Sage Adds Subscription Pricing Option To ERP App Lineup

Sage North America is launching a subscription licensing model for its on-premise ERP and CRM applications in a move to attract new customers, especially SMBs, and offer existing customers a new pricing option.

The vendor also is changing the prices it charges for traditional perpetual licenses for its Sage 100, 300 and 500 ERP products effective April 2, resulting in price increases for at least some of the products.

The subscription plan and price changes are the latest in a series of moves by Sage North America to shake up its business. The vendor is in the midst of an effort to rebrand some of its ERP applications and other products, moving away from older names such as MAS 90 and Accpac to names that emphasize the Sage name.

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The new strategies follow a number of management changes at the company, including the promotion of Pascal Houillon, who previously ran Sage's operation in France, to CEO of Sage North America last year. He replaced Sue Swenson who retired.

Some resellers have questioned the wisdom of the re-branding effort, saying the old product names still have cachet in the marketplace and the name changes could create confusion among customers.

Sage is now setting the starting price at $1,495 for the Sage 100 ERP suite (previously the Sage MAS 90 and 200 applications), $1,695 for Sage 300 (formerly Sage Accpac) and $2,595 for Sage 500 (previously Sage MAS 500).

A Sage spokesperson said the price changes are designed to simplify the company's portfolio have been "rationalized" to make it easier for partners and customers to select ERP products that meet their needs.

The new subscription pricing will help partners attract new customers and develop recurring revenue streams, said Joe Langner, executive vice president for midmarket and CRM solutions at Sage North America, in an interview. "It provides a lower barrier to entry to get customers," Langner said, "and our partners end up making more money under the subscription model."

Sage will pay partners 35 percent of the value of a subscription contract's first year and 20 percent of each renewal year.

Langner said the new subscription pricing will help "transform Sage from being a software product company… to being a solutions provider for the midmarket customer."

As with the rebranding plan, Sage hopes the new subscription option will encourage channel partners to resell a broader range of the company's products. "A lot of our partners are often focused on one specific solution," Langner said.

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Under the subscription plan customers will pay $110 per user/per month for the Sage 100 ERP suite (the old Sage MAS 90 and 200 applications), $130 per user/per month for Sage 300 (formerly Sage Accpac) and $160 per user/per month for Sage 500 (previously Sage MAS 500). Sage CRM can be added to each for $35 per user/per month.

Subscribers will have full access to the same premium product functionality that customers get with the traditional perpetual license, Langner said, as well as the Sage Business Care Gold Plan support. The subscription also includes access to ERP financial and operational reporting tools and the Sage Fixed Assets application.

The subscription is being offered with no minimum term requirements and the right to cancel a subscription with 120 days notice. Sage will continue to offer the traditional perpetual license option for the applications.

Sage will begin rolling out the subscription option to the channel in early April. In coming months the company will expand subscription pricing to additional mid-market products, Langner said.

As when selling Software-as-a-Service or cloud applications, VARs that sell the on-premise Sage applications under the subscription pricing won't get an up-front payment for selling a perpetual license.

For most resellers, Langner said, the recurring revenue stream eventually exceeds that up-front payment. "We haven’t had any pushback on this at all," he said. And he played up the opportunity the new option provides for partners to attract new SMB customers.

But at least one partner doesn't agree that move will benefit Sage partners or customers.

"I am a strong supporter of a fair and equitable subscription model for the Sage mid-market software products. However, this proposed subscription program only benefits Sage and is detrimental to all Sage partners both large and small," said Stephen Blythe, CEO of Blytheco LLC, one of Sage's biggest channel partners, in a comment emailed to CRN.

"Reducing the composite partner margin by over 50 percent and increasing the cost to the client 2-3X adds significant value to Sage but no value to its partners or its customers. These proposed changes will have a significant negative impact on our ability to represent and support Sage product in the long haul. Partners have to be healthy in order to provide effective support to our clients. We respectively encourage Sage to rethink their strategy and provide a fair and equitable Subscription model for benefit of their partners and their customers," he said.

Sage will require its partners to "step up a little more" – in Langner's words – to meet the requirements needed to sell software with the subscription option. Along with current certification requirements, resellers have to add at least one new customer per quarter and have a 90-percent renewal rate among subscribers. Sage also plans to add customer satisfaction requirements at some point in the future, Langner said.

Sage's goal is to sell the subscriptions as often as possible through the channel, although Langner said the company could work directly with a customer if a certified partner isn't available.