One of the biggest mysteries of the Sage Summit 2015 was the launch of a new online accounting software called Sage Live.
There were very few details about the product itself except that it has been built on Salesforce One, a technology platform normally used by startups. It just seemed very strange for a software company the size of Sage to need a third party to build its own programs.
I spoke to several senior executives about Sage Live, on and off the record, to work out why Sage would do this.
In short, this could be an amazing deal. Below video is a transcript (of sorts).
- not Sage’s platform. There’s a platform risk here, and a philosophical one. If Sage is a technology company why isn’t it building it’s own platform?
- loss of revenue. Sage receives 100% revenue from its own software, and with desktop software that is pretty much 100% profit. With this joint approach it will forever pay royalties to SF. And the profit on cloud software is much lower than on desktop, according to SAge execs I spoke to.
- A huge concession for Sage is that it won’t build a CRM program to work with Sage Live. SF will be the only option. Now, Sage sells CRM. So not only is it giving over a percentage of revenue for its new accounting software it is giving up all revenue on its CRM sales.
- SF takes care of multi-lingual, multi-device. This is really important for Sage which operates in many non-English countries in Europe. The pace of change in devices –Samsung releases a new smartphone every 42 days – is something it no longer needs to worry about. CEO Stephen Kelly talks of Salesforce One as a third-generation cloud platform – more advanced than its rivals Xero and Intuit.
- Sage Live shares the same object-based design as Salesforce, which is obviously built on the Salesforce One platform. That means native integration between the CRM and accounting program. How deep? Well it’s the same contacts database for the two programs. This is a big advantage for both companies, and for their customers.
- The speed of development is much greater. Designing on the Salesforce One platform is six to 10 times faster than on Ruby on Rails, the programming language used by Sage One and many rival cloud accounting programs. This means Sage can roll out features incredibly quickly. For example, Sage Live began development in November and launched at the end of July. Not complete but it is in the market. That is incredible.
- Sage is relatively unknown in the US compared to the UK. Its partnership with the world’s most popular CRM gives it instant credibility and brand recognitiion. Sage wants to take a big chunk of the 24 million SMEs in the US and Sage Live is at the heart of this strategy. CEO Stephen Kelly is hugely ambitious about Sage’s prospects in the US on the back of this Salesforce deal.
- The deal also works for Salesforce. Marc Benioff has often talked about combining the front office (CRM) with the back office (accounting). This deal gives him the credibility and dev skills of the largest accounting software company in the world. With an integrated product on the one platform SF can start to push into deals that previously required ERPs.
- And of course SF now has a wide open road into Sage’s heartland, Europe. Sage has six million customers and is the number one accounting program in France, Spain, Germany, UK, as well as Brazil.
- How committed is SF? Sage execs here think it is very committed. For example, as part of the deal SF agreed to share all its IP on its sales methodology. Sage’s sales team has visited SF’s Dublin offices and gone through their process for selling to SMEs, which must be on of the best in the business. SF clearly wants Sage to succeed at selling Sage Live.
- Another important element in this deal is personal. Sage CEO Stephen Kelly and SF Marc Benioff worked together at Oracle many years ago. These people go back. There’s a level of shared history and trust there which will push the deal along.
- I asked Stephen Kelly about losing revenue to SF and he said the royalties deal is very favourable, especially at scale. Sage Live is clearly a vehicle to capture new customers in markets where Sage has no presence, i.e. the US. Some revenue from new customers is better than no revenue at all.
The goal of Sage Live is to increase the pace. Faster software development = more features = access to larger markets = more market share.
Sage is hungry. the CTO Klaus-Michel Vogelburg has been personally leading the charge. He handpicked a group of developers and worked with them 18 hours a day, six days a week for two weeks to make sure Sage Live was ready for Sage Summit.
Will it work? As one exec says, Sage Live is embryonic. Salesforce customers aren’t likely to buy it until it matures. But it gives Sage a product in North America that has a pre-built API, a pre-existing customer base, and a faster platform to develop on than its rivals.
On the whole the deal has a big upside for both companies although the risk is clearly greater for Sage.
That said, the reality is that Sage is a juggernaut. It makes £1.3 billion pounds a year, £190 million pounds in profits. That money comes from its existing six million customers. Even if Sage Live flops it will hardly be fatal.