Sage shaping up to take on its rivals

Sage is eager to redefine its old image as an accountancy and payroll supplier for small-to-medium enterprises by repositioning itself as a business-applications provider that can cater for all sizes of business up to the mid-market.

To achieve this, the vendor has continued its long-term acquisition spree to fill gaps in its product lines. It has also re-branded and re-packaged its existing offerings to make them more relevant to the market. The company now sells three application suites: Sage 50, for small companies; Sage 200, which is aimed at organisations with a turnover of between £1m and £10m; and Sage 1000 for mid-sized businesses.

As Brendan Flattery, Sage's managing director for the mid-market, told ZDNet.co.uk, the company hopes, through these application suites, to maintain revenue growth against rising competition from larger rivals such as Microsoft, Oracle and SAP.

Q: Why did you decide to repackage your product set?
A: End users were saying that they no longer wanted to experience silos of information when they were handling both their accounts and CRM and, as a result, we've moved from providing individual products to creating a suite of integrated applications, with those two applications forming the platform. The consequence of moving to suites is that they provide customers with a holistic view of the business in real-time and offer a deeper insight into how the business is performing.

The elements that make up the Sage 50 suite, for example, are applications that many people are currently familiar with. Line 50, for example, becomes Sage 50 Financials, Payroll becomes Sage 50 Payroll and so on.

The concept also allows Sage to develop packages of applications within the suite to suit particular parts of a customer's business. A people-management package, for example, might comprise Sage 50 Payroll, Sage 50 Health & Safety and Sage 50 HR Management.

Do you plan to expand the number of vertical market-specific applications that you provide?
Key verticals for us are construction, retail, manufacturing and distribution. The Sage 200 suite already includes Sage 200 Construction and, in future, we also plan to take other applications and put them into the suite. So, over the year ahead, as the suite evolves, we'll include Manufacturing too.

Sage 50 is similarly being evolved. It includes Sage 50 Retail, Manufacturing and Construction now, but we'll see other applications welded into it as well. Sage 1000 has no vertical applications at the moment, but they'll also start appearing over the next year.

How has the re-packaging affected pricing?
The move has enabled us to streamline our pricing model significantly as we now have a base price for the platform. Historically, customers would buy the accounting and CRM software separately and pricing would vary for each, depending on the number of users.

But now they would buy the Sage 200 platform, for example, which comprises both types of software and includes a fixed number of user seats. If they want additional users or other modules, such as bill of materials or project accounting, they'd pay for them separately.

This wasn't a backdoor way of us increasing prices, because it's marginally cheaper for them to go down this route. It was a spin-off of a desire by customers to have a fully integrated suite of applications, but they can pick and choose what elements of the suite they take at whatever pace suits them. This also gives us an opportunity to cross-sell other applications to them based on the particular route they have chosen.

What are you doing in terms of integrating the large number of applications you have obtained through acquisition?
We're investing much more in the integration side of things now. Twelve months ago, we spent between five and 10 percent of our R&D budget on integration, but now it's more like 25 percent. We're not rewriting our applications, but we're ensuring that the SOA-based architecture that binds them all together is slick and seamless. Sage has plug-in modules and adaptors for the applications, which means that the architecture does not need to be completely overhauled and rewritten.

Customers are now saying they don't need any more features and a lot of them don't even use everything that's available now. What's more important to them is to have a suite of applications that enables them to view the overall performance of the company.

What are you doing to counter the growing threat of big players such as Microsoft, Oracle and SAP?
We acknowledge that this is a very competitive market. But we believe that our strengths lie in the close relationship we have with our customers, because it's about retaining old [customers] as well as winning new ones.

But we've also taken positive action by refreshing our brand and making it clear to customers that we're not just an accounting and payroll vendor. We can provide them with the software they need to run their businesses as effectively as possible at all stages of their growth because we provide a range of applications that go up and down the market.

Are you seeing demand for hosted software or software as a service?
There's demand, particularly among entry-level businesses and mid-market businesses that have to work in a collaborative way, such as accountants in practice. So this is where we've gone to the market initially with the release of Sage 50 Accounts Professional Online 2007, and we also provide SageCRM.

We see it as a question of offering choice, because customers want to deploy in a variety of ways and software as a service will become a growing part of the market. Some things have to be resolved before it takes off as much as predicted though, and I think it will remain immature until bandwidth improves, so there are no plans to add any more services at the moment.