I’ve just watched the 9th May Sage investors webcast headed by CEO Paul Walker. Sadly, the company chose not to include the Q&A section. Highlights:
- Maintenance revs +10%
- Line 50 (UK) +11%
- Peachtree (US) +10%
- Mid-market (US) +3%
- Revenue +34% (including acquisitions)
- Organic growth +7%
Paul Walker’s quote: “Innovation is part of the culture at Sage” made me smile. While it is true Sage is trying to get its innovation act together, recent efforts have been abysmal. Having said that, the trend towards providing industry specific solutions (up from 15% of revenue to 28%) is changing the shape of the business with a particular emphasis on healthcare. Interestingly, Sage has a decentralised approach to this segment of its business and I agree with Paul that local knowledge is critical to executing well on this part of Sage’s strategy.
Paul made interesting comments about the competitive landscape, asserting that Sage sees ‘very little of SAP BusinessOne’ and that the announcement of A1S provides Sage with comfort that there will be very little overlap between the two companies. I’m not as convinced as Sage on this last point but I would caveat that by saying there is a lot more to discover about A1S. He did mention Navision and Great Plains but is clearly not up on the latest Microsoft naming conventions where everything now sits under the Dynamics brand.
The company is clearly experiencing challenges in the North American market, which now accounts for 44% of total revenue. Growth was a sluggish 4% and Sage has announced a significant reorganisation as it seeks to digest the Emdeon acquisition for its healthcare business and figure out how to manage the overlaps between its Peachtree Quantum product and MAS 90.
There wasn’t a single word about on-demand offerings. Disappointing. Neither was there any mention about how it will seek to fill out the white spaces that exist at the VSB and mid-market levels. When I look across the business landscape, these are the obvious growth segments which others have identified.
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One additional note on Sage's CRM business…during this six month reporting period the global CRM revenue for Sage was some 34 million Pounds, or just under $70 million. Here's a quick research exercise for you. Go to http://www.sec.gov and pull up some old filings from Interact Commerce (the acquisition where Sage got SalesLogix and ACT!). You'll find that in Interact's last two quarters as a public company they delivered some $61 million in CRM related revenues. That was in 2000. So in seven years Sage has grown that figure by $9 million (including the addition of Accpac CRM revenue). I'm not very impressed.
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