Sage warns partners who resist the cloud business model - you're irrelevant
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UK MD of Sage, Alan Laing, announces a new Partner Programme will be available in October. Says on-premise centric models don’t have much of a future.
Sage Summit kicked off in London this week with a firm warning to the software giant’s partners in attendance. While Sage is making deliberate and strategic moves to bring its partners along with it on the journey to becoming a ‘pure cloud’ business - it made clear that partners who don’t adapt to the subscription model, will be rendered irrelevant in the near future.
I’ve written about Sage’s ongoing strategy to shift its customer base to the public cloud, with the launch of a new range of products, and via partnerships with the likes of Salesforce, AWS and Microsoft.
I’ve previously described this as a careful balancing act for Sage - one where it needs to keep its lucrative on premises business customer happy, while taking new business straight to the cloud, all while keeping investors on side.
To date, Sage’s efforts have been successful as measured by the stock price. Since CEO Stephen Kelly's appointment was announced in November 2014, Sage's share price has risen by a shade over 60%. You can read more about the Sage strategy here - where I put success down to consolidating product lines, opening up to working with other vendors and investing in R&D.
However, one central component to the strategy includes working with partners, through the launch of its new Partner Programme - which was announced over a year ago. For Sage to see long-term success in the cloud, it needs to cultivate a partner ecosystem that pushes its products into both small business and the enterprise (scale) and develops on its recently launched Marketplace.
At Sage’s annual US event in Chicago last year, Sage acknowledged that its business partners were less than impressed with the company's development efforts. In short, Sage was struggling to provide partners with innovation capable of materially boosting sales.
On stage, Sage UK MD Alan Laing said Sage now has more than one million customers in the cloud and to assure partners that they are “central” to what it does today and “central” to what it wants to do tomorrow. He said:
Having met many of you over the past year or so, the one question that I get asked repeatedly, more than any other, is how will partners play a role in the future of Sage’s business? No ifs, not buts, we truly love partners. You’re a crucial part of our business.
The Partner Programme
As mentioned above, the Partner Programme was announced over a year ago, but has yet to see the light of day. Laing said today that it would be made available in October and it would be central to partner growth. He said:
We want partnering with us to be a rewarding experience for you. So we are reimagining the Sage Partner Programme by introducing a new partner community - a hub - for all of our partners, to help you grow your business with us.
You’ll be able to manage your leads and your opportunities, access your business plan, and have full access to Sage product education, all in one place. We will continue to develop our Marketplace, where you can promote your solutions. And a marketing development fund, MDF, will be introduced, so that you can co-market solutions and attract new customers and leads together.
So I’m delighted to announce, and I know I’ve been talking about this for two years, that the Sage partner programme will finally launch in the UK - fully ready to go to market - in October of this year. It’s been a huge piece of work for us, but it’s going to help.
Laing said that the Partner Programme is going to be a “complete revamp” of how Sage goes to market, with the focus on creating assets that help partners to become more competitive.
Some of the key points on the Partner Programme website that highlight how Sage intends to incentivise partners to focus on the cloud include:
- Marketing development funds (MDF) for top tiers
- A referral scheme, designed to reward partners who decide to bring business opportunities linked to the Sage Global Cloud Products, to Sage Customer Business Centers (CBCs)
- Access to Sage Partner Portal where you can find sales, marketing and technical resources to manage and develop your sales
- Access to Sage Marketplace for ISVs and Developers
- Training plans and certifications for staff through a digital platform
Laing added:
What we want to do is drive our partners to be incentivised to find new business, to find new customers. Everything we are doing inside, we want to do with partners and we want to create the right environment for them.
The reason that it has been delayed, is purely that we need to build our internal systems so that our partners can work with us effectively and they get the results they’re expecting. Our platform, on Salesforce, will be ready for our partners in October. It’s simplification, meaning that the partners won’t have to spend so much time and resources transacting with us, but they can do it seamlessly using technology.
Tough talk
Off the stage and during a press Q&A, Laing was a bit more hard talking about the importance of partners transitioning to cloud business models. He said that he wants the partners to “embrace it faster” and that if you’re a traditional reseller (read: on premise), then the “business model needs to adapt to the world of subscription. He said:
It needs to adapt to continually monitoring the customer’s use to ensure that that customer stays with you. Some of that are finding that challenging.
Now, I have to say this bluntly, but a lot of them won’t make that journey because they don’t want to adapt or can’t adapt. But that’s the irrelevance point. Sure you can stay where you are and you will have a very nice revenue stream, and we will continue to support your products. But the reality is to grow your businesses, you’re going to have to adapt to that world.
Laing went further and implied that those partners that think there is still a healthy, growing business in simply selling on a vendor’s software will struggle in the future. He believes that the key for partners that make the transition to subscription will be in adding value via integrations with other products and companies. Laing said:
The challenge they face is time to revenue. So if they had $100,000 or $50,000, or whatever, and then suddenly it goes to a much smaller percentage, they’ve got a challenge to pay their people. So it’s a volume game.
If you are a vanilla reseller out there, doing nothing else but passing through a technology from a vendor, I don’t think you’ve got a very long business plan ahead of you. That’s the reality. You need added value services, you need to be adding something, you need to be integrating something from one of the ISVs or from another partner. The relationship of customer - partner - vendor has gone. The relationships have become very complex, there are multiple partners in the sales cycle, and they’re trying to provide a single solution and that’s the way of the world.
Joining Laing during the Q&A was Nick Goode, Sage EVP, Product Management, who expanded on this point and gave examples of how partners could integrate with e-commerce solutions, branded as Sage, and sell them on to partners. He said:
If you look at Sage X3, this is a truly enterprise solution and one we are backing heavily. If you add to that, either XM Symphony, Tangerine, they’re partners that have add-on solutions to Sage X3. So, for example, one of our partners could go and sell Sage X3 plus XM Symphony, which we have rebranded as Sage, that increases the size of that deal significantly.
The other trend we are seeing is moving up the scale in terms of enterprise deals. If you go to Salesforce, it’s all subscription and they’ve got an army of partners around the world, and they’ve got huge enterprise customers. Another thing that’s helping us is those partners want to go on the journey of taking them and us further into the enterprise - it’s a big opportunity.
My take
It’s clear from the tone of conversations that some of Sage’s partners aren’t playing ball with the company’s new approach to software. And while Sage appears willing to guide and help those partners that want to transition to the cloud and larger enterprise deals, it is also willing to be firm with those that are resisting.
Laing and Goode spoke about fostering the next generation of partners that are growing with their subscription models and putting incentives in place (such as the marketing development fund). However, growing a successful ecosystem isn’t quick or easy. Time will tell whether this strategy works to the benefit of everyone - including customers.