I have just been reading this interview with Sage MD Paul Walker on the City AM website and thought I would share a few facts that jumped out at me.
Sage is valued at £3.4bn and sells accounting software and services to 6.1m small and medium-sized businesses worldwide
It has bought over 110 rivals since it was founded in 1981
70% of revenue comes from support and maintenance services
Online software sales currently account for two to three per cent of revenue
The pay of one in four working people in the UK is processed using Sage software
Clearly the subject of online (cloud) services had to come up in the interview and Mr Walker’s response is quoted as being:
“This will suit younger people who start businesses and who are used to working this way. But a lot of other businesses like the security of knowing their accounts and sales information is stored on their desktops.”
Apparently, he also expects revenue from online products to still account for less that half of the group’s revenue in 5 years’ time.
So, what do I think?
Either Sage are dismissive of the threat to their core business from online accounting services, or Mr Walker is being careful to appear so - while the company buys itself time to re-engineer its offerings
For a business to make almost three quarters of its money from supporting and fixing its own products seems immoral.
For most small to medium sized businesses nothing is more mission critical than making sure its employees are paid accurately and on time. By producing the payslips for one in four UK employees, Sage has ensured that a massive chunk of the market will think twice, or three times before switching to a competitor.
Does the interview leave me with the feeling that Sage is an agile, innovative force? No. Does it make me think that Paul Walker is taking his bow before the difficult times ahead? Maybe.
What I do strongly suspect though, is that customer loyalty will be tested severely as small business owners start to look at the new online alternatives and wonder why they are paying Sage “between £500 and £1,200 a year” for help with the software they have already paid good money to purchase.