Sage News and Discussion

Sage Quarterly Mid-Market Executive Business Update is Tuesday November 28, 2014 at 12:30 pm ET Key slides attached. TL;DR: - Looks to be much less ERP X3 NA activity than Sage would like ( negative 8% new license growth?) -- oops. Looks like Sage is having problems executing a sales strategy when there is not a winback base to draw from. - Potential huge pricing change to existing users being studied - possibly moving people from annual maintenance over to subscription which would include gold support, chat (everything except Sage doing the upgrade) <-- this is a threat to partners in my opinion - Most of the sales wins appear to be winbacks -- at what point will winbacks dry up? 3 years? 5 years?

Reminder that this is happening today - Tuesday November 18, 2014 - 12:30pm ET / 9:30am PT

First up is Joe Langner, recounting his meeting with Steven Kelly. Top 3 priorities: 1. Customer customers customers 2. Colleagues 3. Ambition Growth, success in market, exceeding customer expectations

Good look at revenue breakout by product line. This includes maintenance and product licenses but still helpful for comparison between different products.

Joe Langner is going through the revenue highlights pretty quickly - New Customer Acquisition for ERP X3 - (8%) -- ?? I'm not quite sure what the term ""upgrade"" means. Does this mean reinstatements (how could it though with ERP X3). Does Upgrade mean migration?

I think the upgrades are migration into the package. They don't count as ""new customers.

This is not a great testament to the cross-sell initiative which is shown as ""losing momentum"". AKA - low hanging fruit gathered in first year or two.

25,000 SAN (Sage Accountants Network) members announced

Looks like Payments is flat - so they're rolling out payroll! Lots of money riding on CPA/Accountant recommending Sage.

New tier credit plan coming for Sage Payroll - there will be changes to the tier long term but they want something to be announced now. There are 24,000 customers of Sage who use standalone payroll ""from other providers

Services, construction, manufacturing, distribution and retail (acquisition coming here?)

Be more directive with select business initiatives

Mike Wingrove is up with partner recognition (VP Partner Sales)

Three of the top 5 Sage partners are 90 Minders!

Win list for Sage 100 - Q4

Win list for Sage 300 - Q4 (lots of these sound like Winbacks)

Win list for Sage 500

Win list for Sage CRM

Jan Goodman of Arxis is talking about a win with customer Serfas (bike mfg)

Which is taking way too much time ...

It's interesting that so many of the stories are in the family. At what point do we run out of family to upgrade or reinstate? I'm sure someone at Sage is doing projections on just this.

Donna Armstrong to talk about ERP X3 Enzo (?) talking about Top ERP X3 new customer add and revenue

For all the noise that Sage makes about ERP X3 they don't have a lot of partners to report on...

BurCom Consulting talking about their transition from Sage 300 to ERP X3

Fielding ""how do I do this or how do I do that"" type calls. Somehow this is good for the channel. Joe talks quick before the news can sink in for most partners

A pitch for Sage City. Help Sage build their business.

2,500 avg page views a week (90minds.com does 1,202 per week and that's only focussed on one product).

Sean Leonard is up on mobile sales and other apps

90 Minds page views for 7 days

Here we go again - ""we're going to make pricing simpler"". Been hearing that one since the Laurie Schultz days

Does this slide appear to say that there are 17, 692 Sage 100 ERP customers on plan?

Sage appears to be actively considering doing away with annual maintenance and converting users to subscription. This is the first time I've seen them publicly talk about this possibility.

Takeaway for 90 Minds: - Sage would put everyone on Gold - Offer a CHAT to the end user desktop (how many of your users might start to question why they pay you and Sage?) - Sage encouraging quick question type calls - No discussion about how upgrades would work - that's probably Sage's biggest hurdle They'd like to keep the price the same but migrate people to a more robust offering (more modules/support).

Joe is talking about Businessvision migration to other Sage products

$1.3 million of tracked revenue (to Sage) from the Inspire tour. 40% attending buy something. Not sure how they extrapolate these figures - whether they are items the attending customer would have bought anyways.

Sage will be promoting Sage Payments

Sage ERP X3 Consultant Program

Perhaps R&D in the products and a better focus on new customers would help... Just saying.

Is it too late?

I know, they will buy another product. That will fix everything!

Seriously, they could have gone with the HTML5 UI for Sage 500, or completed the web UI for 300 or 100 and made the products relevant again. But they seem to be incapable of making the tough choices and seem to take the stock market focused quick fixes.

Huge thanks to @WayneSchulz for posting the slides. I am not getting Sage emails for some reason and I had already booked a demo during this time slot by the time I found out about it. FYI - UPGRADES = additional licenses or additional modules in to an existing account. This is not MIGRATIONS which is transitions from one Sage product to another.

Speaking of web UI for old products: Infor has apparently done a remarkable job of doing just that. SLX was purchased by them, and so far all I've seen is pretty positive.

They shared more data with us early on this webcast than I recall ever seeing. That change is not accidental, but I'm not sure why. I suspect it's partly to produce more confidence in them by partners. Don't know if that works. It clearly sounds to me like they've been doing some reconsideration in Irvine. I think they are very limited by several decisions in the past. One of them was their announced strategy of invest/harvest/dump. There is no $%^&* way that can convince a significant number of new ERP prospects that 100 is on the ""invest"" list. Not sure if they can do that for 300; it's not clear even to 90 Minds, who follows this very closely. They have 3 customer segments to sell into: 1. current/not leaving; 2. current/looking to leave; 3. non-Sage looking to change. I don't see how they change the situation for 3 without some major development. They are trying to capture 2 by enticing them into X3. It is such a green product, and with Sage's past track record on new products (see MAS 500, is it or is it not dead-erp-walking after less than 15 years?), I think they are seeing very, very hard sledding. In category 1 they have 2 subcategories: a. those happy to hook into the related products, and b. those who really, really , really hate the annual ""tax."" So, they have lots of excitement over 1a. 1b is dicey at best. 3 is really hard without something amazing new. 2 can work over time, but that effectively steals from 1a. They are screwed. It is a matter of time.

I would wait and see on Infor. They are in a very similar situation to Sage - owning a lot of different products with no common code base. Slapping a coat of paint on the UI will help to some extent but I question how much.

I've been skeptical of their approach for a couple years. However, I've now seen quite a bit of the operation, and it seems to be for real. There has been far less smoke & mirrors than we've grown accustomed to with Sage, both regarding the Go To Market programs (including rules of engagement) and the integrating technology. I've unsuccessfully tried to find negative feedback from customers given in the past 4 years. Charles Phillips, the CEO, is an impressive guy. Part of his resume is BSCS degree from USAF Academy, and years in charge of integrating back office systems on Wall Street. He gave a 1 hr presentation to a group of 300 about the company, the strategy, and the technology WITHOUT notes. He spent 15 minutes answering questions that ranged from high-level business strategy to just above the coding level. The skeptical techies I was with agreed with me that he understands it. Very, very different from finance guys running Sage. But yes, we shall see.

http://www.nydailynews.com/new-york/billboard-charles-phillips-mistress-yavaughnie-wilkins-yanked-times-square-article-1.459788

Interesting and sad. But hardly relevant to whether the guy knows business and technology, or how to run a company. Did you ever hear the stories about GE's Jack Welch? I'm not suggesting that the ability to hold a marriage together or even be an entertaining dinner guest for us ""normal people"" is a requirement to run a $2B company. As long as it's not sexual harassment in his company, I really don't care much about it for anybody.

I would take a marketing and sales driven approach over technology driven approach. Technology rarely sells - it's the presentation that does the trick. On a separate note, I've watched the presentation and had a few comments about what's not working: - Driving growth through online channels to compensate for reduction in active customers So basically their website and social media efforts aren't driving in new business leads. Yes. This is why publishers traditionally focus on lead gen and use a channel to produce sales. Sage has lost focus on the purpose of the channel and they are starting to pay the price. They need to give us some marketing funds and leads and let us do what we are good at: connecting with the prospects and customers and selling and servicing their accounts. - Limited adoption of subscription for on premises new business Come on now - this is basic math and Sales 101. No one - and I mean no one - in the channel or within Sage makes money with subscription. I feel like I'm an oddball (like @JohnHoyt - ok ... maybe not exactly like John because he's unique) in that I present subscription on every deal. But I position the traditional pricing as the front runner option. - Cross-sell payment initiative growing but losing momentum I believe that they are speaking specifically about Sage Payment here and this is not necessarily an indicator of other cross-sell products. - Price discipline putting pressure on Net Promoter Scores This is jargon speak for - our constant price increases are pissing off the customers. No kidding. I guess when prices go up, people want to see something extra for the extra money. Does this surprise anyone? - Invest initiatives gaining traction but not yielded their full potential especially in regards to NCA NCA = New customer acquistion. There are only two invest initiatives that I know of that are relevant: X3 and CRM. They are really speaking only about X3 here because that's ERP and Sage is all about ERP. X3 has had a few stumbles around marketing this year and it has slowed lead flow and customer acquisition. This shouldn't surprise anyone. No marketing = no lead flow = no sales (except bluebirds). On the CRM side, there is actually a push to NOT go after new customers and instead to focus on the integrated play. Oh the pain this causes me personally. It's too much to describe so I won't bother trying. Suffice it to say, you can't complain about your children being tired if you stay up all night with them watching television.

Excellent analysis! I've noticed the CRM change you mentioned, too. It is too stupid to comment further on here. Although not as stupid as telling the public you have product lines that you are disinvesting in.

Guesstimate -within 12 months of our next NA re-org.

After looking this over in greater detail, it definitely appears even worse. - Subscription growth of 18% is actually horrible due to the compounding effect of subscription. Think about how if you sign a customer up in the 4th quarter you will get 4X the subscription revenue in the following year. I believe subscription in the Microsoft channel was up 45% or so, If my subscription growth was 18% I would be very worried. And they point out that the small business wants subscription. - VARs want the larger deals not the 1-4 user deals. Their mobile solutions are so simplistic at this point in their development cycle all they can do is shoot for the little guys. - The shift from maintenance to subscription is a really bad idea. The only reason it makes sense is because they have jacked up prices so high on the basic maintenance that they are making it look appealing. However, the vast majority of customers who CHOSE perpetual licenses do not want to switch (IMHO). With respect to the comments made by @PeterWolf, - No one in the Sage channel makes money on subscription, but other channels are doing much better with it. I am on a cloud panel with 4 others for the upcoming ITA meeting and it is interesting how we are all coming to similar conclusions for different reasons. I am over 25% to top tier in SAP next year before the year even starts due to subscription. For a long term thinker, subscription = stability once you cross the chasm of cash flow. - Although I agree that technology should rarely sell, I am amazed at the number of people out there who won't buy what I sell because it is not ""True cloud"" That technology snob mindset appears to be growing. Finally - the real problem that Sage has is that the channel does not sell well enough and they have given up on us. I see very few sales oriented VARs in the channel and Sage can not attract new partners who think about sales first. It took me a while to get to the dark side (sales orientation), but now I play Billy Joel's - only the good die young and focus my business on attracting new customers, which is the lifeblood of any new business. Sage seems to have a very rare blood type.

I agree with your assessment Gary and would like to hear more from you on why you feel that subscription is working better with other vendors. Regarding ""the real problem"" that the Sage channel does not sell well enough ... in some ways, this is a self-fulfilling problem. They have given up on us and created strategies to work around us. That alienates the channel and creates further deterioration - even among the more sales-focused partners! They are throwing the baby out with the bathwater in my opinion. As they say in the southside ""say la vee"". <french>

Some other details from presentation that struck me: - Fixed Assets biz is nearly the size of Sage 300, and more than 1/2 the size of Sage 100. Fixed Assets!? - CRE is the same size as Sage 100 - CRM is $7mm. That is miniscule. It is 1/5 the size of SLX when it was sold off. They showed growth rates down to 1/10 of a %. Really? This is growth-oriented thinking? I think some of product directions they are going in are good. But, like they've done with CRM, they have underfunded the R&D so they will achieve pay off way too slowly.

@PeterWolf - Here is a white paper from Microsoft compiled earlier this year which is more IT oriented, but one of US participants is a CRM partner http://www.zero2ten.com/home.aspx . The paper was interesting to me as anecdotal and directional (not a roadmap by any means).

Thanks Gary. I'm a fan of Zero2Ten. I hired one of their guys a few years back and learned a lot about how they do things in the world of Microsoft CRM. It was a real eye opener.