Sage Reduces Subscription Plan Options For Sage 100, 300 and 500 Customers

In a move that might surprise some of their business partners who haven’t been paying attention and noticed that Sage’s compensation for maintenance plan subscriptions is amongst the highest of any competitor, Sage is expected to announce today that all Sage 100, 300 and 500 customers will have access to 5 support cases as their plans renew beginning with those expiring on or after March 1, 2012.

Several partners have contacted me to confirm they’ve been informed that Sage will announce elimination of the Bronze plan for Sage 100, 300, 500 ERP (Formerly Sage ERP MAS90, 200, Accpac and 500) which previously allowed for only maintenance upgrades and no calls to Sage support. Instead of calling Sage support most customers  relied on their local Sage Business Partner for support..

Customers instead will now be enrolled in the Silver plan. Under the new plan,  effective for renewals on or after March 1, 2012,  for an annual fee of 21 % of product SLP (versus the  previous 18% that the Bronze plan had cost ) Sage ERP 100, 300 and 500 (no other product lines were impacted) customers will have access to direct Sage support.

Additionally, two tiers of Sage’s top partners – Diamond and Platinum will have tier margin on maintenance renewals reduced effective April 1, 2012.

Tom Miller, Sage’s VP of Channel Management, explained that customers on Sage support have shown higher net promoter scores and Sage’s reason for changing the support options was to create happier customers who stay with Sage, continue renewing maintenance, etc.

In addition certain changes were also implemented where Sage partners must actively participate in renewing customers who have fallen 90 days or more off plan or they lose any compensation for the reinstatement order.

When questioned about how Sage will monitor some of these changes such as channel conflict with Sage’s own renewal teams and  how to make sure partners and consultants don’t usurp customer cases without customer consent Sage indicated that they’re still working on the details.

The subscription margin reductions had been widely anticipated (I’d expected them as early as my December 2009 predictions post)  in recent months by some Sage partners. In Sage’s own earnings reports such as this 2010 summary of North America, Sage repeatedly talks about premium support sales as a goal.

In short, Sage partners surprised by these announcements should be paying closer attention to the surrounding environment (what other software companies pay for similar renewals) and even Sage’s own earnings releases which are often full of hints about their future direction.

I’ve spoken at length about how Sage Business Partners need to get local with their customers and develop their own special sauce to clearly differentiate and add value to their firm’s own services. Sage themselves over the last two corporate earnings calls have indicated that adding premium support subscribers was one of their top goals.

What remains to be seen is the level of impact that changes will have on customers.  Will customers subscribing to a partner support plan abandon that plan in favor of the modified Sage offering?

If Sage continuously advertises the availability of support cases then partners might see drop off of 10% or more from their lower end customer base who could switch to Sage support.

A long time Sage partner who has been offering  their own agreements for years  indicates that even before these changes  they’d been heavily promoting Sage Silver plans as as backup option for their customers and would continue to do so since it gives customers a great help desk resource for simple questions and the difference in price was immaterial for larger customers.

Partners can continue to offer similar support agreements though it’s probably best to start labeling them as other than support (one successful Sage VAR labels theirs as Knowledge Transfer Agreements) . Modify your agreements by shoring up existing plans to include local (note the use of this word loca) on-site upgrades as a component of  the agreement .

Following in the footsteps of Sage I recommend enrollment in your company’s own plan be a requirement for you to perform any work for a customer. If a customer balks at maintaining two plans there’s no reason you cannot have a separate fee schedule for customers off-plan.

Where I expect to see the biggest impact of these changes is with what we in the industry term “orphan” users which are companies who have left their prior VAR for any number of reasons and in turn search the Internet for a replacement. It’s difficult to tell what percent of this business might disappear but provided the user is active on a Sage maintenance plan they may chose to migrate directly to Sage for future support instead of another partner as they  may have done in the past before support cases were included in their plan.

It’s important to note that support cases will only be added as customers renew their plans starting on or after March 1, 2012. There is no change to a pre-existing plan until the renewal.