Sage Turns Page: Addition by Subtraction

An interesting article “Sage Turns Page” appeared in the Orange County Business Journal last week about the transformation at Sage North America being led by CEO Pascal Houillon. Since the article isn’t available online without a membership login and presumably a paid subscription, we wanted to provide a few highlights.

Addition by Subtraction

The article mentions that Sage has already done much of the subtraction with three recent deals including sales of the Sage Nonprofit Division along with the ACT! and SalesLogix product lines.

Together, these divestitures have trimmed about 1,700 employees and 10 offices that were associated with noncore business lines (per the strategy announced at Sage Summit last year).

At the time, there were 23 offices in North America and a corporate policy that let acquisitions operate as individual business entities.  Pascal is quoted as saying, “Sage had acquired quite a lot of companies, but they didn’t integrate all of these.”

The recent moves helped to bring the office count down to 13, leaving about 2,300 employees in the U.S. and Canada.

Houillon isn’t through with trimming.” According to the article, he intends to cut 8 additional offices. However, the largest office in Irvine is in line to add employees and the Atlanta, Vancouver, Beaverton, OR and McClean, VA offices are expected to survive the cuts.

It’s All Part of the Vision

According to the article, “adding to sales and profits with a renewed focus on its core business” is a goal that Pascal Houillon had in mind when he took over Sage North America in March 2011.

The recent trio of deals, which closed last month, cleared the way for the next round of consolidation and it appears that Houillon has Sage moving in the right direction according to the article. Sales are up to $325 million in the six months through March 2013 – a 4% increase from the same period last year.  Gross profits totaled $81 million.

“All of the work we’ve been doing in the last 18 months is paying off.”

- Pascal Houillon

Sage Moves Going Forward

In addition to other recent moves like hiring a former Yahoo! executive to lead a new division focused on customer support, Sage is pushing to simplify their business software after internal reports showed that customers use only about a third of a given product’s applications.  Houillon is quoted “Instead of looking to add more stuff, we want to be sure our customer gets the most out of our product.”

The article also references the transition from a license-based model with annual contracts to a subscription model billed on a per-user, per-service basis.

What is your opinion about the transition and whether Sage on the right track?

Leave your comments below.

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Comments

  1. Tim Marshall says

    If I may offer a little historical perspective. I have been working with Sage accounting software since 1981, when they were State of the Art (SOA) accounting software. I was able to build my business because I could go into a company and successfully get the company up and running on SOA software. I would go pretty much anywhere in So. Cal. Therefore, in the beginning much of my business came through referral from both satisfied clients and a happy SOA staff. This made me very happy. But then things started to change at SOA corporate.

    At one point they decided that consultants would only get referrals from SOA within their zip code. They also decided that CPAs would also be able to sell and support SOA software, and recommended that non-CPA consultants join forces with the CPAs. Direct customer support was implemented so that now SOA was in direct competition for support with their consultants. Notice that referring an end user to a consultant for support was no longer something to do.This was all under CEOs David (forget his last name), then Dave Hanna. Other top staff names you might recall are Jennifer Wilson and Ruth Lee.

    We have learned over the years that SOA/Sage/Best/Sage corporate walks a very fine line of supporting and competing with their channel partners, and are not able to adjust very quickly, or sometimes correctly to changes in the marketplace. Corporate will do what they think they need to do to stay in business, and perhaps, even show a profit. All of us, including your clients and Sage are caught in a very difficult situation at this time and we must figure out ways to understand it and get through it. I say that as someone who’s business has outlasted most of our clients through the years. Best to you guys.

  2. says

    The Tampa office is also missing from the list. This location houses the Sage HRMS team which is not listed as a core product but is the only internal HRMS solution for 300, 500 or X3. I realize 500 is going away.

    This is similar to Joe’s observation about Pittsburgh and it’s link to the X3 product. Either Sage intends to consolidate development and support teams centrally, promote more teleworking within these teams, or drop additional product lines and teams.

    Regardless, we can expect more equally interesting movements in the not too distant future.

  3. says

    This has already been said in other discussions, but the “core” channel has not wavered from supporting the “core business” and we have repeatedly questioned why Sage did those acquisitions. We in the channel should be rewarded for our consistent efforts, yet we continue to be beat down by the new structures.

  4. says

    The interesting thing to notice is that the list above, about locations surviving, does not list Pittsburgh. Notice I said interesting not surprising.

    • says

      Joe – Earlier in the article, “Pennsylvania” is mentioned among the offices that remain (13 offices, 2,300 employees) after the recent divestitures . But indeed no specific mention of Pennsylvania among surviving offices in the article. Not sure it means anything – but thought I’d clarify.

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