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Sage’s Portfolio Strategy

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A key tenant of many self-improvement strategies is that it is far more worthwhile to work on strengthening your strengths rather than working on your weaknesses (for instance: this one). You are much more likely to succeed working on your strengths, where you are talented and interested. You have a very good chance of progressing from good to great and being great has the most value. If you work on your weaknesses, you probably won’t be happy or motivated and improving a little bit will not be externally visible. Generally unless a weakness is a real show stopper, you are far better off working developing your strengths.

The same is true for Software Development. Customers realize far more ROI when you strengthen the strong parts of the program. That is why they bought the program and love it. If they cared about weaker features they wouldn’t have purchased it in the first place.

Many times software products suffer from trying to be all things to all people. Perhaps analyzing a competitor’s product and then working on filling in any gaps between the two. But then this is done at the expense of working on the product’s main features and strengths. And does broadening the product like this really benefit customers?

Within Sage we have many competing ERP and CRM products. Often we get criticized if we develop one product in a certain way, but not another. But do we receive any benefit from moving all the products together towards one shared end point? All our products have separate heritages and separate strengths and weaknesses, are we better off strengthening the strengths rather than filling in the weaknesses? For instance if a product has a strong Manufacturing module, but a weak Services module are we better off strengthening the already strong Manufacturing module or propping up the weak Services module?

After all with-in Sage we aren’t really competing one of ERPs against another, but against external non-Sage competitors like Microsoft, Epicor, SAP, NetSuite, Salesforce, etc. So aren’t we better off strengthening the Manufacturing in one product to compete more effectively for those sales and then strengthening the Services module in a sister product that already has a strong Services module to compete for those sales. Again it’s a matter of remaining externally focused rather than having all the Sage products chasing after the same deals.

Similarly our Business Partners have choice. For instance if you are a Business Partner operating in the USA specializing in Manufacturing and selling MAS-500, perhaps rather than branching out to more industries and carrying additional ERP packages, it is better to concentrate on manufacturing and stick with MAS-500. But if you do want to branch out, for instance say your customers are doing more manufacturing overseas then perhaps you would consider picking up Sage ERP X3 which is also strong on Manufacturing and supports multi-country installations. But when looking to grow, sometimes specialization can take you from good to great in one thing, as opposed to branching out and risking being average in a number of things. This is a very difficult decision for businesses and often a very crucial decision to make as you consider how to grow your business.

There aren’t any hard and fast rules about which is the best fit. It isn’t based strictly on company size or vertical industry. For instance a small company may have very sophisticated inventory requirements that are far beyond what Accpac can handle, and for that company X3 is the better fit. Similarly a very large company can have very simple operational requirements that don’t require the advanced features in X3, and there perhaps the simplicity of Accpac is the best fit. Plus all the mid-market products have advanced customization capabilities and large ISV communities allowing each one to compete in a very large variety of deals.

Basically our approach is to manage our products as a portfolio. As we look to fill gaps in our market coverage, we are looking to extend our portfolio to cover any missing elements, rather than all the individual products. So rather than each product trying to fill every gap, we will choose the product that is the best solution and then develop that product to serve the need. This gives us far greater market coverage since each product can be extended in a different direction and then benefit Sage, its partners and customer by providing the broadest solution possible by leveraging the entire portfolio. Again building on our strengths, including the strength of our product diversity.

Migration Strategy

Sage is unique among the ERP vendors in that we have a large range of products that spans from the owner-operator all the way up to the small enterprises (upper mid-market). This allows us to leverage our portfolio strategy and create a migration strategy where customers can move from one Sage product to another as their business grows. Generally we segment this into four markets as the diagram shows:

An owner-operator that choses Sage Spark or SageOne, when ready to move to the next level will be more likely to choose another Sage product that meets his needs such as Simply Accounting, Peachtree, Sage 50 or Pastel, than go to a competitor. Especially if they have received a great customer experience from Sage and we provide a simple way for them to migrate their data. In the same way when they grow further they will hopefully choose on of MAS-90, MAS-500 or Accpac next and then as they grow bigger still they will consider moving to Sage ERP X3. This also assumes that we have a selection that works well for their business, and by having a choice of complementary products, the possibility is much greater.

For mid-market ERP this is crucial, since the days of non-consumption are over. Everyone is already running some sort of ERP package. In fact, by far the most new sales of mid-market ERP that we get are people out-growing and moving up from a Small Business ERP whether one from Sage or one from one of our competitors. The second highest category is people moving off a home grown custom programmed system that has become too expensive to maintain. These studies show that doing migration well is a key enabler of new sales.

Just to show some of our variety, below are screen shots from four of our mid-market ERP packages: Sage ERP MAS 90, Sage ERP MAS 500, Sage ERP Accpac and Sage ERP X3.

Summary

It would be nice if all our Business Partners carried and were expert in all our products. Then for each deal they could step forward with the best product to compete with the various external companies for a deal. It would be nice if all our Business Partners could shepherd our clients from one Sage package to another as the client’s business grew and their needs changed. We know we are a long way from this goal and that it can never be fully achieved, but we are working to develop our products within this framework and to put new programs into place to make this an easier process.

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Written by smist08

January 29, 2011 at 5:20 pm

Posted in Business

Tagged with , , , ,

10 Responses

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  1. […] This post was mentioned on Twitter by smist08, Geek Fetch. Geek Fetch said: ACCPAC Sage’s Portfolio Strategy: A key tenant of many self-improvement strategies is that it is far more worthw… http://bit.ly/g7h6KQ […]

  2. I believe one flaw in your example is the first image showing the different Sage products. The implication is that a Sage customer could own Sage Spark – migrate to Simply Accounting and again to MAS 90, Accpac or ERP X3.

    And while that’s true. They also could just as easily (technically) migrate to a competitor.

    Why?

    What’s missing from that graphic is that they’ll either need to use Sage’s migration teams, rekey their data or have someone perform a time consuming migration (which may or may not migrate everything).

    I was in the audience when then CEO Ron Verni mentioned some secret connection tool being developed in the UK which was to my understanding going to perform some of this migration and/or integration. That had to be a good 7 years ago? I’ve since stopped holding my breath that there’s any magic conversion / integration tool – though I’d gladly welcome the opportunity to be surprised.

    As a Sage Business Partner I’ve BTDT (Been There Done That) in the era where MAS 500 was going to be the perfect migration for users on MAS 90/200.

    Didn’t happen. But it wasn’t for lack of a lot of trying on Sage’s part.

    The reason? The box was the same color. The graphics on the box were the same. However functionality was different and the migration path was, to put it very kindly, awkward. Customers didn’t seem to really understand anything other than most who I spoke with thought it was an upgraded version of what they owned (in my case MAS90. They were surprised when they installed the “upgrade” and features they were reliant on were suddenly missing.

    Secondly, the dream of having all business partners carry and be an expert in all products is honorable yet unlikely. In the partner community that’s also called putting all your eggs in one basket. Maybe there will be a few partners who head down this path.

    Save for a very few large national parters — most partners won’t have the bandwidth to do anything close — except to pay the authorization lip service (for reference – ask around how the MAS 500 authorizations went the last time this theory was tested).

    Sage seems to have recognized this difficulty in getting their partners to carry all their products. In the past they’ve worked all sorts of cross-selling programs. I’ve really no idea how well the cross-selling worked however if my #1 client was looking to leave for another business partner I’d surely not be terribly please to exchange an annuity payment (my services) for a one time commission.

    In essence the current situation with Sage’s portfolio could be described as an opportunity for migrations. It also could be described as a perfect storm for channel conflict as business partners clash with either Sage or other business partners who are trying to market into their clients by offering a product that they do not offer.

    Wayne Schulz

    January 29, 2011 at 7:17 pm

    • Migration is certainly a challenge. Customers do outgrow their ERP software and will migrate to either another Sage package or a competitor. How do we maximize the number choosing another Sage product? Developing migration tools to ease the transition is one part that we are now working on. But we also are working on other approaches, if we can increase the Net Promotor Score (NPS) or the ECE then customers will prefer doing business with Sage rather than looking elsewhere. If we can offer competitive pricing, perhaps just switching their M&S then this all helps. I’m not claiming we are doing well at this currently, just that this is a major initiative and you will see pieces being announced in support of this over the coming year (especially at Summit).

      smist08

      January 29, 2011 at 11:47 pm

  3. I’m not sure what you were trying to show with the four screens that show four totally different functions. What are we supposed to be comparing, the borders and style sheets? Obviously I’m missing something there.

    Regardless, your points are well taken, and they make sense from a marketing standpoint (diversity of offerings, none of which is perfect, will result in the most market churn), but the solution you propose (focusing on strengths at the expense of the weak parts) still envisions compromise as a design objective. And it still falls short of the ideal that a demanding client expects.

    The concept of software that’s built as a collection of components that can be individually extended or upgraded according to the needs of the business seems to be absent from this marketplace. And the one Sage product that comes the closest to offering this ability, Sage Pro Series, is absent from your examples.

    In most cases, clients do not seek out consultants in order to get on board with any particular product line. The ranks of “IBM shops” are greatly diminished these days; especially as organizations grow they are looking for best-of-breed solutions in critical areas, and this is a distributed process that is difficult and expensive to organize. And once a solution is in place, people are trained and cross-trained, data links have been established, and that solution has been otherwise integrated into its corporate environment, there has to be a pretty powerful incentive to reinvent that wheel. This is the challenge that all accounting vendors face, but very few of them understand it in sufficient depth.

    I found it interesting that a large source of new sales is custom applications that have become “too expensive to support”. I will wager that many of those solutions have been in place far longer than what Sage would consider a normal upgrade cycle. The impetus to move is more likely driven by either aging technology or the loss of key people who were critical to its continued viability. This has certainly been our experience when one of our custom solutions has been replaced. Is Sage offering a ten or 15 year solution?

    If Sage were to reinvent itself as an “application tools” vendor, focus on modularity and interoperability, and thus make it possible for the VAR – who owns the client relationship – to build, and then build on, a comprehensive solution based on its various technologies, it would revolutionize the industry. Obviously it’s a paradigm shift, so I’ll continue to breathe at my normal pace. But that’s what the market wants.

    C. Darryl Mattison

    February 1, 2011 at 6:15 pm

    • Sorry for the gratuitous screen shots, trying to keep my blog posts from being all dry text. Good points, thanks for the input.

      smist08

      February 1, 2011 at 9:21 pm

  4. The concept of software that’s built as a collection of components that can be individually extended or upgraded according to the needs of the business seems to be absent from this marketplace. And the one Sage product that comes the closest to offering this ability, Sage Pro Series, is absent from your examples. I was in the audience when then CEO Ron Verni mentioned some secret connection tool being developed in the UK which was to my understanding going to perform some of this migration and/or integration. That had to be a good 7 years ago? I’ve since stopped holding my breath that there’s any magic conversion / integration tool – though I’d gladly welcome the opportunity to be surprised. For mid-market ERP this is crucial, since the days of non-consumption are over. Everyone is already running some sort of ERP package. In fact, by far the most new sales of mid-market ERP that we get are people out-growing and moving up from a Small Business ERP whether one from Sage or one from one of our competitors. The second highest category is people moving off a home grown custom programmed system that has become too expensive to maintain. These studies show that doing migration well is a key enabler of new sales. Thank you for sharing..

    Business Plans

    February 14, 2011 at 11:23 am

  5. […] came across an article on Stephen Smith’s blog that provides some interesting insight about the Sage portfolio strategy. Since Stephen is a software architect with Sage, he offers perspective “from the inside” so we […]

  6. Your ‘strengthen the strengths’ paradigm is fine as long as customers only want one thing from a given piece of software. As long as they only need manufacturing or only need services from one product then you are fine. Alternatively, if the customer needs two products for excellent manufacturing and excellent services, the question will be whether the cost of having the two products talk to each other is greater than or less than the cost of augmenting the functionality of a competitive offering which does both pretty well.

    The fact that you are receiving criticism from this approach suggests customers are expressing a different set of requirements. Listen to your customers.

    Leon Tribe

    April 4, 2011 at 5:08 am

  7. I am trying to upgrade from 5.4 all the way to 6.0, so I have upgraded to 5.5 then 5.6 and to 6.0 but in 6.0, when I run data activation and try activating any module it brings an error saying; ”Description: Incorrect procedure. You cannot upgrade your data directly from version 5.5 to version 6.0. You must convert your database to version 5.6 first. For more information on updating older databases, see the Sage Accpac Update Notice.”. what could be causing this error?

    tmalowa

    November 9, 2012 at 12:49 pm

    • Perhaps you have left one or more accounting modules at the older version? Check system information to see if that is the case.

      smist08

      November 9, 2012 at 5:25 pm


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