Sage opens a charitable Foundation as CEO Stephen Kelly plans for a cloud future

Last month we looked at the new alliance between Salesforce and Sage that's resulted in Sage Life. I commented at the time that the attendance of Salesforce CEO Marc Benioff at the launch event in San Francisco indicated that this relationship clearly had some significance.

Flash forward to today and there’s maybe one additional clue as to why Benioff’s keen on the Sage relationship with the announcement of the Sage Foundation, an analog of the Salesforce Foundation that’s been in place throughout that firm’s lifetime.

Anyone who’s attended a Salesforce gig around the world will have heard the story of the Foundation and the philanthropic pledge to donate 1% of product, equity and time. (You’ll also be familiar then with Benioff’s quip that it was an easy pledge to make when they started as they had no product, no equity and no time!)

Since then of course the Salesforce Foundation has handed out $85 million in grants, delivered up 920,000 volunteer hours by Salesforce staffers and passed on free product to more than 25,000 non-profits and higher education organizations.

More importantly perhaps, it's set an example of other Silicon Valley firms, with Benioff often leveraging his own personal clout to encourage them to make similar gestures and inspire an injection of philanthropy into the corporate DNA.

For its part, the Sage Foundation is taking the 1-1-1 model  and making it 2-2-2 - 2% of the firm’s 14,000 employees time each year (5 days), 2% of free cash flow and 2% of Sage’s products for any charity, social enterprise or non-profit organization. The Sage Foundation will be chaired by Ivan Epstein, CEO of Sage Africa and Asia.

The move’s won approval from some big names. As well as Benioff’s endorsement, Sage CEO Stephen Kelly’s connections from his time in government as UK Chief Operating Officer (COO) may have assisted in winning an endorsement from Martha Lane-Fox, Baroness of Soho and former UK government digital strategist:

The UK has a strong history of businesses giving back and helping to improve social and economic conditions among disadvantaged communities. As the largest UK technology company, it’s fantastic to see Sage not only take up this mantle, but in doing so, set a new global benchmark for corporate philanthropy.

Kelly's eye-to-eye

I’ve known Kelly for longer than I care to remember, dating back to his days as an Oracle sales guy. When we last met it was in his government role, and while we’ve spoken since then on the phone, it was only last week that I managed to sit down with him to get some background on the Sage-Salesforce relationship and his plans for pushing Sage in a new cloud-facing direction.

Kelly joined Sage on 5th November last year, the day after he stepped down as COO of the UK government. (His only regret about the job change was not opting for a 3 month holiday!). On that first day, he met with Sage’s CTO and issued what he calls a ’30 day challenge’:

I said that there’s a huge appetite for change within the company, what’s the answer to that from a technology point of view? I gave him some pointers. I said that it needed to be a cloud platform and that we had to have R&D money going into what customers need. He contacted Salesforce. Historically, we’ve been big into Amazon Web Services. We looked every which way around cloud platforms and it was the CTO who make the call on Force.com last December.

Kelly emphasizes that there are two Salesforce relationships in play here:

There’s the external relationship where we want to give the millennial generation who are used to using consumer technology the same experience at work. That’s resulted in Sage Life.

The other is internal at Sage. We have 21 internal CRM systems form different suppliers. We’d made the decision that we should drink our own champagne and run accounting on our own products. In the US, we’d been using SAP. And on the back of that, we wanted to go Salesforce everywhere for CRM and integrate it with Sage on the back end.

This need to rationalize systems was a by-product of the company’s growth through acquisition. But the world has moved on, argues Kelly and so too has Sage’s business model:

Acquisition growth worked great when countries worked in isolation, pre-internet. In the old model, if we wanted to go into Thailand, we’d have looked around and acquired the biggest company in our space and re-branded it as Sage, then they would have carried on with their own systems and own platform and so on.

Now we’re standardizing more. We’ve set up digital marketing and sales hubs in Atlanta and Dublin that allow us to put whatever language we want through the platform. We don’t have to get the check book out and go into other countries in order to serve them. We can be mightily disruptive. Having a common platform changes the business model of how technology companies work.

It’s also resulted in some uncomfortable discoveries about how Sage has been operating:

We’ve come across moments of madness. In competing countries you’d have Google ad competition, for example. Type in small business in Spain and you’d get Google Ads coming up for South Africa. Historically every country had its own marketing budget. Now we’re aligning the marketing to the global business strategy.

No big bangs

While setting a course for the cloud clearly makes sense, there is the matter of whether Sage’s customers are as ready for this move as Kelly and his team. Sage has 270 different products, largely on-premise. That installed base can’t be forced into a ‘big bang’ switch to the cloud overnight. Kelly concurs:

We want to have a really strong cloud offering, but there will inevitably be a period where the top end of our customers still want to buy on-premise. What we are doing now is going through a product rationalization exercise to see which are growth products.

At the moment, we are defining products by customer segmentation, by revenues, by growth opportunities. We will take some of the products that have flatlined and move them onto heritage status. We’ll update them if there are regulatory changes we need to reflect, but we won’t be making new investment in them beyond that.

We have German customers who think that we’re going way too fast to the cloud. They say, ‘We think we’re on-premise for 10-15 years.’ But they might use something like Salesforce on the front end. I say, “We will be there, but we will also give you a road map to the cloud, but then the decision depends on your business needs.’ So then from a customer point of view, they have that roadmap and they can see how a migration works.

It’s all about trust and ensuring that customers are up-to-date with plans and intentions to keep them on side. Kelly states:

It is really important to us that we have a Customer for Life strategy. We will do things so that we encourage customers to do their own things at the right time for them. We’ll start planning integration tools to help with that and to move on. With QuickBooks Online, when you get to ten employees, you sort of run out of puff. So where do you go then? That’s what we need to help with.

Some enterprise software vendors haven’t made migration easy. We will not be that company that does a forced migration. Our customers are not the Deutsche Banks with their thousands of IT people. Our customers are companies who care about caring about customers, but they’re sitting on a world of fragmented applications.

We can’t be and won’t be disruptive to the business. If customers say one thing about Sage, it’s trust. We will incentivize customers towards migration, but we will not force them. We want to make it financial advantageous to them to move.

But while it’s going to take time, he’s adamant that movement is in the correct direction already:

When we announced our results two weeks ago, the migration towards subscription models was there. It grew 30%. There’s a culture there that’s coming in.

My take

It’s too early to decide whether the ‘new’ Sage is going to achieve everything that it’s set out to do, but it’s difficult not to recognise the ambition that’s being put in place.

Internally, I’m aware that there’s some necessary and long overdue restructuring of how the firm operates and engages with the customers. I’m told from some ‘Sage veterans’ that there is an energy around now that’s been missing for a while.

Externally, much will depend on how successful Sage is in convincing its installed base to embrace the cloud vision in the first instance and then provide the practical support in getting customers to execute on it. It’s a big ask, but an essential one. We’ll watching progress with interest.

Meanwhile, congratulations to Sage on the Foundation and swelling the ranks of champions of compassionate capitalism.