Sage Narrows Product Focus, Designates Some Apps For Phaseout

Sage North America will focus its development efforts on a limited number of applications like Sage One and Sage ERP X3 and reduce its R&D investments in a number of older products.

While committed to continue supporting older products such as Sage 500, Sage Pro ERP and Sage PFW ERP for as long as five years, company executives bluntly told some 1,500 partners at the Sage Summit conference in Nashville, Tenn., on Monday that the Sage product line will undergo major changes.

"We must innovate very quickly, but be very, very deliberate in our choices where we are innovating … and making fundamental changes in our priorities," said Himanshu Palsule, chief technology officer and head of product strategy for Sage North America, in a keynote speech outlining the company's R&D plans.

[Related: Sage Partners Seek Technology Road Map, Channel Reassurance At Next Week's Summit ]

"Frankly, folks, it's not just about what we are starting, but also about what we are stopping."

Sage is also designating certain categories of products as "core," including its accounting, ERP, payroll and related applications that often work together. Other products, largely those that are more specialized or operate more on a standalone basis, are being designated "noncore" and will be managed independently.

"Both core and noncore businesses will remain key parts of our overall portfolio," said Pascal Houillon, Sage North America CEO, in his keynote.

While some have questioned whether Sage invests enough in product R&D, Houillon noted that 22 percent of the company's employees now work in product R&D. "It is spread across too many products, on too many projects," he said. "To make real progress, we need to change that."

Sage has scores of products, most acquired over the years, and continuing to maintain and develop them -- including adding cloud and mobility capabilities across the entire portfolio of individual products -- is unsustainable.

Focusing R&D on fewer products will also benefit customers that have been asking Sage to simplify its product line and reduce "traumatic" upgrades, Palsule said.

"Customers are asking us to stop creating complexity in our products," he said. "Technology has to be an enabler, not an impediment. We have to start scaling back on [the number of] platforms with the complexity they create."

The company will focus its R&D on Sage One, the company's set of online accounting and business services for small businesses, and the Sage ERP X3 software for midmarket customers.

Sage also is developing a number of cloud-based connected services, such as payment services and mobile applications, which will extend the functionality of some of Sage's existing products. The hybrid cloud applications will be targeted toward SMB customers and will run on Microsoft's Windows Azure cloud platform.

Palsule said that over time more functionality would migrate from on-premise applications to cloud services. That, he said, means the amount of revenue generated by partners through implementing and upgrading software will diminish with more of their business focused on value-added services.

NEXT: CEO Houillon Addresses The Issue Of Subscription Pricing

Sage's expansive product line has always been a challenge for the company. Along with stretching R&D resources, Houillon noted that many channel partners still think of themselves as "Accpac resellers" or "MAS 90" resellers, "instead of recognizing ourselves as 'Sage,'" he said.

To build up the Sage brand, the company earlier this year rebranded some of its products. Peachtree Accounting software, for example, became Sage 50 while the MAS 90 ERP applications became Sage 100. Accpac became Sage 300 and MAS 500 ERP became Sage 500. Those changes angered some resellers who had longtime investments in the old brand names.

The plan to phase out Sage 500 in five years was the only product for which Sage executives provided a specific end-of-life time line. Sage will eventually migrate Sage 500 customers to Sage ERP X3, said Joe Langner, executive vice president of midmarket solutions. But various Sage executives cited Sage Pro ERP, Sage PFW ERP, Sage BusinessVision Accounting and Sage BusinessWorks Accounting as products most likely to be phased out.

"We are stepping up the rate of innovation. But to achieve that we have to heavily invest in some areas while starting to minimize investments in others," Palsule said in his keynote. "But we'll ensure that those products that we will be ramping investments down on will have a very clearly communicated road map for all of you to migrate your customers. We have a lot of work in front of us and none of this is going to be easy."

Houillon also addressed the issue of the subscription pricing option Sage North America introduced earlier this year, a move that also upset some channel partners who say they cannot make money on the subscription pricing.

The CEO said two-thirds of Sage's customers are not on any maintenance or support plan and the subscription option is one way to bring them back. "Subscription pricing is one way we are responding," he said. "In the long run, subscription[s] will change our whole way of thinking about products."

Houillon elicited some laughter from the audience by saying that "many partners" had provided "significant feedback" on the subscription move.

PUBLISHED ON AUG. 14, 2012