Sage regroups for growth

Image may be NSFW.
Clik here to view.Sage was refreshingly open at its analyst day in (sunny) Newcastle yesterday on what it has to do to shift its average growth rate from the dawdling 3% of the past 10 years to a still modest but improved 6% over the next three years. That level of change would not be major for a vendor like SAP, Oracle or Microsoft, but given its history, it does represent a step change for Sage.

After what it describes as a forensic review of the business, its market and its portfolio, the like of which CEO Guy Berruyer said had not been carried out before, it is making tough calls to put it in a position to meet its growth goals. These include catagorising its products into three groups – those with low growth potential (sunset), medium potential (harvest), and high potential (invest) and allocating resources accordingly. Although it will continue to develop and supported its existing 270 products to some degree or other, Sage is shifting its resources around to put the greatest investment into the products with the greatest growth potential. It is not actively planning to sell off or discontinue the sunset category products but we can envisage some heading towards the door.

Meanwhile SaaS-based SageOne will spearhead its entry level growth, applications built on Microsoft’s Azure platform (e.g. Sage 200) will drive SMB growth, while Sage ERP X3 is positioned to push the mid market business forward. We can see SageOne and Azure-offerings delivering growth but its harder to see on premise (or partner hosted) ERP X3 making a step change – but cloudy announcements are due shortly so we’ll wait and see.

The technology laggard has also woken up to the potential inherent in the new technologies that have tumbled into the market – cloud and mobile plans run through virtually everything. Rather than going its own way on cloud infrastructure it is aligning with Microsoft and using its assets (see Sage will go with Microsoft to the cloud), which is a pragmatic decision that will help accelerate its cloud portfolio – at last. It has also put a lot of thought into its subscription strategy and has a credible model to drive extra business.

The other major change is a shift in the local/global balance. Sage has always prided itself on its local knowledge and ability to make decisions that are appropriate for local markets. This is still important but there is more centralised decision-making and global development which should help develop Sage’s market position and improve its growth potential.

Berruyer and his team talked of tough decisions made and of more to come in terms of where to allocate resources and how to run businesses, the need for growth and the need to execute. It is down to execution now, but we came away from the event feeling positive.