A recent announcement by Sage Group, the UK’s largest software company (and top-10 business applications software provider in worldwide terms), went largely unremarked in the media. It concerned a streamlining of the company’s mid-market solutions organization in Europe. The new mid-market group will be led by Christophe Letellier, currently CEO, Sage ERP X3.
At first blush this does sound like a rather dull internal memo that somehow got sent outside the company. But, rather like an iceberg, there’s a lot underneath this reorg story that the casual glance doesn’t reveal. What is not immediately obvious – the ice below the waterline – is that this is the next step in a major and ongoing strategic shift for Sage, first initiated a couple of years ago by then-new CEO, Guy Berruyer.
The locally focused buy and build model
Sage built its current position over a 30-year period with a strategy unique in the business software world. It bought leading companies selling business accounting software to SMEs in different countries across the world – generally the #1 or #2 in their market – and then left them largely alone in product development terms, reasoning that local needs were paramount in the SME marketplace. It did bring to bear its expertise in channels, software development and marketing, to further the locals’ success, of course.
Last year, for instance, it made a trio of acquisitions in Brazil (Fohlmatic, EBS and Cenize), giving Sage a strong position there virtually overnight. In this way, Sage became the only SME-oriented business software company with a strong position in countries on every continent.
Extending the model
Along the way, Sage also acquired some mid-market-oriented product lines, notably SalesLogix in the US and ERP X3 in France (née Adonix). These were being sold internationally to some extent, and the French organization in particular made the case that local orientation was not always appropriate in the mid-market, and could be holding Sage back. ERP X3 became the company’s first truly international product in sales and marketing terms.
When Berruyer took over as CEO, moving up from managing Sage’s mainland Europe operations, he brought that view with him.
And, he and his lieutenants built on that thought, realizing that in the emerging world of software-as-a-service (SaaS), global solutions would becoming increasingly viable, even for the small-to-midsize company – and global marketing would be increasingly important. One instance of this: the Sage One (SaaS) solution developed for small UK businesses is now being used as the basis for similar offerings in the US and Europe: localised solutions but based on a common platform.
Other related announcements underlying this global/local (“Glocal) theme are also emerging. For example, for several years Sage’s South African acquisition continued under its original name, Softline, but it has just rebranded as Sage.
And most recently, Sage announced the formation of a “Technology Advisory Council.” This group will act as “a sounding board for the company and as a source of independent thinking on a wide range of technology issues.” As well as Sage’s CEO, CTO and CMO, it includes three other CTOs/former CTOs of well-known companies: Electronic Arts, AOL and Expedia. In PAC’s view this is a significant development, underlining the commitment to common, forward-looking product strategies.
Iceberg – beware
Of course, icebergs can be dangerous things. For Sage, the danger comes from execution. PAC believes that the “glocal” strategy is appropriate, but it is not easy to balance the dual needs of local and global requirements, of small and mid-sized businesses. Sage must take care not to become paralysed as different product groups struggle to relate in new ways, or to let costs spiral out of control.
And, it will face ever-increasing competition, particularly through the cloud route, and especially in the mid-market. We at PAC have been in discussion with a number of potential new entrants that would love to take a share of Sage’s market, particularly through leveraging the economies of scale and sheer cachet of Cloud delivery.