Sage Capital Markets Day: Our Model Was Fantastic Until The Internet Came Along


Sage today presented their future strategy to analysts at a Capital Markets Day in London. The presentation touched on quite a bit of information about future plans as well as an update on some of the key performance indicators that analysts should expect to see.

The prime takeaways (other than financial) are:

Everything will be considered globally . This applies to organizational structure as well as products – which will be categorized now as Growth or Heritage. There are three global products: Sage One, X3 and Sage Life.

Sage is pushing for 85-90% recurring revenue from high quality sources.

First up was Stephen Kelly to kick off the presentation with some candid observations:

Where are we today:

  • Very reserved in Britain, best kept secret of Britain
  • Over 50% of companies in the UK pay employees using Sage
  • 45 million employees across the world paid through Sage payroll

Sage 2020 – A Study Of Sage Organizationally

Truth #1: Massive fragmentation

  • “Company model was fantastic before the Internet”
  • Hat tip to Paul Walker for foundation
  • This model worked well in the days before the Internet
  • 200 products, need portfolio management – the issue is the investment to drive growth
  • Have 100+ growth products — too many, speaks to Sage’s fragmentation
  • 130 offices for 14,000 employees (half of them have less than 50 colleagues)
  • Too high G&A and facilities – 22% or revenues
  • Response: Build model around customer for life

Truth #2: Sage was losing market share

  • Sage losing market share with exception – S. Africa
  • Little focus attracting/acquiring new customers
  • Have been  passive – letting new competitors come into marketplace – particularly cloud based competitors in past 5 years
  • Response: We have to be winners, focus on new customer growth

Truth #3: Inconsistent market experience (digital presence)

  • $150 million/year on marketing
  • Double competitor spend in terms of their global revenues
  • Very inconsistent spending – difficult to navigate
  • Wasting a lot of our marketing firepower
  • Using older technology – email
  • $42 million pound digital spend /  only $18 million pound eCommerce/Web
  • Response: Digital marketing at the heart of our go to marketing strategy

Truth #4: Cross selling (2012 strategy)

  • Failed to execute this strategy
  • Magic happens = movement of money
  • Kelly has seen 400 partners/customers to review this
  • Ex – Sage Pay – integrated with Sage 50 (220,00 UK businesses) – only 2,100 Nov 2014 on Sage Pay (1% penetration)
  • Why?: Failed to execute over the past 9 years (acquired 2006) – 9 years later only 1% penetration
  • Better campaigns
  • Magic happens
  • Response: Coherent organization and operational

Truth #5: No consistent global competitor

  • Sage has market leading positions in many areas
  • The marketplace has “a sea of confusion”
  • Sage can be the “guiding star”
  • Opportunity – there’s nobody globally who is dominating globally


How does Sage win?

  • Secret to change is not looking back but look forward
  • Customer/New Customer:
  • 72 million addressable market
  • Most of the attraction with new customers is GLOBAL products – Sage One, Sage Life, X3
  • Sage Life:
    ERP = customer pain, agony – Sage will have a campaign “No ERP” in Autumn
  • Clear migration plan
  • Three products – Sage One, X3, Sage Life –  all “ready for prime time”

Early Signs of Execution:

  • Customers for Life
    Code Red Team: Resolve problems
  • Reimagining business
    Sage Life
    New ways of working
    One Sage
    Global function

The raised ambition, champion of small and medium businesses
It all starts with customers for life
We genuinely want to be a customer with flawless awesome execution for shareholders and customers.

CFO Stephen Hare presented some ambitious KPI updates:

  • Sage One: 1m customers target (5 pound a month is avg revenue per customer)
  • Sage Life : 4 million businesses – about 100 pound/mo
  • X3: Now over 5,0000 customers – 3% growth
  • Timing is uncertain and no predictions made on when this would occur other than a comment by Hare that “if there is no progress by the end of FY 17 you’ll know we failed”.
  • Installed base – 6% growth  (on prem)



Wayne Schulz is a consultant who writes about the ERP industry and technology related news.

3 Replies to “Sage Capital Markets Day: Our Model Was Fantastic Until The Internet Came Along”

  1. So what’s happened to the global product Sage 300 then? I’m sure the many global business partners and customers of Sage 300 will be interested to put it mildly.

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