apps. What about all those clients still happily running FRx on version before 4.5? From: do-not-reply@socialcast.com [mailto:do-not-reply@socialcast.com] On Behalf Of Ken Adams Sent: Thursday, March 08, 2012 1:27 AM To: Mark Chinsky Subject: Re: [90 Minds Consulting Group] Please archive this post so I can do an 'I told you so' of the century I just thought of something. Maybe I'm a conspiracy theorist, but ...

@MarkChinsky Those clients will expect us (for free) to setup a virtual machine, and configure it with 32 bit to access MAS 90.

Same song, different verse. This just in from a client that took advantage of the off plan renewal program last March. ""The only reason we are even a current plan holder is because of our off-plan renewal. As I mentioned in some of the posts and we discussed via email, our Mas90 needs are so basic we cannot justify the costs involved with one of the business care plans."" Maybe Sage should take a different tack (a la JC Penney) and LOWER their renewal fees. As part of the lower plan, they amend their EULA to deactivate the software if you ever go off plan. In conjunction to this change, they shut down open access to the KB AND to ""The Community"" so freebie support is eliminated entirely. The advantage of LOWER maintenance fees is that total support $$'s will grow because the perceived value of being on plan outweighs the financial disadvantage of the lower renewal fee. They would also eliminate the roller coaster effect caused by users going off plan then coming back on for the ""deal"" only to drop again in the second year. More users on plan for less money equals more support dollars for Sage.

I can only guess that Sage is hedging against expiring codes because internally they're arguing that they could lose those customers forever.

I would guess that far more customers per year drop support on MAS90 than Net new names are sold and that the total install base of maintenance paying customers is now shrinking. Pretty typical for an EOL product.

Who really knows what ""thinking"" goes on in the ivory tower. But think about it, lower cost to maintain would keep many users on plan resulting in higher overal revenues.

@JeffSchwenk you assume there is actually somebody intelligent running the asylum as @PeterWolf puts it...

From the Wikipedia article about Windows 8: Legacy applications: Windows 8 for x86/64 processors will run most software compatible with previous versions of Windows, with the same restrictions as Windows 7, i.e. 64-bit Windows will run 64-bit and 32-bit software, and 32-bit Windows will run 32-bit and 16-bit software (although some 16-bit software may require compatibility settings to be applied, and/or may not work at all).