Sage’s Silver Linings
Sage is one of the biggest names in business management software. Essential Business Magazine spoke to Keith Fenner, Vice President of Sage Enterprise Africa and Middle East, about the company’s worldwide strategic overhaul and the strategies taking them into a new period of growth.
At Sage, times are changing. CEO Stephen Kelly has promised to “shed the shackles of conservatism” and overhaul the company to compete in the ever-changing tech markets. The latest effort involves a string of mobile accounting apps to let business owners run their books from tablets and mobile devices, a move away from the company’s traditional boxed software releases. Keith Fenner, Vice President of Sage Enterprise Africa and Middle East, is confident about the new regime and its potential impact.
“When Stephen came in, he arrived with a broader outlook: ‘Listen, we need to become ‘One Sage’, therefore we need to put some money on different horses for our overall product strategy with a cloud first philosophy.’ Our previous strategy was to have a few leading products dominating local markets. However, we’re trying to be ahead of the curve in every market in which we operate. For example, we are now developing a world-class industry leading cloud strategy. We are thrilled to announce that we are now fully cloud ready, scaling from start-up, and scale-up to Enterprise segments.”
Cloud computing in Africa has always been a contentious subject. While there’s certainly the capital and huge potential benefits for African businesses in cloud adoption, there’s also a lack of interest, and the on-the-ground reality of limited connectivity and bandwidth holding the technology back. According to Fenner, however, these are increasingly problems of the past, and indeed his organisation has already begun preparing around them.
“We’re seeing a huge shift towards cloud in Africa and Sage is well positioned for this, because the product’s already completely web and mobile capable. It’s a testament to our tech strategy and compliance with the third platform. That strategy is driving us into some new market areas; historically there are not many ERP players in the African market because of the high cost to entry, whereas we’ve been here for over 25 years. All we need to do is release the right product, at the right time, to enable us to win in the market and provide a platform to support our customers for life”.
Sage’s new business model operates in a two-pronged approach to revolutionise business. The first is aimed at what Fenner calls ‘true enterprise customers’, who will be running the software with hundreds of users and typically across multiple regions and countries. This segment has seen some interesting developments over a timescale as short as the last six months, with many more customers simply asking for cloud-based platforms and forgoing the additional infrastructure headache.
“We used to have larger businesses who would just buy the kit, put in the infrastructure and pay for an IT team – but that’s changed now. It’s partly because big CAPEX investment is tough in this climate, so OPEX models have become more attractive. It’s also to do with retaining staff – especially in South Africa, where we’ve got a resource drain into Europe and Australia – but more importantly we’re seeing IT departments becoming service centres responsible for delivering new business strategies. IT teams have essentially become less technical. It’s less about fixing broken printers and more about developing new strategies around ‘how can I deliver the growth this company requires at the cost model they require it to happen at’. They don’t want to worry about the kit, they want to worry about delivering value back into the business.”
This trend speaks to the general improvement in computer literacy across the African market, but also mirrors developments in other regions, including Sage’s native UK. With more and more employees able to fix their own printers, (or Google the problem for the same result) dedicated IT departments are going from trouble shooters to efficiency multipliers. This is already reflected in Sage’s strategy for customer support, not to mention their efforts to acquire new customers, a field in which Fenner is confident about.
“I think we’re very strong with new customer acquisition as well. Our approach is to hand the keys to the castle to our customers: we want them to own and maintain their own products moving forward, giving them the capacity to grow. Other vendors tend to keep teams on site permanently, which drives up the total cost of ownership, and that’s not our strategy. We keep our consulting rates at a mid-market level for all our customers, whether enterprise or not – that is the Sage way.”
Why the cloud?
Although the company has traditionally built software that works offline on premise, and cloud-based software might seem like a poor choice in the face of the endemic connection issues found in many African countries, Fenner believes that looking to the past risks leaving a tech company fundamentally unsuited to the future.
“To take a step back, the way X3 is built is probably the most fundamental point of the strategy. If you look at what’s driving ERP business today, you’ll see billions of dollars going into SMAC – Social, Mobile, Analytics and Cloud. These new platforms are really hard to get into if your business management software isn’t optimised for this new way of working. If you haven’t got the technology ready now, you won’t be in a position to expand with your customers and help them unlock the benefits down the line. Four years ago Sage was already designing our new UIs for these problems, so we’ve already been through the teething issues. We’ve delivered a system that works on any browser, any device (as long as it’s a major supported one) – a system that’s platform independent.”
Sage’s new platform is also heavily designed to work with new analytics systems. Analytics data is the most exciting of the SMAC technologies, with the potential for what Fenner calls “a fourth industrial revolution, the internet of things”. He suggests that even traditional manufacturing can be optimised like software, sensors across the plant feeding data into centralised analytics hubs, which can then be used to modify the manufacturing process for greater efficiency, making full use of the new technology and infrastructure developments, allowing Africa to become better connected. Sage looks set to be very involved when it comes to this buzzword of the moment.
Keeping up with the industry
Part of the reason for Sage’s new global strategy is the rapidly changing nature of both the industry and its user base, each driving the other. Extensive mobile development was perhaps the least predicted aspect of the current tide of change in the industry, with its accompanying decentralisation of the office space. Fenner talks about the challenges of developing for mobile:
“When developing for mobile we took a step back and looked at what our customers really want, all over the world in all the different markets. They want to work online and offline and to build apps using a toolset residing in the ERP solution. We have delivered exactly that, with a core set of mobile applications and then given the toolkit to our customers and our partners. This enables them to build any apps that they want and deploy them any time that they want, online and offline. That’s a huge bonus moving forward because then you’re not buying apps that are custom written, which causes challenges when the software gets upgraded because the apps also need to be upgraded. With Sage X3 embedding mobility in the single web platform, it self-upgrades.”
However, convenience isn’t as simple as upgrading some infrastructure and creating connections. Mr Fenner’s experience of the technology sector, particularly in the African markets, is one where the people are changing as fast as the machines, if not faster. “Now if you’ve ever employed someone born after 1992, you’ll realise that if you put them in a green screen mainframe with function key shortcuts and multiple keystrokes to do something, you’ll quickly lose your talent as that is not the way a millennial works. They believe in touch, mobile and collaboration and they only understand these new ways of working. The real digital natives – they want to work in that way. We designed the architecture of the X3 platform with that in mind, as retaining talent is essential in the competitive marketplace of Africa.”
A second strategy and traditional markets
While the enterprise-focused version of Sage allows full customisation, development and integration, not all customers are looking for such a powerful and versatile system. For many, the sheer customisability of Sage X3 is essentially unnecessary. For these firms priorities are different, and the second prong of Sage’s business strategy caters to them.
“The traditional market is for products between 20 and 50 users, where they probably have a product that they’ve invested in and haven’t changed in the last 5-10 years. They’re probably recruiting millennials and need to make their business competitive and provide a platform the new staff can use. They want all this in the cloud at a low cost and with a contained scope – ERP implementation can spin out of control, and no business can afford that. They want fixed-scope implementation, and we offer that with X3 Fast Start.”
Cost overruns and scope creep are familiar to any business that has embarked on an ERP project, and many of the true mid-market customers can’t afford the high prices or lack of control that comes with a customised solution. Sage X3 Fast Start is a template-led version of the full X3 solution, not a downgrade. As Fenner says, it is essentially the same software, but designed to be rapidly implemented to save on time and installation costs, without the full customisation scope. The product is designed to be deliverable over 20 days, with all its core modules delivered in the cloud, and is pre-configured to the customer’s business environment. Customisation isn’t impossible but is reserved for the end of the project. Indeed Sage’s pricing model has allowed for customer-focused modifications – which is almost always used after the initial go-live. The design is intended to provide customers flexibility and the option to customise without compromising the fixed scope of the project, to ensure overruns aren’t an issue. It’s a strategy that seems to have paid off.
“If you look at Sage’s penetration into the mid- and enterprise market place in Africa, it’s massive in a very short space of time. However, we increasingly see new vendors coming to occupy this space. As a result, what we need to do is to make sure we have a solid customer-for-life strategy, so when we detect these customers, we give them an attractive migration option. We manage this using their OPEX budgets and give them a bullet-proof Business Management Solution and technology platform for the future, to last well beyond five to ten years.”
A question of piracy
Piracy is a problem faced by every software company, and some consider it as almost inevitable. In Africa, digital piracy is quite common, as the costs of buying software are often prohibitive and enforcement weak. Failure to adjust their prices to an African market can often see a business losing much of their revenue. Fenner is relatively relaxed about pirated versions of his company’s software, however.
“If we look out there in Africa today, we’d probably find a lot of Sage products which are unlicensed and not paying maintenance. That’s not pirated software, that’s software that’s not on the latest version and is a major concern. There’s a huge potential with those customers to bring them into the fold of our Customer for Life strategy that would include upselling and cross selling from our portfolio of products per market segment. Have we got unlicensed, unpurchased software in Africa? I’m sure we have. However, as we engage customers and demonstrate value to their business, we will bring them back.”
The hope is that that some of these unlicensed users will eventually end up purchasing and licensing the software due to the benefits of the cloud, or to take advantage of actual support now that their business has grown to the point where the software is affordable.
“That said, I think there were two things in Africa that were holding back growth in the IT industry – the concept of security and last-mile connectivity. The security side of it is becoming less of an issue thanks to the cloud and last mile connectivity is prevalent across the continent in major hubs.”
Thriving in adversity
It’s safe to assume that the nature of Sage’s business, both in terms of their multinational reach and their position in the markets, insulates them from many of the macro challenges of operating in African economies. The challenges of commodity prices, political instability and currency devaluations doesn’t mean that they simply ride out the downturns, they strategically prepare for them.
“Let’s take the oil crisis,” says Fenner. “When it hit we did not cut back. Instead, we went and sold to many oil companies in a very short space of time. Every cloud has a silver lining for us, and because we span the market from bottom to top, we pick up the growing customers because they’re still covered by our Customer for Life strategy. In such a crisis, some companies won’t buy, but bigger ones will probably want to save costs and those are the ones we pick up and sell to as they move to a Tier 2 strategy, either replacing Tier 1 ERP or complimenting it – like we did with Aramco.”
Sage’s flexibility as a business means that they can easily respond to the many opportunities across the continent, but that’s not the only secret to their success. Although headquartered in the UK, it has been careful to establish a local presence and work to gain trust based on actions rather than reputation.
“We’ve been here for 25 years and we understand Africa. Not just that, but with our offices in Lagos, Nairobi, Johannesburg, Cape Town and established Partners all over the continent, we’ve got a trust factor. Everyone knows who Sage is, we’ve been here for so long. In addition, we have the Sage French and Portuguese teams, with export divisions that service French and Portuguese-speaking Africa, breaking the language barrier. So if you add up the power of the actual Sage businesses in Africa, it’s absolutely vast, and that’s what I believe we’re capitalising on now, as well as the fact that we’re literally delivering an enterprise product with a technology stack, and a cloud first strategy that is second to none.”
A bright outlook
“Sage’s focus in 2017 is the execution of its cloud strategy,” Fenner continues. “Sage X3 is delivered cloud first but the on premise and cloud versions are the same – we have not split the products as the technology allows us to offer monthly updates in the Cloud and deliver these to our on premise and Enterprise cloud customers once or twice a year to minimise upgrade disruption. And what I’ve described to you is exactly how we’re going to do that in Africa. We’ve got 70-odd partners, still selling the same product but it’s spun up in the cloud. They still consult the same way, and we’ve retrained them on how to deliver the in the cloud and transition themselves to a Partner of the Future.”
Sage is also now working with Amazon Web Services, which boasts incredible processing power (NASA have chosen to use its services), and a couple of smaller local services offering better connectivity across Africa. 4G networks are also in place too – many African countries jumped the whole fixed line straight to 4G. The mobility aspect is vital to Sage because it represents the way people are working today.
Fenner concludes on a positive note, with the New Year looking promising: “I’m confident in the work we’ve done in the last four years in cloud development, and you can see that we grew by 74% last year, so we’re outperforming the market, gaining share and looking at high double-digit growth in the next five years.”