Following on earlier stories that Sage is readying an on-demand product, I can confirm this is the case. I had a briefing with Sage’s commerical and technical people to get a feel for the product, its go to market and positioning. What follows is necessarily abbreviated.This deals with the commercial aspects of Sage’s offering. The second part looks at the product.
These services are aimed at micro businesses where the user count is most likely to be a single user plus the accountant. The typical customer will be a lifestyle business that might be selling goods or services and may not keep any books today.
Sage is opting for a soft launch with SageLive, the brand which Billing (a free service) and Cash (paid for) will occupy. As of tomorrow, the company will be in open beta and eliciting feedback.
Pricing has not been finalized but expectations in the £10 per user per month range were not denied. Sage is offering a second user – which would usually be the accountant – for free. This leaves open the question what happens when, for instance, professionals are working with banks which might want access to the data.
Under current thinking, a third person would be considered an extra user. We had some discussion about what that means and the impression I got is that Sage is open to thinking about restrcited access for some classes of user at some other price point. Sage laso has a Blackberry client. This is an add-on but from what I ahev seen, it is worthwhile if limited in functionality.
There is no publicly announced commercial launch date although they are suggesting somewhere in the February/March time frame. In keeping with other similar services we have seen, Sage is keeping its options open and relying on feedback as a guide.
Sage is not looking for partners in the early stages but will be using its direct sales force to introduce the service.
Those are the facts as relayed to me. The question is whether this will work. We had some discussion about the SageLive team and the company’s commitment to this market. As we’ve seen before, incumbent players have special problems in adjusting their DNA to suit the on-demand world. Sage is no different. It talked about enthusiasm and relying on customer feedback etc but at this stage that has to be taken with a grain of salt.
Customer feedback is a must-do thing but you have to be asking the right questions. So while Sage has tried to take a business approach to the new service there is enough of the ‘old’ Sage included to leave me wondering just how they will crack this nut without wallpapering the internet (and presumably PC World) with display advertising.
I didn’t hear anything that suggested to me the company has fully thought through the economics of an on-demand business building to scale. It wasn’t clear for instance whether Sage has sized the market appropriately but that is reflected in the caution with which it is going to market.Similarly, I’m not sure it knows just how much it will cost them to get to critical mass in a way that meets shareholder objectives. While I agree Sage’s 61% revenue in service qualifies it better than most, I don’t think they’ve grasped the enormity of what they’re facing. Remember that to reach £100 million in revenue, it needs some 833,500 customers. That’s a large number and won’t come overnight. During the conversation, Sage said that it was well aware this is a market where there are many unknowns. It would not therefore surprise me to see them go slower than might be competitively good for the long term health of the on-demand segment.
I think they’ve missed a trick in not recruiting at least some professional firms. Yes, it is an immature market and yes the prospective universe of forward thinkers is modest. But they exist. And where they do, they are way ahead of your traditional firm and can onbaord many customers. It could be they’ve not thought through the onboarding issue but that seems odd given they will need to work with customers in the early stages.
The micro-market is a good niche but my sense is that it almost always requires a semi-vertical approach in order to reach serious, profitable scale. Given the tough economic conditions, Sage could easily find that it is harder to sell in than they thought and that the services of forward thinking firms is essential to helping them reach that critical mass.
Even so, for the first time in many a year, they are coming to market with a product/service that looks like an on-demand business I recognize.
Competitiors will be keen to see how Sage plays this market. On the one hand, its entry is a massive validation at the bottom end, on the other, there are many go to amrket questions that remain unanswered. As always with incumbent players trying to plough new furrows, the economics cannot be ignored.
The good news is that SageLive doesn’t look like a competitor to its existing Sage 50 business so it shouldn’t cannibalise existing core revenue. The fact it is using the Sage 50 database provides it with an easy way of integrating to practitioner products so it is not creating significant headaches for the professional who has to pick up SageLive ‘books.’ I like they are using Billing as a teaser service because that will allow them time to both learn customer requirements while providing a simple on ramp to the paid for Cash service. It also means minimum disruption for customes. That on-ramp isn’t availiable today but is expected in time for the commercial launch.
There are many questions that remain unanswered and hopefully, Sage will continue the dialogue. As I said at the end of the discussion, Sage is too important a player in the market to make a mess of this at a time when there is significant interest in on-demand and where conomic conditions favour the on-demand provider. Moving on to the technical discussion.