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Sage UK imposes up to 90 percent upgrade price hikes for SMBs

Den Howlett Profile picture for user gonzodaddy July 29, 2014
Sage UK is imposing price hikes of up to 90 percent for upgrading its Sage 50 users. How this goes down with users and resellers remains to be seen but right now it does not look like a wise move.

Sage subscription pricing
Sage subscription pricing

In what some will consider a breathtaking moment of utter madness, Sage UK is imposing substantial price hikes for its core Sage 50 range of SMB on premises solutions. These range from 67% to 90%. From Accounting Web, which claims the following represents a composite of emails between 'AHB' a reseller and Sage:

You’ve now all been officially communicated the price rises effective from August 1st, 2014.  Standard for the most part with 3 glaring changes:

Sage 50 Accounts Upgrade - £315 + vat at the minute – up to £526 + vat from August 1st

Sage 50 Accounts Plus Upgrade - £455 + vat at the minute – up to £819 + vat from August 1st

Sage 50 Accounts Professional Upgrade - £600 + vat at the minute – up to £1140 + vat from August 1st

These price rises represent 67%, 80% and a whopping 90% respectively. Accounting Web says these are in line with changes in the subscription pricing.

Apparently, Sage is launching a massive campaign to notify customers but this all seems rather late in the day. It does however raise an interesting point about the perceived value of software from both the on premises and subscription standpoints.

While it is often difficult to make appropriate comparisons between on premises and subscription based pricing, my sense is that Sage is using this opportunity to force its customers to go with the subscription model. That's because when you add in all the oncosts associated with on premises operations, the overall cost will be far higher than the sticker price they're applying today.

Resellers will be in a bind over this. Their cost is tied to a percentage of the sticker price so they will have to pay more. On the other hand, the extent to which they can compete becomes limited once customers realise there is a viable alternative to the reseller model.

The big question is the extent to which this pricing strategy opens the door to other cloud solutions or whether those same solution providers will take their cues from Sage. SMBs are price sensitive so any move here has to be taken with caution by the reseller. The exceptions come where the reseller has a strong relationship based upon specific functionality they support on behalf of certain clients. But that's jam, not bread and butter work.

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My guess is that the accounting profession, where Sage has a presence both as occasional provider and in the Accountants' Club will need to take stock. Whether they do, rather than simply shrugging their shoulders remains to be seen. Past evidence would suggest the latter rather than the former but that's not a done deal.

Sage competitors, and especially Xero are aggressively moving into the accounting turf. At a recent event in London for example, Xero attracted 300 representatives from accounting firms. That's an impressive number by any stretch and compares well to the 100 they got to their first annual customer event a couple of years back.

sage stock price
Sage for its part seems more concerned about financial market reaction. Right now, the stock is trading some 12% below its value in May so one can safely assume the markets have looked at Sage's pricing moves and said; 'meh.' The only question remaining is whether the real market, its customers, will say the same.
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