Sage’s Many Dilemmas: Why Channel vs Direct Is The Tiniest

This morning there was an interesting email in my inbox concerning Sage’s increasing willingness to tackle customer issues directly either through their professional services group or via a new Gold level of support that promises to offer upgrade assistance direct to customers via a pre-schedule appointment (See New Sage ERP MAS90 and MAS200 Maintenance Plans ).

Both of these services sound an awful lot like the consulting services provided by Sage’s channel partners.

Sage is offering these services not because they want to take money out of the pockets of their business partners. Rather they offer these setup or upgrade services because increasingly customers are demanding less complex products that they can self install and/or upgrade.

When Sage offers to provide these services directly the issue of channel conflict arises. Consultants cry poverty because Sage is marketing directly to the customer and according to the consultant when Sage also provides services (aka consulting or support) direct to the end user then the consultant’s revenue stream is in jeopardy.

It’s a dilemma for Sage. They have two choices – do nothing and have competitors react by pointing out that Sage’s products are complex and requires lots of consulting time to install or upgrade. Or Sage could change their technology so customers who want to self-install — whether it’s an upgrade or a new implementation — can do so.

Therein lies Sage’s true dilemma.

Sage’s Dilemma: Customers Want Self-Install

In a way I see Sage’s dilemma — because it’s one that we’re addressing every day.

There’s a segment of customer (rightfully in my opinion) who question why they have to pay a VAR each year to come in and create a project out of upgrading their system.

The customer questioning this is usually the smaller company with very simple needs.

Those customers, in my opinion, have a right to expect that they can self-update. Especially when most of the “upgrades” are more maintenance and less feature.

I believe Sage is designing their services to meet these needs. Ideally Sage’s product upgrades shouldn’t require a consultant to install and configure. However Sage hasn’t figured out how to do that — so their only realistic short term option is to brute force handle it with an offer of labor.

Remember that shortly Sage will be increasingly competing in a more material way against SaaS products that promise this “no effort” upgrade. In order to be competitive Sage is forced to also create the illusion that their product is a “no effort” upgrade.

Sage’s Dilemma: Changing Technology So ERP Is Self-Install Isn’t Easy

It’s smoke and mirrors. Sage hasn’t been able to make the technology seamless to install or upgrade– so they’re forced on the low end to perhaps offer services to assist with the install.

The long term industry trend is that customers don’t expect to have these types of upgrade expenses. They’re used to a world of applications and services that are seamlessly self-updating. They have it with their smartphone, Facebook, Gmail, etc, etc, etc.

Whether we think ERP should ever self-update is largely irrelevant. The bigger question is what will the customer expect from their systems.

Increasingly I think the less complex user expects the upgrades to be seamless and self-installable. This expectation is starting to reach across to new implementations as well. In order to compete Sage is forced to offer this “no effort” installation. It’s where the market is headed.

It’s really Sage’s job to deliver that (and I think they’ve fallen down in that regard over the last 5 to 10 years). Sage has not been able to achieve a zero effort self-install on many of their platforms. Instead Sage will create the illusion of self-install by allowing users on the proper support level to interact directly with Sage.

Sage’s Dilemma: The Low End ERP Customer Is Expensive To Service

My thoughts are that the low end of the installed base is increasingly not worth the effort to service. They’re generally looking for a lot of free Q&A to feed back to their IT staff who is struggling to install an upgrade themselves and when it goes off the rails they look to the VAR to fix it for free (or spend an hour explaining why a fee applies).

Personally as a VAR I’d (selfishly)  love for these low end users to have a poor self-install experience with Sage and then come back to the VAR for paid assistance as these are the types of customers who once burned with a low price can sometimes turn around and realize the value add that consultants like us offer.

Don’t get me wrong — a low percent of these “burned” users ever turn into A++ clients. However my experience is that increasingly the lower end of this ERP market does not have a proper budget and has very mis-guided expectations on what a VAR should deliver for free — both technically and administratively. I say let them go clog the Sage help lines.

It’s my gut feel that Sage is creating this ability to offer some assistance in an effort to capture this low end of the market and keep them on maintenance.

Overall will this strategy work for Sage? Well they have scale and numbers on their side. Hard to say whether they’ll make more money in maintenance than they’ll pay out in labor to keep the lower end customer subscribed.