Your Business In Mind

Here’s a wakeup call for Sage Partners who don’t renew their client maintenance plans directly (relying instead on Sage to do so).

I had a client forward me an email (full copy below) from Sage which was an attempt to upsell them on their annual software maintenance plan.

This shouldn’t come as a shock to anyone who is paying attention. Sage UK have indicated in their last two earnings calls that premium support upsells were on their radar. It’s just taken Sage a little longer to get these upsells into place than they’d probably have like.

The upsells are now actively underway – as evidenced by the email an existing user of MAS 90 received from Sage’s outsourced maintenance renewal team (OMR for short).

In the email the Sage representative points out (with somewhat fuzzy math) that for only an extra $100 the user could receive 5 support cases direct from Sage. (Note: The actual additional cost seems to be about $260).

If you are offering your own phone support plans (hopefully you are) – this should be a wakeup call.

I’ve asked a lot of partners what they do with the annual software maintenance plans for the users that they support. Do they invoice their clients directly and retain ownership of that billing relationship? Shockingly most have told me that they let Sage chase the user and collect the fee(s).

Is it any mystery why small VARS are “selling” their practices (aka becoming semi-retired) by the boatload? Each year conference attendance gets lighter and lighter as fewer VARS show any interest in sharpening their consulting skills.

Of course you could argue to let Sage sell 5 support cases for $100  (the reps math is a little off and the pricing difference appears to actually be $260) and you provide some type of higher level plan…..

~$50 per call support?

If you want to stay in business as an independent consultant  it’s time to bundle higher value personalized services into your plan or at some level Sage (or any publisher hungry for new revenue)  is going to eat your lunch for you underbid you on your arguably most profitable service.

Here’s the forwarded message from an existing user of Sage ERP MAS 90 accounting software which started me thinking. He emailed me questioning the call from Sage about maintenance renewals and wanted to know what it was all about.

Why did he email me and not Sage?

That’s simple. We manage the billing relationship for support renewals – not Sage. For at least the last 5 years we’ve invoiced the clients directly for their renewal. Over time we’ve earned their trust as their business advisor.

Would we have the same trust if we left the billing of maintenance to a third party? Perhaps but I think we’d have far fewer opportunities to provide value to our clients by assisting the with questions and offering a higher level of response.

I make no claims that Sage has done anything improper. It’s actually quite smart business — for Sage.

However if you make your living providing professional services (including ongoing phone and remote support) – you’ll notice something disturbing about the second option that the Sage representative makes directly to the end user. When consultants gather at conferences the phrase we use for this is called “dropping your shorts”. It’s providing a price so low that there’s no realistic way anyone is making money.

Begin forwarded message

Hi Wayne,

Do you know what this is about?

______________________________

From:
Sent: Wednesday, April 20, 2011 3:18 PM
To:
Cc:
Subject: MAS Maintenance Renewal

xxxxx –

My name is xxxx and I’m your ClientCare rep for Sage MAS. I spoke with xxxx briefly and he pointed me in your direction to discuss the MAS renewal and the changes that have occurred recently.

I wanted to take a moment to discuss some different options you all have with Sage this year that haven’t been available in years past. Sage has recently revamped its support agreements, and in your company’s case, it actually works out to be very affordable to get support through Sage. The pricing for support is as follows:

Bronze (current agreement): $2336.10

Bronze allows you to continue getting updates and upgrades to the software. It also allows you access to the Knowledge Base and any other online resources regarding MAS. With Bronze, you don’t have any ability to access Sage Tech Support. Formerly, you could purchase individual support cases on Basic for $300/per.

Silver: $2595.67

Silver allows you to get everything included with bronze plus 5 support cases and a 15% discount on Sage’s Anytime Learning Classes. Last year, you all paid $1750 for Basic, so it would be just a little more than $100 to get 5 support cases this year! 

Gold: $3244.58

Gold gets you everything included with bronze plus unlimited support, free anytime learning classes, 15% discount on any added products, priority access to tech support, and more…

*In addition to adding support, you can also lock in your maintenance/support cost at a discounted rate with a 2 or 3 year renewal option.

Thanks, and let me know if you have any questions.

xxxxx

MAS 90/200 Client Care Rep

Sage

Tel:

Fax:

Corporate: www.sagemas.com

Your business in mind.™

Here’s how we’ve always handled our maintenance renewals.

We invoice all of our clients in advance for maintenance from Sage. I’d say 90% pay us and completely ignore Sage to the extent that they will ask what they should do with Sage’s invoice.

There’s a slight issue in that sometimes Sage will invoice VERY early before we have figures and Sage’s online pricing shows incorrect totals in about 75% of the cases so you have to call Sage or you send an invoice that doesn’t match what Sage has sent the customer.

If you control the billing relationship it is more difficult (though not impossible) for Sage to sell add-ons to end users. The user remembers that they deal with you and they aren’t sure why Sage is sending a bill. Exactly the reaction that we want and I’d say in 90% of the cases our clients ignore Sage.
For those of you who say you have no time to do this:

a. I use Freshbooks to invoice all my clients. At first I spent a lot of time worrying about what Freshbooks was weak in (mainly tracking of hours and reporting on them). Ultimately I abandoned billing for hours and Freshbooks has worked great. I use it to invoice in two stages – first email a quote, client approves online then second email the invoice. I also save about $60 per month in postage.

The quote and invoices all are sent via email. I’ve elected not to connect a credit card merchant account – but if you want you can allow your clients to pay your invoices online. I pay $ 323.46 per year for Freshbooks.

b. My office manager does all the maintenance billing. It’s not highly technical work. You just need a process for it.

Would I rather not invoice for this? Absolutely.
Is it a pain in the ass sometimes? Absolutely.
Does Sage make it difficult when they issue three weeks before you have accurate totals? Absolutely

I think that invoicing the client directly will help fend off these maintenance upsells by Sage.

My next (current) project is to fashion our support so that it’s more than Sage can offer from California and delivers higher value to the client. Would like to bundle in automatic assistance with upgrade, service updates, product updates (for an annual fee) – still thinking on that one.

3 Replies to “Your Business In Mind”

  1. But how do you get Sage to stop emailing the clients with these invoices? Pay them before they do?
    For Pro customers, it is often not reasonable to purchase maintenance since there may be tons of modifications present.

    1. In my opinion you’re never going to stop a software publisher from having contact with an end user. What works for us is promptly mailing out an invoice and trying to have it delivered before the publisher mails theres. Depending on the client you might also go on site and do a quick review of modules to be sure everything is still used and the invoice is accurate. I’d probably try to time this so that I was there for other items as well.

      Most of the time our customers pay us directly – probably 80%.

  2. I typically love what Sage is doing (particularly on the SageCRM front) but this is one area that leaves me cold. The problem with public firms is that they are forced into the mode of chasing dollars instead of focusing on a core area.

    In my humble opinion, Sage should be focused on Marketing and Developing world-class software applications for small and medium-sized businesses. I think supporting the clients dillutes their focus.

    I realize that they feel they “must” to make more money but I look at companies like Microsoft that continue to get into new lines of business because they “must” and I just don’t get it. What was once a clear mission statement is now dilluted.

    Just my 2 cents.

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