Last week, I attended Sage Summit 2019 in Atlanta—my first since 2016. Prior to the event, I was thinking about the challenges that Sage has faced in the cloud era. While many of its rivals jumped on the cloud bandwagon early, Sage took a slower, more conservative approach. As a result, Sage has struggled to gain mind and market share with a new generation of cloud-savvy SMB customers that it needs to attract to fuel growth.
But that was then and this is now. In 2017, Sage acquired leading cloud-based financial software provider Intacct, as well Fairsail (now dubbed Sage People), which provides cloud-based human resources software built on Saleforce’s Force.com platform. Earlier this, year, Aaron Harris, former Intacct CEO, took the helm as CTO for Sage worldwide, and CFO Steve Hare replaced former Sage CEO, Stephen Kelly.
With these changes in mind, I was interested in getting back up to speed in Sage’s progress and directions. Here are my top takeaways from the event.
- Sage’s transformation to a cloud-centric company is accelerating. Sage executives outlined Sage’s strategy to transform Sage into a “great software-as-a-service (SaaS) company for customers and colleagues.” The vendor intends to increase organic investments and make additional acquisitions (similar to Intacct and Fair sail, which is now Sage People) to extend its cloud portfolio. Two-thirds of the money the company has earmarked for innovation will go into new products.
- Investments in on-premises, cloud connected solutions will continue. Sage will not leave its large installed base of on-premises customers in the lurch. According to SMB Group research, small and medium businesses (SMBs) are increasingly moving to the cloud, but a good percentage of customers will stick with on-premises accounting and ERP solutions. Sage will continue to invest in and support on-premises, cloud connected applications, including Sage50cloud Sage 100cloud and Sage300cloud. Microsoft Office 365 integration is at the core of Sage’s cloud connected strategy, providing customers with integration both to Office 365 and to hundreds of applications that integrate with it. At the event, Sage announced the new Sage Production Management for Sage 100 cloud, and new CRM web screens, integration, customization, search and sorting capabilities for Sage 300.
- Focus on customer success and innovation will guide spending. Sage is investing in new contact center technology to provide round the clock, more responsive, and more comprehensive customer support. The company is also digging deeper into its Net Promoter Scores (NPS) to get a better understanding of what’s working and what’s not in Sage products, make more proactive improvements, and better target it spending on innovation that customers truly want and need.
- Increasing investment in the U.S. market. Sage underwent significant employee churn in its U.S. workforce ranks under Stephen Kelly’s reign. To many of us in the analyst community that followed the vendor, it seemed that Sage was under-investing in the U.S. market. Acknowledging that the U.S. comprises almost 60% of the total addressable market for Sage, executives noted that the biggest portion of Sage’s investments will focus on the U.S. going forward.
- Sage North America is growing. In FY18, Sage’s organic growth was 12%; recurring revenue rose 13%; and subscription revenue accounted for 48% of total revenue. While a good chunk of this growth is likely due to its Intacct and Fairsail acquisitions, Sage is also making good progress converting on-premises application customers to the relevant subscription-based connected cloud variants of these solutions.
- Enabling the future ready finance and accounting professional is a top priority. Sage Summit featured several sessions and breakouts to help its accountant partners gain awareness, prepare for and adapt for change in the accounting industry. Some of these were based on findings from Sage’s recent study, The Practice of Now 2019, which surveyed 3,000 accountants in January 2019. The survey provides insights into current and future trends in the profession, perspectives on areas that accountants need to reassess, and perspectives on how they can position their businesses for a successful future.
Sage’s cloud strategy is finally taking shape. It’s acquisition of Intacct—a true SaaS pioneer with 11,000 customers—certainly raised its cloud profile. While Sage People isn’t as big an acquisition, it has a lot of potential: It’s one of the top human resources apps on Salesforce’s AppExchange, and Sage and Salesforce have a co-selling agreement in place.
With new and fast-growth SMBs increasingly gravitating to the cloud, these cloud-native solutions—and others that Sage intends to invest in—are the key to its ability to attract more net-new customers.
But Sage certainly can’t abandon its on-premises customers—many of whom are likely to stick with their current accounting solution for the foreseeable future. Sage’s connected strategy gives these customers a more gradual on-ramp to try other cloud solutions to support other business functions.
Sage’s renewed investments in North America, as well as in customer service and accountant education should also pay dividends.
However, Sage will also need to double down in other ways to succeed at scale in this noisy and ultra-competitive market. Among other things, it will need to:
- Invest to elevate the Sage brand in the cloud market. Sage’s reputation as an on-premises software provider is very strong. As it pursues its cloud goals, Sage will need to provide a clear, constant drumbeat in the market to get on the radar with SMBs that are looking for cloud solutions.
- Create a strong cross-selling and upselling program. This is necessary not only between cloud solutions like Sage Intacct and Sage People, but to educate Sage’s on-premise accounting customers about the benefits of using Sage People, and/or to migrate to Sage Intacct.
- Expand and its cloud developer partner network.To further validate its cloud direction and ambitions, and to fill in key gaps for critical customer segments, Sage needs to keep the developer pipeline for Sage Intacct and Sage People full, active and visible.
© SMB Group