Sage Partners Seek Technology Road Map, Channel Reassurance At Next Week's Summit

Next week's Sage Summit 2012 conference in Nashville could be pivotal for the software company's long-term relationships with its North American channel partners.

Sage North America, a part of the U.K.-based Sage Group plc, has taken several steps this year -- including renaming some of the company's ERP and accounting products and instituting a subscription pricing plan -- that have angered some of the company’s biggest resellers.

Some partners say Sage isn't investing enough to update its aging products or to develop a comprehensive cloud software strategy. Others go so far as to question the company's overall commitment to the channel. One points out that this year's planned, Sage-paid trip to Miami Beach in January for the company's "President's Circle" 60 biggest revenue producing partners was cancelled, replaced by an awards ceremony at next week's conference.

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"There's a sense they can do it without the channel," said one longtime partner who, like many solution providers interviewed for this story, asked that they not be identified for fear of jeopardizing their relationship with Sage North America. "It just doesn't feel like a two-way street."

"I think there's a lot of strained relationships between Sage and its partners at this point," said another partner.

Sage executives acknowledge the vendor's strategic shifts in the last year have made some partners uneasy. Take the rebranding, for example. "I think when we announced it a year ago there was a lot of concern," said Joe Langner, executive vice president of midmarket and CRM solutions, in an interview this week. "Brand changes take time."

But, Langer and other Sage managers say the company's commitment to the channel remains as strong as ever. Langer notes that "the vast majority" of the company's sales are made through channel partners, including about 85 percent of the company's core ERP application products. And, Langer notes that more than 1,500 solution providers are registered to attend Sage Summit next week.

Some partners say they understand why Sage is moving in new directions. "I think that for years Sage wasn't aggressive enough," said Peter Wolf, president of Azamba Consulting, a Chicago-based Sage partner. He describes himself as being in the "pro-Sage camp" when discussing the split amongst the vendor's partners over the company's moves.

Many of the changes at Sage North America have been implemented under Pascal Houillon, who took over as Sage North America CEO a little more than a year ago after the retirement of Sue Swenson. Houillon, previously CEO of Sage France, has been tasked with boosting Sage North America's revenue growth, which declined 4 percent in fiscal 2010, ended Sept. 30, and increased 3 percent in fiscal 2011.

Several channel partners said Houillon seems to be pursuing a course that more closely follows the strategies used by Sage North America's European parent, including promoting the Sage brand rather than the names of acquired products and possibly even putting more emphasis on direct sales.

"Looking at their strategy, it's all about short-term gain," said one Sage partner.

NEXT: Product Rebranding, Subscription Pricing Plans Roil Some Partners

The rebranding effort, announced at last year's Sage Summit and implemented three months ago, created new product names -- Sage 50, 100, 300 and 500 -- for such longtime Sage products as the MAS ERP 90, 200 and 500 application sets and the Accpac and Peachtree accounting applications.

"They're diluting the North American brands," said one angry partner who resells some of the renamed products. The reseller also said he had to devote a lot of time and money to making changes to websites, marketing materials and more. "It's very expensive and a complete waste of resources."

The partner also said resellers were not reimbursed for the expenses. But, another reseller said partners could use Sage-provided market development funds for the changes. Sage executives said the company offered co-funding up to 100 percent for eligible brand-transformation activities, as well as such assistance as an electronic brand transformation tool kit.

"It makes things a bit challenging with our customer base," said Manny Buigas, principal at Axis Global Partners, a Miami-based solution provider, of the rebranding. He recently got a call from a prospect who thought Sage was no longer supporting Peachtree (now Sage 50), for example.

Another partner who described himself as "neutral" on the re-branding added: "I don't think it's going to generate the new business that they think it's going to."

Other partners, however, either say the rebranding hasn't been a big deal or have dealt with it and put the issue behind them. Some even back the plan.

Wolf at Azamba Consulting, for example, said the rebranding effort "represents a commitment that I can get behind" because it makes Sage more competitive and "self-deterministic." But, he's also quick to say he understands why other partners are upset: "People have a hard time with change."

More partners today seem up in arms about the new software subscription plan. Sage announced the subscription pricing option for its ERP and CRM applications in March, as well as price changes for traditional perpetual licenses and changes in customer support and maintenance plans.

One partner said the margins on the subscription pricing are less than half those Sage's top partners can earn on traditional licenses. "There's absolutely no motivation for me to sell it," he said. The partner also noted that Sage increased prices for perpetual licenses on some products in April and dropped the lowest level maintenance/support option -- effectively raising that price as well. "The whole purpose was to make the subscription pricing look more palatable," he said.

"We have yet to sell one subscription because there isn't enough margin in it for us," said another partner, who calculated that his company would earn only one-third the margin it gets for perpetual licenses.

"We really don't break even or get ahead of the deal for five or six years," said another.

The subscription pricing is targeted at smaller companies that want to use Sage software but can't afford the up-front cost of a perpetual license, Sage's Langner said. "It's really a new means of financing for our customers," he said, adding that it gives partners an opportunity to sell to new customers and re-engage with customers who have let their maintenance plans lapse. "Some of our largest partners have been selling on subscription."

About 20 percent of Sage's new license sales today are subscription, according to Langner.

NEXT: Longtime Partners Sign On With Sage Competitors

Several partners cited Sage's elimination of the Bronze customer support plan as another issue. "So they're taking support opportunities away from the partners. That definitely didn't make any of the partners happy," said Mark Goodson, president of BCG Systems, an Akron, Ohio, solution provider that maintains a "minimal" Sage business after selling off a MAS 90- and MAS 200-related (now Sage 100) business several years ago and who now partners with Microsoft and NetSuite.

Another longtime partner worries about what he described as "the lack of innovation" with Sage's current products. "They don't seem to have an answer for that," he said. "I will tell you we are very concerned about hanging onto our Sage customers."

In what could be a sign of the dissatisfaction in Sage's partner ranks, several of Sage's biggest channel partners in recent months have struck deals to partner with other application vendors, including NetSuite, Intacct and SugarCRM. Most are careful to say those moves are meant to broaden their product lines and add cloud services to their offerings -- and don't represent a move away from Sage.

"Literally 100 percent of our prospects were asking for SaaS-based options for their consideration," said Stephen Blythe, CEO of Blytheco, one of Sage's biggest channel partners. Earlier this year Blytheco partnered with SugarCRM and with NetSuite. "We get invited to the dance more by having those."

Just this week, Plus Computer Solutions, a Sage partner in Burnaby, British Columbia, partnered with Intacct to work with that vendor's cloud financial management and accounting applications. Sage partner Arxis Technology partnered with SugarCRM in March.

"We realized we needed to diversify our product portfolio," said Buigas at Axis Global Partners, which became a NetSuite partner earlier this year. He said demand for cloud-based software was growing, particularly among startup companies and family-owned companies that are being turned over to younger people who grew up with the Internet. "We were missing out on those opportunities."

One partner, who still counts on Sage products for about 95 percent of his business, has recently added software from Intacct, SugarCRM and other vendors to his offerings. "Our hope is that becomes 50 percent of our business in the next three years," he said.

NEXT: Sage Summit 2012 Expectations

here are signs, however, that Sage and its partners may be getting past the turbulence of the last year. Jeff Roth, CEO of SWK Technologies Inc., Livingston, N.J., said he detected a more positive tone from Sage toward the channel in recent months. He and Stephen Blythe both pointed to a recent Business Partner Advisory Council meeting where they said Sage executives seem to be listening more to partners' concerns. Roth also said Langner, who joined Sage eight months ago, is taking on more of a channel advocate role.

Azamba's Wolf called the value of a number of other partner services Sage has launched in recent years "immeasurable," including the Fast Track for Marketing and Hire Assist programs – the latter of which is a service to help partners find sales and consulting talent. "I take advantage of these programs, and they've helped my business so much," he said, saying he used the service to hire a new sales representative.

New York-based IT service and solution provider Net@Work, which has become one of Sage's biggest partners, plans to unveil at Sage Summit an alliance program that builds on Sage's efforts to get more partners who sell specific Sage products to work with each other. Net@Work pitched the alliance program to Sage execs who co-president Edward Solomon said were receptive to the idea, which would make Net@Work something of a master VAR.

Partners will be looking for more clues at Sage Summit about the vendor's direction both in terms of its channel efforts and its product strategy.

Blythe is hoping to hear a "forward commitment to development of [Sage's] core midmarket products" and a "viable and competitive SaaS strategy." He'd also like to hear about a redesigned subscription plan that's "equitable for partners."

"We want to be sure the products we're selling today can deliver the goods," said SWK's Roth, who, like Blythe, is hoping to hear more about "a true SaaS cloud strategy" for Sage products. Roth declares himself "bullish" on Sage ERP X3, the company's midmarket ERP application set.

At Sage Summit, company executives will outline "how Sage is going to embrace the Web and mobile technology," Langner said, and showcase new products that "are going to raise some eyebrows."

On the technology side, all eyes at Sage Summit will be on Himanshu Palsule, a 15-year Sage veteran who last month was named chief technology officer and head of product strategy for Sage North America.

Sage North America has centralized its research and development under Palsule, and in a July interview, Palsule said the company has spent the last nine to 12 months developing a long-term product strategy that will emphasize development of common cloud and mobile services that legacy Sage products can tap into -- rather than redeveloping all those products. Some products could see reductions in R&D investments.

Sage Summit also will feature sessions that address the subscription pricing issue, Langner said, and the Sage Advisor system that provides partners with information about how customers use Sage products to help partners provide better service.

And providing better customer service is what it's all about, said Wolf. "At the end of the day, if we put out good solutions that meet customer needs, that's what matters."

PUBLISHED AUG. 9, 2012