SageForce – “the end of ERP”?

SUMMARY:

The end of ERP? A bold claim from Sage CEO Stephen Kelly, backed up by the blessing of Salesforce CEO Marc Benioff. But away from the spin, what’s behind Sage’s tie-up with Salesforce?

Oracle alumni in action
Oracle alumni in action

Much excitement in the run-up to Salesforce’s latest tie-up with Sage yesterday, with speculation that we’d all been looking in the wrong direction and it was Salesforce as acquirer rather than the acquired as recent rumours would have it.

The prosaic reality was rather different of course, but a nonetheless interesting move by both firms and an indication of where new CEO Stephen Kelly intends to take the company.

Kelly’s spent most of the past couple of months touring the world, evangelizing the firm’s Sage 2020 vision to internal staff.

But yesterday he broke cover for a sit-down in San Francisco with Salesforce CEO Marc Benioff to announce Sage Life, a new offering built on Salesforce1 pitched squarely at the small business space.

Benioff’s presence at the event was a pretty big deal in its own right. The Salesforce CEO doesn’t show for any old product announcement or alliance.

Even though there are strong Oracle ‘old boy’ connections here – this relationship seems to have been heavily brokered by Steve Garnett, Salesforce’s EMEA Chairman – Benioff’s appearance before the media shortly before the latest quarterly numbers next week and with takeover rumours still in play, was a significant indicator of how important Salesforce regards the Sage push.

What does Salesforce get out of this? Well, apart from the added credibility of a major applications company turning to Salesforce1 as platform of choice, there is the small matter of the US firm’s continuing ambitions to grow its European footprint. Handily, Sage is, as Benioff reminded his audience:

the second largest software company in Europe. The largest software company in Europe is a company that I don’t know the name of! They are a cloud denier.  It’s great to see the second largest software company in Europe being a cloud lover.

And so with typical understatement, the Salesforce founder declared of “this incredible partnership” that:

Today is by far the most exciting day ever for our platform and it’s also an exciting day for small businesses because those two things get to come together for the first time.

For his part, Kelly had his own ambitious mission statement for Sage Life, no less than to:

smash down the walls of back and front office. We see business of the future being radically different [from] the batch processes of the past.

He added:

I pinch myself when I say this, but I think this is as important for small businesses as the iPod was in 2007/2008 for consumers. We think for small businesses everything is going to be driven by the consumer revolution.

What is it?

OK, so that’s the hyperbole. But what is Sage Life? According to the official description:

Sage Life is fully customizable, cloud based and can be used on any device, from smartphones to smart watches and from tablets to the desktop. With its mobile control center, employees can view data in real time and react as one team. With social networking at its core, Sage Life allows seamless interconnections between colleagues, customers, partners, suppliers, and other stakeholders.

It will be launched in the summer, targeted at companies with 10-200 employees. It’s going to be jointly-marketed by both Salesforce and Sage, but sold by Sage. Kelly added:

You can trust us to have one office in the cloud – Salesforce front office, Sage back office. We manage the movement of money, Marc’s guys are looking after the customer experience and CRM and analytics.

Before the official announcement in San Francisco, I caught up Kelly for a quick chat. (Last time I had a chance to sit down with him was in the heart of the UK government where he was Chief Operating Officer before jumping ship last year to head up Sage.) He started by telling  me that it is time accounting was rethought:

If you look at accounting, everything is batch-based. There’s been very little innovation since the Middle Ages and the time of the Medici banks and the invention of double-entry book keeping. Technology has really just automated things. What we’re doing here is real-time, collaborative and re-imagined.

Of Sage Life, he made a startling claim that will inevitably come under a lot of scrutiny and critique:

This might be the end of ERP.

By that he means:

In the context of some of the competition, what we’re going to do is going to leapfrog the competition. We want to reimagine the way small businesses work and we’ve worked with Salesforce to do that.

Around 60% of the reasons that small businesses fail is due to failure around finance. You often have two people – one who goes out and does the selling and one who sits back at the office and does the books.

It is the case that companies have major arguments because one person has cause one person holds the power because they have access to the information and they know where the money is. It can often take on average 28 minutes just to get access to the cash balance. This is radically different. Everyone has real time information about the customers, cash, supply chain.

This is completely real time, mobile, social, collaborative. This provides real time information for entrepreneurs . You can run your business from your Watch with all the critical factors for running your business – invoices cashflow, billing etc. It’s  real-time business information as easy as Twitter.

All in on Salesforce1

Sage Life is also the first major deliverable of the previously announced relationship between Sage and Salesforce that has seen the former elect to move away from its traditional Microsoft development platform and bet the farm on Salesforce1. Or as Kelly put it, it’s:

a big strategic bet for our company.

It’s a wager that was placed after Kelly, on day one as CEO last November, issued Sage’s CTO Klaus-Michael Vogelberg with a tough challenge:

I said, I think there’s a revolution about to happen and we have the opportunity to lead that revolution. Or we can be in denial and let it pass by. I said to him, you have 30 days to tell me the answer to the future.

The answer was Salesforce1 and that’s the commitment from now on. Kelly said:

This is all the Sage products but in combination with Salesforce. Everything we’ve done with this has been built on Salesforce1.

All of this is also going to result in the creation of an app store built around Sage, said Kelly:

We want to create an eco-system of apps like the consumer paradigm of the app store. We passionately believe that if you’re a metal working company in Germany or a hospitality company in New York, you should have a rich experience of apps that you can assemble to support your business.

What about the installed base?

Time to move on from the Medici Bank?
Time to move on from the Medici Bank?

Sage Life is clearly heavily pitched at new customer opportunities and is a major commitment to the cloud where Sage has been accused of being a laggard. While there’s clearly a huge opportunity in this direction of travel, the reality is that 85% of existing Sage customers remain on premise. Those people also need to managed and supported.

They will be, insisted Kelly:

I’ve made a really strong statement that we’re committed to customers for life. We have a lot of products around the world and we will continue to support them.

If you look at the market for small businesses, just in the 24 countries in which we operate today, we have about 70 million businesses as potential targets. We have 3 million customers under maintenance or who have bought something from us in the last 3 years, so that’s a small footprint. This is about looking at new customers and new markets.

Now, maybe in 2,3,5 years, existing customers might decide they want to adopt this new technology. But today, for example, German customers say they are in no hurry to move to the cloud and that they want us to be there on premise for another ten years. If I’m an existing customer, there will be no pressure to move, no forced migration. But when they’re ready, then we’ll be there and we will be building richer migration tools.

My take

You certainly can’t fault the ambition here. Kelly’s moved quickly to put his own stamp on Sage, both internally – with the appointment of global heads of responsibility for HR, IT and so on – and now externally with some high-visibility positioning alongside Salesforce, complete with personal blessing from Benioff.

There’s still a lot to do of course. That cloud laggard claim has not been without foundation. While this tie-up with Salesforce makes clear the direction of travel, as Kelly admits, there’s a long way to go to get the Sage on premise installed base moving along. The devil’s in the detail here. A clear, coherent and credible migration path is going to be essential. The theory’s good; now for the execution.

As for those Salesforce-taking-a-stake-in-Sage rumors so popular in the past few days, Kelly gave the careful response:

This is absolutely a product announcement. Everything else is wild speculation.

Disclosure – at time of writing, Salesforce is a premier partner of diginomica,