Sage appoints civil servant as new head

Sage has appointed a senior civil servant as its new chief executive.

Stephen Kelly, the government's chief operating office and former head of software company Micro Focus, will start at Sage on 5 November.

Guy Burruyer, who announced his plan to step down in May, will then resign as chief executive officer and director.

Some analysts and media commentators have concerns about the appointment.

Diginomica's Dennis Howlett said: “If Kelly is to be the transformation manager that Sage needs, then he has to convince investors that a sacrificing of margin in the short term will be needed in order for the company to become competitive in the SME space. History does not bode well for him.”

Angela Eager, an analyst at Techmarketview said that Kelly will have to change the way “staid” Sage is run while maintaining its “enviable profitability record”.

Doing this won’t be easy, Eager said, because with major change “there is always the risk of losing too many people too quickly if the methods are too far removed from the culture – and Sage cannot afford more delays in its cloud transition.”

Another challenge will be clarifying Sage’s strategy.

Until a few years ago Sage said it wanted to go upmarket by selling to the biggest companies. That would mean competing against bigger enterprise resource planning (ERP) suppliers such as SAP and Oracle.

Now Sage is focused on two markets - small and medium-sized businesses. It also wants to streamline its product range after lots of acquisitions during the past decade.

In May, Sage announced a new version of its ERP software, ERP X3 version 7, for medium-sized companies.

The software company makes about 80% of its sales from small business. But profits are higher in the mid-market – which Sages defines as businesses with between 100 and 500 employees.

Sales to medium-sized businesses are growing in the double digits, Sage said in May.