11,500 paying subscriptionsᵝ (H1 2012: 2,450) for Sage One, our SaaS solution for start-up and small businesses, a four-fold increase in the last 12 months; accelerated roll-out of SageOne to new markets, with Germany launched in March 2013 and Spain and France launching in May and June 2013. For SMB businesses, Sage is on track for the commercial launch of cloud enabled versions of ERP products, Sage 200 in the UK and Sage Murano in Spain.
SageOne is now localized for five countries: UK, Ireland, USA, Germany and Ireland. The top line 11,500 number looks impressive but there are some points to note:
- Sage is in a distant fourth position in the SME accounting market, albeit growing very rapidly. Details of the top three can be found here. We would have to further discount for payroll for reasons set out below but that figure is unknown. The company's CFO says that the average revenue per user er month is £8.50 which is well below that achieved by Xero, the revenue leader in the UK.
- This counts all customers from all territories, so we don't know the extent of growth in any one market although the company is understood to be strongest in the UK by some distance.
- SageOne is both a book-keeping and a payroll solution. We suspect that it has achieved the most traction in payroll rather than number crunching. This is derived from the fact that in the detailed statements. the company said:
The business capitalised on the opportunity offered by the implementation of Real Time Information (“ RTI”) , which relates to a change in the way businesses must file their payroll data with Her Majesty’s Revenue and Customs, resulting in particularly strong growth in Sage 50 Payroll and training.
- While you might argue 'But Sage 50 Payroll isn't the same as SageOne,' we point to the fact Sage has been making a lot of noise about RTI on its SageOne media properties. They don't do that for no reason.
- At September 2012, SageOne counted 6,190 paying customers. That means they have grown that segment 85 percent in six months. Not at all shabby. However, we need another pit stop check at 30th September to determine whether the momentum was temporary or sustained.
- Regardless of the plaudits that Sage can take to itself for achieving solid growth, that business unit must be costing the company a fortune in support - they offer included telephone support as well as email - and they are marketing this solution for all its worth. All in I would be very surprised if it is remotely close to break even. Even so, the company has no choice but to continue investing now that it has established a beach head.
Overall, it is hard to tell from these numbers where Sage is seeing the best opportunities. I have long argued that Sage's presence in the SaaS accounting market is important but assuming the company achieves respectable growth in the coming half year then it would be useful for them to break out the geographical distribution. That is because the key US market is where we will get to understand the degree of opportunity.