Sage's nightmare week

This week has been one of the worst I can remember for Sage. It points to systemic problems. They're all solvable but Sage has to remove its myopic spectacles.
Written by Dennis Howlett, Contributor

Sage UK is a company I follow as part of my ongoing research into SME business applications and especially in the finance and finance related departments. This week has been a nightmare for the company and its recently minted CEO, Guy Berruyer. Here is what happened:

  1. First came the announcement of SageOne, its entry level SaaS/cloud accounting solution. Those who looked at it described it in two ways: weak and simple.
  2. Earlier today UK time came the shocking news that Sage will not provide its large Accountants Club members with all the tools they need in order to prepare iXBRL accounts in time for a UK imposed government deadline. It effectively handed its competition a free pass to grab market share.
  3. Finally I noticed that Sage's share price sagged in the post SageOne announcement. While the price was trending in line with the FT100 and it did receive an uptick on the SageOne launch, it hasn't proved of enough interest to influence the price against market trends.

Why should any of this matter? Software companies go through ups and downs, it is all part of the business cycle.

Sage is the big dog in the UK's SME business applications market with a market share that is an order of magnitude greater than any other vendor. Today, Sage's US business is larger than that of the UK but it is playing a lowly second fiddle to Intuit's market dominance.

Sage has had a very tough time reversing declines in revenue from its Emdeon acquisition plus the fact that up to 2010, Sage had not been offering US VARs much to be happy about and you quickly see a picture of problems across multiple regions. In regard to Sage's cloud strategy this is what I said in December:

To date, Sage has demonstrated no understanding of SaaS/cloud beyond a handful of tiny experiments scattered around the world.

That was only one of many problems. This latest set of revelations suggests that nothing much has changed. The biggest problem Sage faces is that it is not talking to people who truly understand both the technical and business landscape for cloud based solutions in the SME market. . Phil Wainewright should have been all over the SageOne release. He's silent. They almost never speak to me except under duress. Others who assiduously follow this space shrug when I ask if Sage has called them up.

Instead they seem content to allow brash upstarts like KashFlow and its mouthy CEO Duane Jackson to walk all over them. Jackson conjures drama in a manner that Larry Ellison, CEO Oracle might well approve. Now Sage has handed an important professional services competitor the perfect opportunity to eat another line of business lunch.

It all points to a company that is at once in denial about its issues and does not know where to turn or is afraid that the answers it receives will be too uncomfortable for it to swallow. I've been told that certain executives intensely dislike my commentary and are taking it personally. That's a fatal mistake but one that is all too common when the truth smacks you between the eyes. The one thing a company should never ever do is actively attempt to shut out its more prolific observers. It won't stop them talking but it excludes the company from the conversation. It's a losing strategy that SAP figured out some years ago.

Putting my ego aside Sage should:

  1. Actively listen to what its VARs are saying and the conversations occurring in the various LinkedIn groups.
  2. Pouring effort into the accounting channel, be prepared to listen and make commitments to not only repairing the damage but actioning the things that constituency needs.
  3. Using the bad news as a way of beefing up R&D so they can deliver solid solutions rather than the limp offerings we see today. They'll take a share price hit but better to do that now than suffer a cannibalized death by a thousand cuts.
  4. Talk candidly to those who can help them understand the things they are missing in the marketplace.
  5. Ditch the welter of self serving survey and focus group efforts. They wont tell Sage what it needs to know only confirm what they already think.

What do you think. Am I being over dramatic or simply pointing to the obvious? If you're a customer are you worried? If you are  a VAR is Sage doing enough to keep you happy? Answers in Talkback please.

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