Sage has announced its results for the full year to 30th September, 2010. As expected and in marked contrast to both other on-premise vendors and the SaaS/cloud players, it recorded an overall flat result. Revenue was £1.435 billion (£1.439 billion) with operating profit up from £280 million to £330 million, all coming from cost reductions. As usual the devil is in the detail though there was nothing unexpected in the regions. (see illustration.)
Sage continues to blame the economic outlook and the fact SMEs are first into a recession and last out. It’s understandable though I suspect the excuses are starting to run a bit thin when compared to the rest of the market in its space. US earnings season is just over and all players I follow are reporting moderately healthy upticks in activity. The SaaS/cloud players continue to grab the headlines as they outstrip the performance of their on-premise peers.
Included in the notes were details of a management reshuffle. Paul Stobart now runs northern Europe while Sue Swenson, CEO of North America will retire in mid 2011 to be replaced by Pascal Houillon, currently CEO Sage France. Sue Swenson’s retirement will be a blow to the American market. She had done a great job in almost impossible circumstances. I have no clue how the US operations will react to the introduction of an outsider but past history suggests they will give him a shot but be wary.
It looks as though Sage is expanding roles and not replacing country CEOs. For example there was no announcement about a UK CEO replacement, Ivan Epstein, currently CEO Africa and Australia also takes on responsibility for Middle East and Asia. That suggests to me that Sage is tightening its management belt considerably while seeking to move away from a decentralised form of management. This is a sensible move because it helps to provide greater regional visibility and so allow management the opportunity to act more quickly to changing conditions.
David Clayton will take on responsibility for strategic development including the web. However, there was no mention of any new SaaS/cloud products. HEre’s an interesting snippet:
…as Sage looks to increase its share of revenues from connected services and online business solutions, there will be a stronger focus on developing web based businesses that extend over multiple countries and are complementary to Sage’s core accountancy and ERP business. These businesses are likely to operate under different business models to Sage’s traditional business. They will therefore be ring-fenced, incubated and supervised centrally as they grow.
This structure leverages the experience of our current executives and also brings through a new generation of leaders. The new team better reflects the international and entrepreneurial nature of the business and exploits our operational expertise. It will enable us to collaborate better, to drive innovation and to maximise the opportunities we have to deliver outstanding software and services to our customers and partners.
This is an interesting statement. It is the first time I have heard Sage recognize the need to manage a SaaS/cloud business differently from the core. This is vital if the company is to have any hope of succeeding as a credible SaaS/cloud player. In engagements with other vendors in a similar position I find there is a temptation to co-mingle roles. This does not work because it doesn’t insulate the SaaS teams from operating in the way a SaaS business needs to in order to both fast track innovation and grow the commercial part of the business. Where there is a co-mingling of roles, management conflicts and tensions get in the way, inevitably impacting both parts of the business.
The crucial next steps along the path to execution will need to be carefully navigated but this is encouraging.