At this year’s Sage North America 2012 event, Sage North America CEO Pascal Houillon unveiled Sage’s strategy to reckon with changing market realities, rationalize its product strategy and set clear directions for itself, its partners, and its position in the market.

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 .

Rebounding from Rebranding

At Sage’s Summit 2011 event, then newly appointed CEO Houillon announced that Sage NA would embark on a phased approach to drop individual product brand names  (such as MAS, Peachtree, etc.) in favor of the Sage brand. The reasoning was that a stronger, more unified brand would drive cross-selling opportunities in the Sage installed base, and elevate consideration among small and medium businesses (SMBs) not yet using Sage products.

Last year’s rebranding announcement initially sent shock waves across the partner and influencer community. While the initiative was designed to strengthen the Sage North America corporate brand, many expressed concerns that it would erode the brand equity that individual brands had built up over the years.

My minority view at the time was that this decision would produce some short-term pain, but was necessary for Sage’s long-term gain. By this year’s Summit, it seemed that many more people agree with this perspective. While the name changes are still confusing for many customers, most of those I spoke with were neutral to enthusiastic about the rebranding, and a few told me that it was time for Sage’s brand identity to catch up with the vendor’s actual size. And although some partners were still grumbling about the costs of revising marketing materials and educating prospects and customers about the name change, most seem to have accepted the rebranding and moved on.

Realigning for Growth

Sage executives focused their keynotes on plans to reinvent and reinvigorate the company. Sage has been stuck in a rut for a long time, with revenue growth in the low single digits. And although millions SMB customers use Sage products, about 2/3 of them aren’t currently buying anything from Sage—whether upgrades, add-ons or support.

Dispersing development, marketing and service investments over its gangly portfolio of 60-plus North America offerings had become untenable. The company needed to reset, refocus and re-energize for growth–something it hasn’t seen much of in recent years. The company has set its sights on three high-level goals: growing the addressable market, increasing market share and growing share of wallet among existing customers.

Sage is relying heavily on customer input to help achieve these goals, conducting personal interviews with more than 300 SMB CEOs to better understand their requirements. In these discussions, Sage heard a recurring theme. SMBs want to put the power of technology innovation—whether mobile, cloud, social or analytics to work for their businesses. But they want this innovation delivered to them when, where and how they want it, without minimal business disruption.

Bringing the Core Portfolio into Focus

Houillon indicated that although 22% of Sage’s employees are in R&D roles, this investment has been spread thin across too many products and projects. So Sage is focusing to differentiate between “core” and “non-core” applications. By deliberately focusing on core products, Sage believes that it can deliver the innovation and the simplicity SMBs require, and drive its own growth.

Core solutions include selected accounting, ERP and related solutions (payments, payroll, CRM, etc.) that Sage believes are best suited to helping it drive growth in key SMB markets. For instance, Sage has designated Sage 50 (formerly Sage Peachtree) and Sage 300 (formerly Sage ACCPAC) as core accounting solutions, and Sage CRM as its core CRM product. Most innovation will happen in this core set of products, and be shared across them.

Sage has also anchored its core portfolio strategy around the needs of three distinct market segments—which align directly with its growth goals.

  1. Cloud-based Sage One, for micro-businesses with 10 or fewer employees. Sage introduced Sage One  for North America in May of this year. Built on open-source Ruby on Rails, Sage One is a cloud-based business services solution that provides invoicing, project tracking, payments, expense management and collaboration in an integrated solution. Designed for true small businesses without any IT support (or VC funding), Sage One is aimed squarely at helping Sage grow the addressable market with a true entry-level solution. Sage One offers a free 30-day trial, and is priced at $29 per month per business for an unlimited number of team members, and includes 5GB of storage and support. Sage One also features a friendly interface–you don’t need to be an accountant to understand how to manage your books with it.
  2. Hybrid solutions for small and medium businesses. Sage announced that it is partnering with Microsoft and using its Azure platform to help its existing ERP and accounting customers bridge to and take advantage of cloud solutions. Sage is surrounding its existing applications with integrated, cloud-based connected services. For instance, Sage will provide common mobile, payments (Sage Exchange), identity management and in-context support (Sage Advisor) to all core products via these connected services. Over time, Sage will move more functionality from ERP and accounting to more flexible cloud services that customers can turn on and off as needed. Sage is betting that this approach will not only help it increase wallet share among existing customers, but make it more attractive to new, off-base prospects as well.
  3. Sage ERP X3 for midmarket companies. Sage ERP X3 is a comprehensive, highly customizable ERP solution for midmarket companies and divisions of larger companies with a two-tier ERP approach. Sage announced a new subscription licensing offering for Sage ERP X3, hosted on dedicated databases at Sage data centers. Sage also revealed Project Syracuse, the next-generation, fully web-enabled version of Sage ERP X3, which is very strategic to helping Sage grow share in this market. The new version, scheduled for availability in 2013, takes advantage of RESTful architecture, and features a cleaner UI, more modular design and enhanced mobility capabilities, among other things.

Non-core Doesn’t Mean Over and Done

What happens to the rest of Sage’s North America portfolio? Sage is basically grouping the rest of its products in two different buckets:

  1. Products that Sage will continue to support, but plans to phase out within a few years. This primarily include accounting, ERP and related products such  as Sage BusinessWorks, Sage DACEasy, Sage 500 ERP (formerly MAS 500). These generally older products are not the best fit for applying the common R&D innovations that Sage has on the drawing board.  Sage committed to clearly communicating what it will phase out and when, and to help partners and customers with migration to core solutions.
  2. Products that are strong and have a long life ahead, but that Sage needs to manage differently. These include industry-specific solutions such as Sage 300 Construction and Real Estate (formerly Sage Timberline Office) and Sage 100 Fund Accounting for non-profits and government. It also includes Sage ACT! contact manager and Sage SalesLogix CRM, which have been used primarily as standalone (not integrated with Sage accounting and ERP). Underscoring the likely longevity for at least some in this group are the fact that Sage Construction Anywhere is Sage’s first offering built on Azure; and that Sage is developing a new SaaS-based version of ACT!, slated for release in 2013.

The Rest of the Story

There is a new vitality at Sage that I haven’t seen before. In his year at Sage, Houillon has retained some of Sage’s strongest executives, including Himanshu Palsule, Chief Technology Officer and Head of Product Strategy, and Connie Certusi, EVP Small Business Solutions. At the same time, he’s attracted impressive new hires, such as Joe Langner, Executive VP, Mid-Market Solutions; Doug LaBahn, SVP Product Management; and Brad Smith, EVP of Customer Experience. The team appears realistic about Sage’s position, but confident and energized about the path they’ve charted to elevate that position. Partners and customers seemed much more upbeat about working with Sage, and appreciative of Sage’s clear-cut roadmap.

That said, Sage is taking the turn a bit late in the game and its course will not be easy. But Sage has taken those essential first steps to make the changes it needs to prosper and grow.