Sage Bosses Divided over Future of SaaS

Sage CEO Paul Walker recently told silicon.com:

In the back office accounting area, business solutions, we’re seeing very small, slow growth in terms of demand [for cloud computing]. We have a number of products that meet that demand that so far is relatively modest

It didn’t sound right to me at the time. Why spend 18 months developing Sage Live, (their software-as-a-service offering that later got pulled) if the demand for it is so small and their current product range meets that demand?

Chiefs Disagreeing

Motasim Najeeb, relatively new CTO for Sage North America, made some interesting comments at their Partner event in Nashville. He talked about making Sage products an alternative to cloud-based offerings like salesforce.com.

In the article linked to at the start of this post, Walker told Silicon:

in two or three years time I’d be very surprised if 50 to 60 per cent of our customers were on [cloud-based applications] but it could be more like 15 or 20 per cent

But Najeeb is quoted as saying that  in three to five years Software-as-a-Service will probably surpass on-premise software.  You can guess who I agree with.

SaaS, not “Cloud Computing”

Sage also seems to be some confused about what their soon-to-be-ex customers actually want. Walker talks about delivering more “cloud computing” apps – which is a catch-all term that includes just delivering the same old software over the internet (not the same as “the web”) using remote access software. The ex Sage customers we and other SaaS accounting companies are picking up aren’t looking for cloud computing solutions. They specifically want true SaaS applications that will pass The Touring Test.

Sage say they’re meeting the existing demand from their customers. Here’s a quote from a direct message I received on Twitter today which is typical of the kind of thing we’re hearing all the time:

I’m historically Sage oriented but willing to look at online solutions as well and Sage’s offering is ****. Perhaps demo ?

The sender doesn’t want to be named as he still has a relationship with Sage. But needless to say he has now seen our software and it’s the only product he’s recommending to his clients for web-based accounting. He only came to us because Sage have nothing suitable – ie, they’re NOT meeting the demand.

It’s not only Sage resellers, consultant and accountants that are telling us Sage can’t fulfill their needs, but some of their bigger international commercial partners are  too – more about that another time perhaps.

The demand from the Sage reseller channel for a SaaS app has been so great since the start of this year that we had to develop a reseller programme specifically to be able to capitalise on it.  We don’t have anything online promoting it just yet, but it’s up, running and being used.  (Contact Neil Ballard on 0800 848 8301 if you’re a reseller interested in this)

Plugging into the web

I made a post last year with the title Sage Prove They’re Both Worried and Clueless. The “clueless” in the title was about their lack of understanding of the ‘net and specifically social networks. Since then I’ve been really impressed with the way they are using Twitter to engage with clients. And now it seems Sage, in the US and the UK, are reaching out to industry commentators, like Ben Kepes, that really know their stuff.

I guess it takes a while for a juggernaut to change direction. But all the signs now are that Sage are (very) slowly moving in the right direction.  Hopefully the CEO will listen to his CTO about the technology (the clue is in the T!) and we’ll see a viable product from them one day soon which will give a lift to the whole SaaS accounting industry.

My Tuppence Worth

As Sage seem to be soliciting opinions on their approach, here’s mine just in case anyone is still reading.

They seem to have two major problems:

1. Software for the web bears no resemblance to software for the desktop, they have lots of experience with the latter, but none with the former. The skills are not transferable – that’s what doomed the Sage Live project. Software for the web is not in their DNA.
2. SaaS is a business model as well as a software delivery model. That business model cannibalises the existing models of software companies like Sage. You can’t have the same people responsible for pushing forward a SaaS company and a old-style software company

To me the solution to both problems is pretty simple:

They need to get a new company up and running, owned and funded by Sage PLC (although I know a few VC’s who would happily pour money in)  – give it a big fat budget and some good project managers and let it run independently.

Then recruit developers that are real web developers, not desktop developers. These people can’t be from within Sage – they need to be people that know the web but aren’t tainted by exposure to old-school software houses, their methodologies and blinkered approach. They need to build an app from the ground up using pure web technologies – PHP, .Net, Ruby, whatever.

The new company should be able to access Sage’s expertise on the accounting side of things – but not make use of ANY of their existing technology, code,database structures or concepts of how software should work. That last bit is so important. I can understand how tempting it must be to re-use code and database structures to save time and money. But that would be like a cancer in the new product. Don’t do it!

I reckon they could easily put together something good enough to take to market within 6 months.

From then on, they can revive what I suspect was part of the Sage Live game plan: release the app sooner rather than later and improve it based on feedback from actual users. Improve and release again ad infinitum (a web-app is rarely finished) and price it very aggressively.

Once the product is working well, let them tap in to the marketing machine that is Sage PLC as well as having their own budgets for online marketing.

If done correctly the new business will very quickly start taking customers away from it’s parent company. But these customers were going to be tempted away anyway – better for Sage that they leave for a Sage-owned subsidiary than elsewhere.

Or there’s always Option B. If Sage want to save some time and make a very serious web play that will keep them relevant to the fast changing market then they should just buy 37Signals. That’d shake things up a bit!