Sage Streamlining Takes a Major Turn With the Sale of ACT! and SalesLogix

sage imagesLast week, The Sage Group announced that it is selling its Sage Act! contact manager and SalesLogix CRM to Swiftpage. Swiftpage is a U.S. based digital marketing software vendor and has been a Sage partner supplying Sage E-Marketing as a connected service for three-plus years. The move is part of Sage’s strategy to streamline its business software portfolio and focus on its core application areas, accounting, ERP and payroll. Sage is also selling Sage Nonprofit Solutions to Accel-KKR, a private equity firm.

In addition, Sage is unloading four solutions sold in Europe. Combined, these sales amount to about $145 million, and result in a loss to Sage. Accel-KKR and Sage provided Swiftpage with significant capital to help finance Swiftpage’s SalesLogix and ACT! purchases. Sage will retain 16.1% ownership in this deal.

The sale affects about 1,000 of Sage’s 13,000 employees, with about 250 people from Sage ACT! and SalesLogix moving to Swiftpage. In my conversation with Himanshu Palsule, Sage’s North American support group is working with Swiftpage to put an escalation process in place for customers.

Sage isn’t exiting the CRM market, however. It is retaining Sage CRM (which it acquired as part of its purchase of ACCPAC several years ago) as its core CRM product.

Following Through On a Strategy to Streamline

Sage’s announcement doesn’t come as a big surprise. At Sage Summit 2012 last August, Sage North America management revealed its strategy to concentrate development on what Sage termed core solutions areas–namely financials, ERP, and payroll, as discussed in my post, Sage Turns a New Leaf: Top Takeaways from Sage Summit 2012.

At the event, Sage North America CEO Pascal Houillon set forth Sage’s strategy to move from a heavily decentralized product management and marketing approach to one that is more centralized and focused—and to put the company on a stronger growth trajectory. By streamlining its offerings, Sage intends to provide customers and partners with a more integrated experience and more flexibility to take advantage of new cloud-based connected services.

Shedding CRM Solutions That Weren’t Keeping Pace with Market Trends

Over the years, Sage has been very acquisitive. But many of its acquisitions haven’t really paid off. This has been particularly true for Sage ACT! and SalesLogix, both of which Sage acquired in 2001 when it bought Interact Commerce. Sage bought these products when desktop and client-server computing were at their peak–but about to wane. Since then, of course, the likes of Salesforce.com, Zoho CRM, Nimble and many other CRM cloud offerings have come to the forefront. Meanwhile, Sage has struggled to make the cloud transition with its CRM products. In addition, Sage hasn’t been able to keep pace with developing the new social capabilities that customers want in CRM solutions. These limitations have made it difficult to sell these products to new customers.

While Sage did develop integrations for ACT! and SalesLogix with its financials solutions, its attempts to cross-sell CRM to its installed base of financials and ERP customers met with limited success. The partner channel and end-user decision-makers for CRM and financials solutions are very different, and Sage was unable to develop an effective method to bridge the gap. As a result, there is very little customer overlap between the two.

With ACT! and SalesLogix off the plate, Sage intends to increase its focus on its core financials and ERP products, including Sage 50 (formerly Peachtree), Sage 1oo ERP (formerly Sage ERP MAS 90 & 200), Sage 300 ERP (formerly ACCPAC), and Sage ERP X3, and provide a richer set of connected services for these solutions.

Moving Forward

For a very long time, Sage has looked to acquisitions as a way to fuel growth, acquiring scores of business software products over the years. Sage has had a hard time rationalizing its strategy, sparking much criticism for having a cluttered portfolio, too many products and not enough focus.

Now, Sage is taking a 180-degree turn to sell off surplus solutions, freeing up development and marketing resources to create cleaner, more integrated solutions and messaging. While it’s too early to tell if this new strategy will result in the growth Sage is looking for, the move does give the company more bandwidth to concentrate on its core financial solutions, and give its remaining Sage CRM product the types of cloud, social  and mobile capabilities that it needs to be competitive. In addition, Sage no longer has to contend with the politics of competing product lines and partner channels.

While the move may be a bit emotionally jarring for current ACT!  and SalesLogix customers, they shouldn’t experience too much change in the short term. Over time, they may in fact see an upside, if Swiftpage, which has a strong focus in the digital marketing space,  can infuse the former Sage solutions with the updated cloud, social and mobile capabilities that they will need to attract new customers.

Can IBM Make the Social Business Connection with SMBs–and Does it Need To?

After 20 years, IBM has transformed its Lotusphere user conference into IBM Connect. This evolution has been in the making since IBM introduced its vision of “social business” a few years ago. During this time, IBM has added to its traditional Lotus messaging and collaboration solutions with new social, mobile, analytics and cloud solutions to broaden the scope of IBM Collaboration Solutions’ (ICS) charter.

As usual at these events, IBM showcased a panoply of new, updated and acquired solutions under the theme “From Liking to Leading”. I’d paraphrase IBM’s social business strategy as helping companies integrate new social tools with business workflows to operate more effectively–whether to increase employee productivity, improve customer service, streamline the supply chain or to market and sell goods and services. For example, IBM illustrated its approach to integrate social with key business processes through demos of its recently acquired Kenexa HR and talent management portfolio, and via its Smarter Commerce “buy, market, sell and service” platform.

While IBM’s broad definition of social business makes sense, it is also somewhat squishy depending on who, when, what, where and how the story is told. Furthermore, there are literally dozens of moving parts in the story, from the Lotus portfolio to IBM SmartCloud for Social Business to the new Smarter Workforce Kenexa strategynot to mention integration with other IBM and partner solutions, and the services needed to use them effectively. This begs the question of whether IBM can effectively communicate its social business vision to SMBs–and maybe whether it should even try.

Making the Connection with SMBs

Currently, many SMBs equate social business to using public social media sites such as Twitter, Facebook and LinkedIn to promote and market their businesses. In fact, SMB Group’s 2012 SMB Social Business Study revealed that SMBs’ use of social in their businesses remains concentrated in marketing areas (Figure 1).

Figure 1: Medium Business: Current Use of Social Tools For Business Functions

Slide1

But interest in using social in other business areas is growing, especially among medium businesses with 100-999 employees–a prime target market for IBM. Medium businesses are increasingly using and finding value in social beyond the marketing realm.

Meanwhile, as shown in Figure 2, just 13% of medium businesses view integrating social tools with traditional business applications as a very important, top priority.

Figure 2: Medium Business: Importance of Integrating Traditional Business Applications with Social Media Tools

Slide2While 44% think its important, they either don’t have the time/resources for it, or will do it opportunistically. These companies in particular will require that vendors come to the table with clear messaging, accessible solutions, and the ability to demonstrate a rapid return on investment.

Given these realities, how likely is it that SMBs will connect with IBM’s social business story? Even though I was only one of a handful of SMB technology analysts at IBM Connect, I wasn’t the only one in the Analyst Q&A sessions asking how IBM will make its social business solutions more digestible not only for mid-market businesses, but for IBM business partners (most of whom are SMBs themselves). The dialogue exposed a healthy degree of skepticism about IBM’s ability to clarify its social business message and simplify how midmarket businesses access and use its solutions–and left it unclear as to how it will help its partners capitalize on this opportunity.

Should IBM Even Go There?

With IBM’s impressive and solid stronghold in the large enterprise space, why should it divert any of its attention and resources to the midmarket? After all, the midmarket requires an entirely different solutions, services and sales approach than in the large enterprise space. In fact, as I was tweeting key points and thoughts during one the Q&As, I had the following exchange:

@sliewehr: analyst q&a at #IBMConnect-?s re if IBM will sell to #SMBs. affirmation they will. #Idontgetit

@sliewehr: I’m not sure you need to orient products to SMBs in order to educate them if you’re IBM. Still odd to me.

@lauriemccabe: do you mean its odd that IBM wants to sell to SMB or something else? Not clear what you meant ;)

@sliewehr: Yes…confused why IBM feels they should focus on SMB at all. It’s a tail-chasing game that they’ll lose to smaller innovators

@StuartMcIntyre: IBM doesn’t tend to do SMB well, but it’s a huge market that they’d be crazy to ignore. IBM+partners can reach it

@lauriemccabe Reasons IBM needs SMBs: 1-fuel its own growth 2-some SMBs grow up to become LEs 3-SMBs fueling growth/innovation

Why IBM Can’t Ignore SMBs in the Social Era

Admittedly, as an SMB analyst, I’m biased. But I see several reasons why IBM can’t ignore the need to develop a compelling social business story for SMBs, including:

  1. The size of the SMB market is too big to ignore. IBM needs to expand its market share here to fuel its own corporate growth.
  2. Fortune 500 turnover. Small companies become large businesses and large ones go out of business. 238 of the companies that made the 1999 Fortune 500 list had slipped off the 2009 Fortune 500 rankings. New technology solutions will only intensify this turnover, and agile innovative fast growth companies will start small but become the Amazons and Googles of the future.
  3. SMBs are leading the democratization trend in technology solutions. Because scarcity of IT and business process expertise is the norm in SMBs, hey need solutions that they can deploy, use and become productive with quickly and easily. IBM needs firsthand insights into how SMBs use technology to most effectively capitalize on these trends and develop solutions that can scale up or down.
  4. Adoption of collaboration and social solutions is often viral. Collaboration is the only activity that every employee, in every company, engages in every day. User adoption of solutions in this space is as likely to be bottom up as top down, as evidenced by vendors as diverse as Dropbox and Twitter. In this market, solutions need to be appealing and accessible or users will bring their own to work.

Perspective

Will IBM be able to take its SMB game to the next level in social business in the SMB market? Some IBM social business offerings, such as Smart Cloud for Social Business, have the potential to tap into this opportunity, but IBM seems to move slowly and has little visibility compared to competitors, such as Google Apps for Business and Microsoft 365.

Overall, IBM is making a strong channel investment to enable its business partners, and especially Managed Service Providers (MSPs) to provide midmarket customers with its solutions. But unlike some other technology areas, social business is as much (if not more) of a cultural shift as a technology shift. Midmarket organizations don’t have as much bandwidth–or patience–to absorb complex messaging and solutions as large enterprises. And, let’s not forget, most of the channel partners that serve SMBs are themselves SMBs.

While IBM will almost certainly wear the social business crown in large enterprises, its ability to make significant inroads in the SMB market is questionable. Given the diverse, highly fragmented nature of both the SMB market and the partners that serve it, IBM needs to do a lot more work to make its solutions easier to understand, access, use and sell to make real headway.

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