Sage Software, facing competition from a host of cloud providers, has sold off $100 million of its “non-CRM” assets to focus on its core ERP and accounting practices.
According to IT Business in Canada, Sage has sold three products managed from Sage North America (Sage Act, Sage SalesLogix and the Sage Nonprofit Solutions product suite) and four product suites in Europe.
I rarely hear about Sage. It’s a company that has grown through acquisition over the past 20 years and profited handsomely. That is until about five years ago when, as Dennis Howlett analyzed last summer, the company became a bit too content to belly up to the table and dine on those fat maintenance fees it collected for the aging software.
At some point, and we are seeing it a lot lately, companies start hearing about new options such as SaaS offerings that make the old on-premise tools seem just ridiculously out of date.
And then there is management, who you silently hope will do something radical and show the new players that they will fight like dogs throwing ninja stars. But just as it’s impossible for a dog to throw a ninja star, so is it almost as unlikely that a company like Sage would take on the cloud players with deadly aim.
And so here we are. Sage is in sell-off mode and SaaS players like Xero are eating up the small business accounting market, once Sage’s place of power.
To its credit, Sage does have a cloud play called Sage One. Howlett writes that it is a key pillar of future growth but is only expected to yield some $47 million in incremental revenue over the next three or so years.
Here’s what Sage said about the sell off. They say they have a strong partner channel who can do consulting to integrate CRM, payments and all the other pieces that a customer might need to get “lifetime value.” In other words, it gives Sage the chance to get more maintenance fees.
I can’t see how a model like this will continue to be viable in face of new development practices that SaaS and Internet services have become so adept at using. Dennis Howlett goes through Sage’s numbers, showing that the company is working its balance sheet more than innovating.
Sage can keep rolling along with modest results, but companies like Xero are the ones that show the most potential as the new leaders in the small business market.