Sage’s Everest: Building Mind and Market Share With A New Generation of SMBs

everestAt last week’s Sage Summit, one of the featured speakers was renowned British explorer, entrepreneur and adventurer Justin Packshaw. Among other achievements, Packshaw spoke about the challenges he and his team of 10 climbers faced to successfully reach—and then descend—the peak of Mount Everest, the highest mountain on the planet.

Watching Sage’s new (as of November 2014) CEO Steven Kelly interview Packshaw, I couldn’t help but think about the uphill battle that Sage has faced in attracting net-new customers to its accounting and ERP software solutions over the past several years. While many rivals were quick to bring innovative cloud, mobile and social capabilities into their solutions, Sage has taken a slower, more conservative approach. As a result, although Sage has done a fairly good job of retaining existing customers, it has struggled to gain mind and market share with new generation of cloud and mobile savvy SMB customers that it needs to fuel substantive growth.

Making the Case for the New Sage

Steven KellyKicking off the event, CEO  Kelly made his case for a newly energized and more engaged Sage. At the 50,000 foot level, Kelly:

  • Pledged Sage’s commitment to “being the best technology company for small businesses,” by providing small businesses with help to run their businesses, give them more control, and help them make the right choices.
  • Positioned Sage at the forefront of the “golden triangle” of accounting, payroll and payments solutions to make small businesses “100% compliant, 100% of the time.”
  • Reiterated that Sage “loves on premises, hybrid and cloud solutions” and will support all of these models to give businesses choice.
  • Vowed that “end of life” is not part of the Sage vocabulary. Sage won’t force existing customers to go to the cloud before they are ready; instead, it will provide pathways and tools that enable customers to control the pace of their migration.
  • Asserted that the term ERP (enterprise resource planning) really means “expense, regret and pain,” and that Sage will also banish this term from its vocabulary (which by the way, got a pretty big round of applause).

All of the above should be welcome news for existing Sage customers, who have stayed the course through numerous changes in Sage strategy, management and products over the past few years. But, it doesn’t offer much in the way of helping Sage attract net-new customers So how will Sage ascent its Everest? 

Sage Live: Poster Child for the New Sage

sageliveKelly’s roadmap for new growth focuses on rapid, global new solution development for next-generation business decision-makers who are already sold on a cloud and mobile first world. Sage One, Sage’s offering for sole proprietors and very small businesses from pen and paper and spreadsheets, is part of this, but Sage Live  (formerly Sage Life) is really the poster child for Sage’s new approach tailored to the “office of the future.” Notably, Sage Live was designed and developed in six months from when Kelly gave the team its marching orders.

Built as a multi-tenant cloud-based accounting solution. Sage Live is aimed  squarely at growing small businesses who need more power than entry-level accounting solutions offer, and want cloud, mobile and collaborative capabilities out-of-the-box. Pricing starts at $30/user/month for full users (such as finance and accounting users) and $15 per user/month pricing for more casual business users. Slated for U.S. release now, and for UK availability at the end of the summer, Sage Live is designed to be a global solution.

The Salesforce1 Shortcut

Sage choose to build Sage Live on Salesforce1, the largest cloud development platform in the world, to gain development and go-to-market efficiencies, including:

  • A rapid development environment and tools to design, build and bring the solution to market.
  • The ability to embed Salesforce1 mobile and collaborative functionality, such as Chatter, directly into the Sage Live solution.
  • An enormous partner ecosystem to add features and functions for specific markets. For example, Kimble PSA announced its integration with Sage Live at the event. With a partner-centric approach from the get-go, Sage Live doesn’t need to become a clunky, monolithic solution.
  • The same look and feel as Salesforce, giving Sage a natural entrée into Salesforce’s 95,000 SMB installed base customers. 

Customer-Centric Design

Salesforce1’s platform also made it easy for Sage to pull in its best small business accounting experts from around the world to collaborate on Sage Live. Sage also involved customers in its early adopter program from the beginning, seeking out non-Sage customers–both owners and those in financial roles—for input.

What Sage heard is that they are spending too much time juggling too many spreadsheets. As their businesses grow, they need better tools to budget and forecast, the ability to look at their business through different lenses, and more collaborative capabilities. They want a “one-office approach” with easy cloud and mobile access to real-time information for all users.

In response, Sage Live’s multi-dimensional accounting engine allows users tag records with geographical, product or other information. Users can then easily pull up different views and reports based on the tags. The solution can also be configured for different role-based views or “scoreboards” giving users just the information most relevant to them.

iwatchEmbedded Salesforce1 real-time social and mobile capabilities make it easy for users to collaborate and share information, ala the “business in the moment” example of Sage Live notifications on Apple iWatch.


New and fast-growth SMBs are increasingly gravitating to the cloud for accounting and ERP. SMB Group’s 2015 SMB Routes to Market Study reveals that 29% of SMBs planning to purchase new accounting/ERP solutions are leaning toward cloud deployments. Sage Live provides Sage with a much-needed solution to tap into this market, and meet it’s elusive (to date) challenge of attracting net-new business. 

While some have questioned the wisdom of building on Salesforce1, I believe that this was a good choice for Sage. Salesforce1 has enabled Sage to skip the plumbing work and to build Sage Live much more quickly than it could have from scratch. Furthermore, Sage gains exposure to Salesforce’s large SMB customer base, and an entrée to Salesforce’s extensive developer ecosystem.

In addition, while Salesforce customers have many choices when it comes to accounting solutions, Sage Live is the only small business accounting solution native to the Salesforce1 platform (FinancialForce is native as well, but aimed more at the midmarket).

Finally, armed with a true “net-native” cloud solution, Sage can apply its extensive expertise as a volume SMB marketer to the cloud and mobile first SMB segment. Sage is even opening a new Customer Business Center, exclusively dedicated to digital marketing and sales for the Sage Live solution.

However, this is not enough to ensure success. I see a few areas in which Sage will need to double down, including:

  • Creating a clear, constant drumbeat to articulate why Sage Live is different from other Sage and its competitors’ offerings. Getting on SMB radar is hard in a market where so many vendors are vying for customers that have outgrown QuickBooks and other entry-level accounting solutions. And, since SMBs rank “Figuring out how different technology solutions can help my business” as one of their top three technology challenges in SMB Group’s SMB Routes to Market surveys. Sage will also need to provide in-depth education to make it to SMB short lists.
  • Persuade Salesforce to more actively promote Sage Live. From what I gathered at Sage Summit, Salesforce sales reps will refer customers to Sage Live if they want to integrate accounting and CRM. This is a start, but fairly passive. Sage Live needs Salesforce to play a more active role to kick-start consideration and adoption. Sage will be a Platinum sponsor at Dreamforce, and it will be interesting to see how Salesforce reciprocates.
  • Prove that it can expand traction with developer partners. To further validate its cloud direction and ambitions, and to fill in key gaps for critical customer segments, Sage must quickly recruit high-profile Salesforce developers to the Sage Live fold.

Prior to Kelly’s appointment, Sage had been investing in new technologies to modernize its existing accounting payroll and payments solutions for quite some time. But progress seemed to be slow, and it was clear that simply moving existing solutions would not be enough to fuel significant  growth. With Sage Live, Steven Kelly is already operating at a bolder, faster and more aggressive pace than his predecessors to pursue this growth. Now, having proved it can get on the fast track with product development, Sage’s next—and bigger challenge—is to get on the fast track with marketing and sales.

Sage Summit 2013: That Was Then, This Is Now

logoI’m a bit behind in getting my wrap up and thoughts on Sage Summit–Sage’s annual event for business partners and customers–together. But better late than never! As you can see in the related links at the end of this post, I’ve attended these events for many years. During this time, Sage North America has gone through many significant changes to bring sharper focus to its mission and more value to its customers. At this year’s event, I saw promising signs that these efforts are beginning to pay off.

That Was Then

Sage North America has been on a transformational journey since 2009, when Sue Swenson took over as CEO, made some tough choices, and began setting the wheels in motion to change the company’s downward trajectory. In the four years since, the company hired another new CEO, Pascal Houillon, in 2011. Under his leadership, Sage made some controversial (at the time) moves to unify the Sage brand and product names and divest Sage of seven non-core businesses, including ACT! and SalesLogix, which had large installed bases. To help streamline the company’s focus on its core business and on improving customers’ experience with Sage, Houillon also brought some fresh talent into the executive ranks.

This Is Now

The result of all this is a more focused, purposeful Sage. Gone are the days of trying (unsuccessfully) to rationalize an unfathomable number of overlapping products. On Houillon’s watch, it is unacceptable for Sage executives to position the Sage portfolio in different ways. At Sage Summit 2013, the executive team was singing from the same hymnal regarding Sage’s core positioning and messages:

  • Continue to focus on its core businesses (accounting, payroll, payment processing, ERP, etc) for very small businesses, SMBs and the midmarketSlide1. Key to executing on this is the company’s move to centralize R&D Centers of Excellence for cloud, mobility, customer experience. In the past, each individual product brand would undertake separate development efforts for new functionality. Now, Sage R&D develops new features, extensions and add-ons once (for mobility or analytics, for instance) that individual product groups can replicate across their solutions. Sage is also in the process (though not yet there) of standardizing service and support offerings. It launched Sage City, a new centralized online community for customers, business partners and employees, last month. And, Sage will make new acquisitions when needed to supplement its core solution focus.
  • Expand its connected services strategy and offerings. Sage is building more cloud services, such as, Sage Mobile Sales, and Sage CRM, that connect to core financials and ERP solutions, as well as for partners to build and sell add-on connected services. The company’s big picture vision is to “liberate” data and services that had been locked into ERP so that customers can use them in the cloud, anywhere, anytime, and from any device. Sage is building a data cloud on Microsoft’s Azure platform with common connectors, bi-directional synch, multi-tenant storage and disaster recovery. This means that Sage connected services will work the same way regardless of the backend ERP/financials Sage customers use. This will all come together in the Sage Marketplace, slated to launch in FY14.
  • Going all-in on the subscription pricing and the cloud. Sage now offers subscription-based pricing for all of its solutions, and comps partners on a percentage of subscription sales over the life of a contract. It has also committed to developing cloud versions for its solutions, including a cloud version of Sage ERP X3, which will feature a user pure web experience when available in 2014.

Taking the Marketing Road Less Travelled

sage lisltensThe Sage commitment to putting customer experience first underpins these initiatives. Sage has several initiatives underway to up its listening game, such as the Sage Listens RV Relay, which is allowing Sage to also kick off a “Shop Local” campaign to encourage people to shop with local businesses.

In contrast to the “build it and they will come” tack that most tech companies take, Sage is taking its cue from the Proctors and Gambles of the world. It is getting customer input upfront before developing new products and functionality. Sage is hearing that customers want easy to use, flexible solutions, mobile capabilities and a low-cost of entry, and is concentrating resources on these areas. In fact, in one of the breakouts, when an analyst asked a Sage executive about social and big data plans, the exec said that customers are not calling these out as priorities. He added that while Sage isn’t ignoring these areas, it is prioritizing development and marketing based on customer input.

For instance, Sage recently launched Sage Healthcare Advisory Services , which includes a new “My Workforce Analyzer” tool to help SMBs understand plan for the Affordable Care Act. Analytics are under the covers, of course, to help SMBs develop what-if scenarios and optimize planning. But Sage isn’t calling it a big data solution.

Sage has often been knocked about for not keeping pace with the generational shift in the North American workforce. But it is now facing the facts–specifically that people born before 1968 will comprise less than 20% of the workforce by 2015. Sage is recalibrating its strategy to align more closely with different generational expectations. As Brad Smith, EVP of Customer Experience stated in his keynote, “We have to over-service the pre-PC guys but we also have to find ways to reach the ‘digital natives.’”

To that end, Sage demoed a voice-to-text initiative in which users can use voice-activated mobile technology to interface with ERP systems on mobile devices. It’s sort of like Siri, but within the context of the business and business workflows, so it appears to do a better job of handling user queries and requests. While the voice command initiative is in its infancy, it could be a key differentiator in the future.

Finally, Sage is putting its money where its mouth is, by tying Sage metrics and compensation for all Sage execs to Sage Net Promoter scores (NPS). The company’s previously shrinking North America business has grown 4% year-over-year.

Channeling The Channel

6a00d8345177fc69e20192ac233035970dSMB Group research shows that accountants/CPAs and technology business partners represent 2 of the top 3 influencer channels for SMBs selecting financials and related business solutions, with peers in other businesses rounding out the list. Sage has a large channel in both areas–with over 25,000 accountants in North America and more than 26,000 technology reseller partners worldwide. But over the past few years, cloud competitors have been trying to poach these very valuable resources.

Accordingly, Sage has several new initiatives underway to re-focus partners back on Sage. In addition to committing to provide cloud-based offerings across the portfolio to give partners a Sage cloud offering, Sage is:

  • Partnering with the Business Learning Institute to develop a curriculum for accountants to help them provide more competitive services to their SMB clients.
  • Planning to launch a new certification program for accountants focused on startup market, with a collaborative version of Sage One, Sage’s solution for very small businesses, to make it easier for them to automate tasks and take care of clients.
  • Introducing the Sage Advisor Partner Dashboard, which uses current customer data to help Sage reseller and accountant partners more readily identify new opportunities in the installed base, and provide a more personalized, consultative sales experience.

Sage is also recruiting new partners for midmarket Sage ERP X3, and new accountant partners to help it build traction among very small businesses for the Sage One solution.

Summary and Perspective

Minus ACT! and SalesLogix customers and partners, this year’s Sage Summit was smaller than in 2012. But, the energy level was much higher. Sage executives were more confident and relaxed, and the messages they delivered were consistent and crisp. Sage demos were more engaging, and even at times, entertaining.

Key metrics, including rising NPS scores, modest growth in its North America business, and a stock price that recently reached its highest point in 13 years are also good signs for Sage. As important, conversations with customers at the event led me to conclude that “Sage Listens” has moved beyond a slogan to put the programs in place to proactively engage customers.

However, there are a few areas in which I believe Sage needs to double down:

  • Sage One marketing. Worldwide, Sage has about 10,000 customers using this very small business management solution today. But most of the millions of very small businesses have never heard of it. Sage needs to significantly enhance awareness and demand gen campaigns to become more than a blip on the radar.
  • Third-party connected services . Sage has a big installed base, which should make it an attractive partner for third-party developers–especially now that developers can write just one connector and reuse it for all of Sage’s core products. But Sage has only about 20 endorsed connected partner services today. Again, many developers don’t know about this opportunity. Sage must raise its overall visibility in the developer community and launch a targeted recruitment program to get developers to build the apps that its customers need.
  • Clarity around CRM. After divesting ACT! and SalesLogix, the company’s sole solution here is Sage CRM. But other than discussing integration and a cloud version of Sage CRM that is in the works, CRM was very low profile at the event. Given Sage’s focus on core financials/ERP it leads me to wonder how committed is Sage to Sage CRM, and if will make the investments required to provide a truly first-rate CRM solution.
  • Innovation. Sage made a good case for its direction in the cloud, mobile and integration areas. However, analysts and press did and will continue to hound it on social and big data/analytics. While Sage customers may not have put these areas at the top of their priority lists yet, it’s only a matter of time before they do. Sage needs to get out in front in these areas.

That said, it’s challenging to do everything at once. The Sage leadership team has made the decision to move forward instead of standing still. All in all, I get the impression that Sage as a company has a better sense of who it is, where it’s going and how it will serve SMBs.

Related posts:

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

Sage Turns a New Leaf: Top Takeaways from Sage Summit 2012

Sage’s Rebranding: More than a Name Change

Sage Summit 2011: Tackling the Sage NA Branding Challenge

Impressions from Sage Insights 2009

A View From the MSP Trenches: Cloud Opportunities in the Midmarket

As discussed in my blog, IBM’s Managed Service Provider Initiatives for Midmarket: An Interview with Mike McClurg, IBM views MSPs as an increasingly critical channel for delivering cloud-based technology solutions to midmarket companies. Just a few days after I posted this interview, IBM announced that it would further strengthen its initiatives to help MSPs meet the growing midmarket demand for cloud services.

Now, all research (including SMB Group studies) points to a rise in midmarket adoption of cloud solutions. But, what do MSPs see as the key midmarket hotspots, how are they turning these into opportunities for their businesses, and how is IBM helping them? To help answer these questions, I spoke with three very different IBM MSP partners to find out their views on the cloud opportunity:

  • Oxford Networks characterizes itself as “a 112 year-old start-up,” which began as a phone company and has since reinvented itself a couple of times over to become a high-end carrier’s carrier transport network. Oxford recently acquired an MSP and is building on this to offer a spectrum of IT and telecom services SMBs.
  • Perimeter E-Security delivers highly secure infrastructure protection and compliance solutions via its security-as-a-software platform, including: firewall management and monitoring, vulnerability scanning, intrusion detection and prevention, hosted email, hosted collaboration, email security, message archiving and mobile device management. Perimeter offers its on demand in the cloud, and on customer premises.  About two-thirds of its customers are small and midsize businesses (SMBs).
  • Velocity Technology Solutions provides virtual private cloud managed application and hosting services for its customers’ ERP solutions. It also hosts and manages connected applications, such as analytics and workforce automation; and complementary technical solutions, such as imaging. In addition, Velocity offers remote managed services for customers’ on premises applications, including a full replication service for disaster recovery.  Velocity’s customers range from businesses with about $50M in annual revenues to the Fortune 500.

Despite different technology and market footprints, these MSPs share a similar view of the compelling opportunities to provide cloud services in the midmarket. They are zeroing in to meet  customers’ requirements in several key areas:

1. Offloadinfrastructure management. More midmarket companies want to outsource management of the “IT plumbing” that their businesses require—from infrastructure and telecom to middleware and applications. Demand for IaaS services is spiking as customers seek to move resources from IT to other, more strategic areas of the business. Often, the need for application upgrades trigger a move to an MSP. “Businesses have been there, done that and have little appetite to go through the headaches again”, according to Tom Bruno, President & CEO, Velocity Technology Solutions, “Our opportunity is to take software and turn it into a utility or dial tone for our customers.”But, says Bruno, “the most important thing we can have is our customers’ trust—trust translates into availability. Partnering with IBM gives us the peace of mind that we can deliver.”

Many companies aren’t ready to put all of their applications into the cloud, but still want to offload management. Offering remote managed services for customers’ on-premises applications gives MSPs with another healthy revenue opportunity in the near term.  And, as Bruno puts it, remote managed services also provide these customers with “an on ramp to the cloud.” Bruno envisions that IBM PureSystems will give Velocity even more flexibility to tailor offerings for either an on-premise or private cloud environment.

2. Implement the leading edge technology solutions necessary to grow their businesses. Midmarket businesses increasingly recognize that they need leading edge IT solutions to be competitive. But in most cases, they lack the IT skills and expertise to keep up with these technology changes. According to Craig Gunderson, President & CEO of Oxford Networks, “Our customers know that technology is moving very fast and disrupting the status quo. Moving to the cloud and outsourcing is often the only way that they can maintain a competitive position.” By providing customers with a fully managed data center, PaaS and IaaS solutions, Oxford can “give them far more capabilities than they could have on their own, with fewer limits, and at a lower cost.”

Mobile is a prime example of an area in which SMBs need to innovate, but struggle to keep pace. Perimeter recently rolled out a new mobile security offering that provides best practice guidance and services to help SMBs comply with privacy statutes in world in which “bring your own device” is becoming the norm.

Oxford’s Gunderson and Andrew Jaquith, Chief Technology Officer, Perimeter E-Security, both view new access to IBM’s four new Global Centers of Excellence as key to helping them keep up swiftly evolving market demands. By leveraging IBM’s technical and best practice expertise, they can develop the scalable and reliable new solutions that their clients will require.

3. Provide stronger security, availability and performance levels. Companies know that an IT outage or security breach can seriously compromised or even destroy their businesses. Jaquith asserts that as industries become more regulated, they are increasingly held to higher security standards, similar to what banks have become accustomed to. As a result, “Demand is rising for end-to-end security solutions for messaging—including mailboxes, archiving, encryption, control and reporting, content filtering and more. But the technology needed for this is getting very complicated.”

Jaquith sees IBM as “a technology leader that gets the cloud, and a partner to help us achieve our goal to provide instant-on, scalable and elastic cloud services.” IBM storage and security solutions underpin Perimeter’s current offerings. With IBM’s new MSP initiatives, Jaquith sees opportunities to develop new services built on IBM SmartCloud, which provides enterprise-class cloud computing technologies and services for securely building and using private, public and hybrid clouds.

 The demand for higher availability solutions is also rising. Velocity’s Bruno notes that “Midmarket businesses may have 5 to 20 applications in the back office alone. They want providers to get the formula down for higher availability.” Velocity does this by providing standardized virtualization solutions and a single source of support across applications—from break/fix to functional, “how do I do this” support.

One of the common threads I heard was that midmarket companies are looking for comprehensive services. Although they may want to tap into discrete services in an incremental way, they want them to integrate with each other in a Lego-like fashion. Since few MSPs can provide everything, those I spoke with emphasized the importance of being part of a strong ecosystem. For example, at Oxford Networks, the focus is IaaS and PaaS services. But Gunderson and team work with IBM and its ecosystem partners to also provide SaaS solutions to customers when they are a good fit. Meanwhile, as Velocity’s Bruno explained, “Everything is advancing so fast in the ERP world. There’s a rush of analytics, industry apps, mobile apps, collaboration requirements and more. This creates more complexity in the infrastructure.  We can tap into IBM and its expertise to provide new services more efficiently.”

Clearly, the rapid rate and pace of change in technology—and what it means for business—creates an enormous opportunity. MSPs can leverage economies of scale and skill to provide better-performing and more cost-effective IT solutions than midmarket companies can attain relying only on internal IT resources.

But capitalizing on this opportunity also presents challenges for MSPs, who need to keep ahead of the technology learning curve, improve their marketing skills and programs, and identify and enter new markets. In my next post in this series, I’ll discuss these challenges, and how these three MSPs work with IBM’s MSP program to help address them.

This is the third of a five-part blog series by SMB Group that examines the evolution of midmarket business technology solutions and IBM’s Managed Service Provider Channel programs. In the next post, I’ll look at what MSPs see as their top challenges, and the role IBM plays in helping them to meet them.

IBM’s Managed Service Provider Initiatives for Midmarket: An Interview with Mike McClurg

Here’s an edited transcript of my interview with Mike McClurg, VP of Global Midmarket Sales for IBM. [If you’d like to listen to the recorded podcast, click on the orange circle below].

Laurie: Mike, thanks so much for joining us today. Before we dive into our conversation about IBM’s strategy and programs for managed service providers (MSPs), can you give us a big picture view of IBM’s midmarket strategy?

Mike: Sure. In IBM, we typically classify midmarket accounts as firms with 1000 or fewer employees. Our midmarket initiative is global, and midmarket is one of our fastest growing segments, including growth markets, such as Brazil, Russia, India, China and Eastern Europe. We’re seeing real expansion of the midmarket and SMB client base in those geographies as they build out their infrastructure. We’re also seeing nice growth in traditional major markets.

Our products and services range from servers and storage that SMBs use to build their infrastructure, to business analytics tools such as IBM SPSS software and IBM Cognos software which are very popular to help create smarter approaches to manage data and knowledge. We also provide cloud capabilities and management and administrative services, to name a couple of the services we offer.

Trends show that midmarket customers are moving into some of IBM’s core strength areas—for instance, outsourcing through MSPs, business analytics and big data in the services area. So it’s an exciting time for us with the midmarket business.

Laurie: Can you tell us a bit about your background, Mike?

Mike: I have been with IBM for four years. I came from XIV, a storage company that IBM acquired in 2008. Prior to that, I ran channel and SMB businesses for EMC and Sun Microsystems. I’m fairly new in terms of my IBM tenure, but have long experience with the channel and SMBs.

Laurie: Thanks. So, turning to IBM’s MSP initiative, how do MSPs fit into the picture for IBM?

Mike: We look at it from a customer demand perspective. We see more interest from midmarket customers to leverage outsourced solutions. It is very appealing for them to roll out a new application and leverage standard solutions without expanding their IT organizations or building a lot of infrastructure. MSPs can help them do it quicker and with less upfront investment and risk. So outsourcing and MSPs are key trends.

Laurie: There are so many areas in which technology is evolving so quickly—cloud, and mobile, social, and analytics. Even if SMBs want to do some of this in-house, the pace of change is so rapid that they can’t get new solutions in place quickly enough with only in-house resources.

Mike: That is exactly right. Their IT organizations are working 9 to 6 five days a week, so it’s great to have a business partner that can provide a mission-critical applications such as email with a 24/7 service level. And they can leverage cloud capabilities for security monitoring.

Another benefit is that an MSP sees millions of intrusion detections a day, and can do statistical analysis to understand where the next one is likely to come from. That’s a level of sophistication that a midsized firm probably doesn’t have. But they can leverage that from an MSP partner.

Laurie: So MSPs can provide not only economies of scale, but economies of skill because of experience. But the MSP area can be very blurry, with a lot of definitions and overlap between MSPs and other partners like VARs or solution providers. How does IBM define MSP, and what type provides the best synergy with IBM?

Mike: We look at it from a few different perspectives. First, there is the traditional non-cloud MSP, which is what folks typically think of when they talk about an MSP: They provide network system management outsourced infrastructure management.

But we’re seeing real growth among cloud service providers, who fit into three categories: infrastructure as a service, platform as a service and software as a service. The best way to think of it is how much does that service provider provide as an outsource service to the end-user customer?

  • Infrastructure as a service (IaaS) providers are traditional MSPs that provide servers, storage and management capabilities such as security and backup.
  • Platform as a service (PaaS) providers provide infrastructure plus a development runtime environment.
  • Software as a service (SaaS) providers manage everything, including your application and data, for you.

IBM has programs for each type. IaaS MSPs are great partners for our Tivoli management tools, servers, storage and endpoint management tools for mobile applications. PaaS providers also use solutions such as Cognos, an analytics tool, SPSS and Rational development tools. SaaS providers may work with IBM partners who have built on IBM infrastructure or the IBM SmartCloud Enterprise.

Laurie: Several major IT vendors are courting MSPs. What differentiates IBM?

Mike: When we talk to MSPs, their needs focus on two areas. One is they’re looking for a full offering. Can I buy a platform, management tools, platform development tools and services? IBM has a really strong story to tell up and down the whole continuum of offerings—not only the products, but also the services.

We tune our offerings so that an MSP can plug-in anywhere. If they need a platform, we’ve got that. If they’re developing a vertical service that they’re rolling out and they would like to offer a managed backup or a managed security service as part of that, we have it and it’s available, priced and configured so that they can integrate it into their solution and sell it to their end-user customers. We’ve got a lot of flexible offerings and capabilities to address their needs.

Laurie: It sounds almost like they can get as many of the LEGO pieces as they want.

Mike: That’s the way we like to think of it. You define what your business is, and IBM will plug-in the areas that are not core to you or where you could use some help. If it’s another service that augments the business that you’re in, then that’s the way we’d like to work with you.

The other thing that’s really exciting is that IBM is very focused on how do we build a business relationship with an MSP? What do we do for joint marketing to drive demand for their services? We both have an interest in them being successful because the more they sell, the more they consume the technology we provide to them.

We focus on their people and capabilities, leveraging our background and business partner experience. We’ve done a lot in the last three years to assist with marketing support for our business partners to help them go to market as opposed to us just handing them a lead. We’re much more efficient if we put more money and investment and skills in their hands, supported with marketing investments and some other services that we can provide to them.

Sure, we’re a technology provider, we’ll hit all of your needs there, but we’re really focused on the business relationship and how we provide you the marketing support to drive demand, and how you can leverage the IBM brand and logo in the marketplace.

Laurie: What is the traction like with IBM for MSPs so far?

Mike: Explosive growth. We’ve gone from a couple hundred of MSPs to 1400 globally in just a few months since we’ve focused on bringing our message to them. We’ve kept it kind of a quiet secret; but since we’ve been starting to drive the discussion with partners, it’s starting to expand very rapidly.

Laurie: What are the best opportunities for MSPs in the midmarket to work with IBM on, if you had to pick a couple of sweet spots?

Mike: Most of our business today comes from the IaaS providers—the traditional hosters that are building out infrastructure. In major markets, they’re looking at systems like IBM PureSystems, which is an advanced fully functional platform. In growth markets, they’re saying come in and help us with our data center strategy and how we should build out these data centers.

But the other two areas, PaaS and SaaS, are ones that we’re really seeing explosive growth in. In PaaS, we’ve got partners developing environments based on IBM Rational software and IBM Cognos software, and some SaaS partners are using IBM SmartCloud Enterprise and Cognos tools. All three are great areas, and we’ve got a good story to tell for all of them.

Laurie: Can you give me an example of a specific MSP that’s really taken the bull by the horns and done a great job?

Mike: Yes. I’ll talk about one from Austria, a company called Pitagora. They developed a CFO dashboard around SmartCloud Enterprise in Cognos, which they host in our environment. They had been a traditional IBM Business Partner, so this was a great way for them to add significant value and launch a whole new services arm based on Cognos and their expertise in business analytics.

Laurie: What should an MSP know about the programmatic aspects of working with IBM?

Mike: Where to get information. Go to IBM PartnerWorld – Managed Service Providers, which is part of IBM’s global partner program. We’ve got information about the top offerings, depending on the type of business partner or service provider you are, and what would be the right way to engage with us from an offering perspective and from a business development perspective.

There’s a form you can fill out there, and we’ve got a business development team to understand your business and help you map IBM’s resources to your business. We’ve got folks that are really smart about this business. All they do is work with service providers to understand their needs and how to bring the full force of IBM to help them.

Laurie: How is the business model structured?

Mike: We’ve made it a lot easier to register, and the business development executive we assign will stay on and work with the MSP partner. Our business motto is that the partner will have an assigned person not just for the sign-up phase, but also once we’ve both decided this is the right partnership, getting those first few customers and starting to scale the business.

Laurie: Mike, I just have one more question to ask. What would be the most important takeaway you would want an MSP to have in terms of how they view IBM?

Mike: You know, it’s funny. I think when we have that conversation with MSPs, generally we’re not the first name that they think of in this space. But our team is focused on being an active participant in this marketplace. We’ve been listening, and what we’re hearing is that MSPs need a full set of offerings and somebody that really views this as a partnership and is willing to invest upfront in developing the business jointly.

Our key message to MSPs is that we are very interested in this business and in working with you. We’ve got a lot of very exciting things to offer, and there is a lot of leverage and benefit from being affiliated with IBM—so we would absolutely love to talk to them. The next step would be to take a look at IBM PartnerWorld – Managed Service Providers and get the ball rolling, and we’ll follow back up with them. We’re very committed to this business, and we would love to talk to them.

This is the second of a five-part blog series by SMB Group that examines the evolution of midmarket business technology solutions and IBM’s Managed Service Provider Channel programs. In the next post, we’ll look at the opportunities and challenges from an MSP perspective.

Acumatica’s Best of Both Worlds ERP Story

Just want to let you know that we are publishing highlights from recent vendor briefings on the SMB Group web site. As time permits, we discuss our takeaways from the more interesting briefings. I’ll try to remember to post them here as well. There are several up there already, here is the most recent one.



Acumatica is a relatively new player on the SMB ERP scene. It delivers its web-based ERP solution both on premise, and via a software-as-a-service (SaaS) model. Targeting companies with 5–1,000 employees (or roughly $5M – $500M in annual revenues), Acumatica provides accounting, CRM and distribution capabilities, and worldwide currency and language customization.

Acumatica offers customers a choice to run its solutions on-premise or via the SaaS model, providing the benefits of cloud technology and social media capabilities in both delivery models. Subscription pricing for the SaaS version of the accounting module starts at $12,000 annually, while on-premise licenses start at $15,000.  On-premise pricing is CPU-based, not per-user based, enabling customers to maximize the ERP user base without incurring added costs. The company has more than 50 customers using its solutions to-date. About 30% use Acumatica via the SaaS modes, and the other 70% have deployed it on-premise.

Acumatica has a 100% indirect sales model, which provides an attractive and neutral compensation model to motivate value-added resellers (VARs) to sell the solution that will work best for the end-user customer. The vendor has signed up more than 40 VARs to date—mostly from the ranks of Microsoft Dynamics and Sage.

Quick Take:

Acumatica intends to capitalize on key trends and requirements in the traditional VAR community and it the SMB market.  First, as I’ve written many times, SaaS vendors have yet to crack the code on creating a VAR-friendly model. Customer demand for SaaS is on the rise, and  many VARs want to add a SaaS offering to their line-up. But, they worry that SaaS vendors (who often sell both direct and through channels) will disintermediate them once the partner has brought in the business. VARs searching for a SaaS option are likely to find Acumatica’s 100% indirect model, combined with a choice of delivery options and a Microsoft-centric approach, quite attractive. The fact that VARs can sell the same solution via either delivery model is also a plus—most VARs don’t want to be evangelists, they want to sell the solution that best fits the customer’s needs.

Acumatica offers customers a distinct value proposition as well. Customers can either self-select what model (SaaS or on-premise) will work best for them, or Acumatica and its partners can help them decide what will work best. In contrast, other major vendors in the mid-market space—including Intacct, NetSuite, Microsoft, Sage, etc.—have a pre-determined agenda.  Acumatica also offers customers that want to switch from one delivery mode to the other discounts that take into account their prior investments.

As a relative newcomer, Acumatica will have to work harder than more established rivals to prove that it has both the product capabilities and corporate viability to be a “safe” choice. However, if Acumatica can keep pulling in VARs, and broadcast its best of both worlds story out to the market, it should be able to cross this chasm.

NetSuite’s SP 100 Program: An Offer VARs Can’t Refuse?

In a bold move to get traditional value-added resellers(VARs) off the SaaS fence, NetSuite announced its new Solution Provider (SP) 100 Program, which gives business application VARs 100% margin on the first year of license subscriptions they sell. The program requires a 2-year minimum license commitment from the customer, and after the first year, NetSuite pays VARs 10% margin on recurring annual license fees. Prior to this program, NetSuite had offered VARs 30% of annual license sales.

NetSuite’s SP 100 Program targets established mid-market and enterprise ERP and CRM VAR’s and consultants, including VARs selling Microsoft Dynamics, SAP, Sage, Epicor, Deltek, and others. The program is not exclusive—VARs can continue to sell their packaged business software offerings as well. NetSuite is also extending the program to it’s current solution provider partners, and it includes all other SP program perks, including sales and technical training, sales cycle assistance, and marketing support.


Since the model got off the ground over 10 years ago, SaaS vendors have argued that SaaS can open the door for VARs to create a recurring revenue stream, and free them up from low margin IT service chores to focus on generating higher value business.

But the case has evidently not been strong enough to entice the masses, for a few key reasons. First, the recurring revenue model is radically different to the conventional business applications model, where VARs earn a large upfront commission for selling a business solution, hardware and infrastructure software. Second, VARs have balked at not being able to generate income from services necessary to deploy and maintain business applications on customer premises. Third, whether real or perceived, many VARs don’t trust SaaS vendors. Deep down, they think that after they make the sale, SaaS vendors will take control of the account and soon disintermediate them entirely.

Quick Take:

NetSuite’s SP 100 Program supplies VARs with the big upfront payment that they are accustomed to. NetSuite’s own side-by-side VAR revenue comparison to Microsoft Dynamics favors NetSuite of course, but VARs can try it and do their own math to see how it proves out without having to give up selling competitive packaged software. It’s an opportunity to get up to speed on SaaS, the cloud and recurring revenue models and develop their business consulting skills.

As important, it comes at a time when the SaaS model has proved its maturity and staying power, many VARs have lost deals to a SaaS vendor, and many customers are trying to avoid big upfront capital outlays. While some VARs will remain skittish, distrustful, or even just lethargic about adding a SaaS solution to their business management portfolio, I think NetSuite’s SP 100 will be big wake-up call for many VARs.

Top Takeaways from IBM’s General Business Influencer Summit

Last week, I attended IBM’s General Business (GB) Influencer Summit for analysts covering the mid-market (companies with 100 to 1000 employees and larger enterprises that are not currently spending a lot with IBM, sometimes termed “white space” accounts). I’ve attended this event since IBM began holding them a few years back. IBM recently split GB into two groups, creating separate sales and marketing arms for the mid-market and white space large enterprise accounts to better tune its resources and initiatives to the very different needs of these two sectors. While Big Blue is a natural to grow market share in the large enterprise space (especially as the ranks of Sun defectors grow), the mid-market is an area that IBM is still figuring out. It’s also the area that I cover, so focused most of my attention on how IBM is evolving strategy and execution in this area. Here are a few key takeaways that bubbled to the top for me, and that underscore some of the ways IBM is shifting gears to better reach and serve the mid-market.

  • Telling a more aspirational, transformative story. IBM is making its corporate Smarter Planet (which centers on the message that the world is rapidly becoming more intelligent, instrumented and interconnected—in other words, smarter) more relevant to mid-market customers by engaging them in deeper, more industry-specific conversations, such as “What does it mean to be a smarter retailer?” and providing solutions that will help them to achieve better business outcomes from their IT investments. In addition to the industry-specific approach, IBM has themes that run across industries, such as Dynamic Infrastructure, New Intelligence, and Green IT. While it may be difficult for IBM to condense the Smarter Planet story in sound bites, if IBM can clearly articulate the vision in a targeted way (by industry and/or horizontal requirements), it should resonate as the economic recovery gets underway and mid-market companies re-focus towards growth.
  • Continuing to shift from commodities to solutions and bottom line business benefits. Mid-market customers prefer to buy solutions, not piece parts. To that end, IBM continues to push its revenue mix further towards software and services. The vendor is introducing more integrated, cross brand offerings that zero in on top mid-market issues such as improving efficiency, reducing costs, getting new customers, increasing productivity, improving customer service and managing risk. The goal is to make it easier for mid-market customers to deploy solutions for specific workloads, and speed time to value from them. For example, IBM has introduced solutions building blocks that offer customers pre-configured, pretested building blocks that combine IBM hardware, services and financing. IBM packages the components in a loose bundle that customers can order and assemble quickly. Comprehensive Data Protection and Cognos Express are some of the first out of the gate, with more scheduled for 2010. Then there’s IBM’s Linux based smart appliances, which include the SmartCube and Lotus Foundations (see What is a Business Applications Appliance and Why Should You Care? for background), as well as a growing portfolio of cloud-based services (see below). IBM’s new integrated solutions story is kind of a back to the future experience—ala the AS/400—that IBM has had great success with in the past. This time, however, IBM is offering customers many more solution paths, which is good for choice, but also makes the story more confusing. IBM will need to clearly position and delineate benefits and outcomes to avoid getting in its own way.
  • Shaping its cloud strategy and portfolio. Like most legacy hardware and software vendors, IBM has been somewhat ambivalent about the cloud. However, it seems to be moving past this ambivalence with a more decisive strategy that includes both public and private cloud offerings. IBM will significantly expand its Smart Business Services offerings, which are standardized services that run on IBM’s cloud, such as LotusLive, which IBM currently offers, and a slew of planned solutions for  analytics, development and testing, desktop and devices, infrastructure and storage, and business services. Smart Business Services also includes IBM’s private cloud services, in which IBM builds and runs a private cloud behind the customer’s firewall. In addition, IBM is developing Smart Business Systems, an integrated platform to deliver and manage cloud solutions. While the vendor still has a lot of work to do to clearly position and market these solutions, and is still searching for the right formula for creating value with SaaS developer partners, it seems to have a more substantive and cohesive strategy than its had in the past.
  • Ramping up and revamping partner programs. In addition to significant investments in global partner recruitment and enablement, IBM is restructuring incentives to help partners weather the recession. The vendor has moved from a cumulative type ladder approach to a simplified incentive program that pays partners in a more linear approach from step one. IBM is also trying make it easier for partners to do business with it, with new PartnerWorld communities and concierge service designed to remove administrative costs and hassles. Being the behemoth that it is, IBM may never be able to make the partnering process friction-free. But, I’ll give it points for pushing the needle forward, and more points for helping cash-strapped partners stay the course in difficult times, and its efforts to remix its channel to better align with evolving mid-market customer requirements.
  • Increasing investment in demand generation. Partners have told IBM to focus more on demand generation, and less on lead passing. So IBM is scaling up resources for high air cover marketing. All told, IBM conducted 835 marketing events, drawing more than 63.000 mid-market customers, in the past year. For instance, the vendor is conducting what it terms “Grand Formaggio”sessions around the world to personally engage mid-market CEOs with senior IBM executives, and also has a series of events aimed at CFOs. IBM also recently launched InfoBOOM, a social network for U.S. mid-market businesses, in partnership with CIO Magazine. IBM sponsors the site, but content is designed around mid-market themes and issues so that IBM can better understand and share with the community. IBM intends to launch this in other countries soon. Successful demand generation will be critical to raising IBM’s profile and heightening awareness about what IBM can offer mid-market customers—and keeping the channel happy.
  • Reconfiguring operations for growth markets. IBM has invested in building two management systems, one for established markets, and one for emerging growth markets. This enables IBM to tune in to the different requirements, approaches and government investments that different regions afford, and accelerate expansion in emerging growth markets. For instance, IBM has added more than 50 new offices in growth markets, and investing in leadership and talent development by moving seasoned IBMers from developed markets to emerging ones, and bringing fresh new faces to more established territories to learn the ropes. Big Blue has built new innovation centers in countries such as Vietnam, South Africa, Poland, Brazil and Hungary, and a global innovation center in China.
  • Better financing programs for the mid-market. IBM’s 30 year-old Global Financing arm (IGF) is strong, healthy and proactive—in fact, financing accounts for 9% of IBM’s pretax income. The vendor offers solution financing for hardware, software and services with at least 20% IBM content, and has simplified rate structures and contracts to help streamline the financing process. IGF has also introduced some “recession busters”, such as a Q4 deferral program and 0% financing for Software Group financing for 12 months. IGF also runs a huge asset recovery program (processing about 40,000 pieces of hardware a week) and $1.5 billion dollar used equipment business, which offers cash-strapped companies value based alternatives as well. IGF is also ramping up partner programs and education to help partners better engage mid-market CFOs in the IT purchase conversation. In the current economy, IGF is clearly one of IBM’s most powerful marketing weapons, helping companies to invest now to jump start growth as the economy turns around.
  • Continuing investments in asset-oriented acquisitions that can scale to the broad market. IBM has been on a shopping spree, acquiring companies such as Internet Security Systems (ISS), Cognos, Outblaze and SPSS, among others. IBM can use its global distribution capabilities to expand the footprint for these solutions, and as necessary, make them more relevant for mid-market customers.

As it nears its 100th anniversary (in 2011), IBM is putting a more shape and substance into its mid-market strategy and execution capabilities than it has ever done. However, in a market where brands such as Microsoft, Dell and HP dominate, and Google and other “born on the Web” vendors are ascending, IBM’s job isn’t easy.

The IBM brand is already well-respected in the mid-market, but IBM will need to continue to step up its efforts to become more relevant. Unlike many of its competitors, IBM doesn’t have a consumer or even a small business presence to leverage in the mid-market. Big Blue will need to wow the mid-market to move customers out of their current comfort zones.

One of IBM’s strengths is that it has a very rich portfolio of offerings and solutions, but this is also a double-edged sword. IBM will need to articulate and position overlapping solutions to help guide both customers and partners through the clutter to best-fit solutions. IBM will also face challenges on the channels front. How will it make the economics of the channel and the economics of lower-cost, volume based solutions work? And how will it fold high-growth SaaS vendors into a value-added and profitable business model?

To succeed in its mid-market quest, IBM will have to fire on all cylinders over the long haul, continue to sharpen its mid-market focus, and ensure that its offerings stack up well not only against the Microsoft-centric status quo, but against the increasing array of newer solutions available.