QandA: Sage Software CEO Touts Growth In Business-Software Market

Sage Software might not have the name recognition of an SAP, Oracle or Microsoft, but this multinational business-software vendor is one of the major players in the SMB space. Sage has been a voracious acquirer of other software companies in the past few years and has been growing. The company recently ended its fiscal year with revenue of $1.4 billion, up 14 percent over the year prior. Ron Verni is CEO of Sage's North American operations, which is responsible for 41 percent of the company's total sales. He recently talked with VARBusiness managing editor/technology Carolyn A. April about the business-software market, consolidation and partner strategy.

VB: Tell us how Sage is structured and what your responsibilities are.
Verni: Our group company is Sage Group plc, and it is run like a holding company within four major geographies run by individuals. I run North America, which accounts for 41 percent of the group's total revenue. We've been growing and bought a number of companies, including ACT and Saleslogix, and ACCPAC's CRM, in the past few years. In North America, we have 2.4 million businesses as customers, excluding CRM.

VB: Who do you compete with in the business-software space? Is it Oracle and SAP, or Microsoft, or others?
Verni: This industry is consolidating. You've got us on the lower end, and the Oracles and SAPs at the high end. Five to 200 employees are our sweet spot--companies that are spending tens of thousands, not hundreds of thousands, of dollars. There are 7.8 million businesses in North America that fit our description. We think of Oracle and SAP in the higher end, and we touch them competitively from the bottom.

With Microsoft, it's different. With its CRM product and Great Plains software, we compete. But we are seeing less and less of Great Plains and more of [Microsoft's] Axapta and Navision products. They are moving up to the higher end because Microsoft wants to sell its full stack, and you don't sell the full stack in small businesses. Microsoft is also trying to move CRM up-market now.

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The vertical players and Microsoft are our competitors. We created pillars inside our company to do verticals. And we bought some vertical applications players, like Timberline in the construction industry.

VB: How many partners do you have?
Verni: We have about 6,000 in North America and over 22,000 worldwide.

VB: How have you reconciled partners acquired from other companies? Are your programs integrated now?
Verni: The acquisitions we made all had large partner channels, especially ACCPAC, so from a partner view, we are partner-friendly. Five years ago, we decided not to compete with partners at all, especially in the midmarket where they are our exclusive distribution. In the few cases where a larger corporate customer wants to deal with us directly as the vendor, we still bring partners in as part of the deal.

It's one integrated program now. We do have regional sales managers who are dedicated to specific products. Where we are spending time and energy, though, is a story unto itself. We are spearheading a number of activities and programs to help partners become better businesspeople, meaning boot camps, training sessions and our 100/100 program. In that program, Sage helps partners find and hire the best salespeople in channel. We hire the recruiting firm for the partners, pay for the sales hire's first 90 days on job, and provide training and metrics to make they are sure successful. It's a salesperson-in-a-box, if you will.

Our focus is on how to make partners more successful, because it is a co-dependent relationship. We lost some partners because of this, because they were not committed.

VB: Software as a service--what is Sage's approach to the emerging business model?
Verni: Sage CRM is offered as software as a service, or it can be run traditionally on a desktop. We call it freedom of choice for customers. Both versions sell through partners. We host the services version, but we have created models so partners can participate in the revenue stream. On the accounting side of the software business, the uptake is very slow for software as service [for cultural reasons].

VB: Speaking of accounting, how do you view Microsoft's entry into this space with a product aimed right at the smallest businesses?
Verni: We see the results of their sales for the retail version. And they are only selling in hundreds of units. It's a very difficult marketplace; QuickBooks and Peachtree [which is a Sage product] own 90 percent of the market. The majority of purchases are the result of word of mouth among accountants, who are also are reluctant to change software. Microsoft's share numbers are like 1 to 3 percent. It has puzzled us why they entered this space.

VB: What are your top goals for 2006?
Verni: Growth. We are a consolidator and don't intend to be consolidated ourselves. We will drive expansion into verticals by two methods: getting deeper into the five we are already in by either acquiring or expanding products, and then also going into new vertical markets.