Sage’s Portfolio Strategy
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.
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.
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.