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Sage Advice

When Microsoft bought Great Plains Software in the US, and Denmark’s Navision, last year, I predicted that Sage, one of the UK’s few software success stories was about to join a growing list of endangered species, leaving me to speculate whether the company would outlive my daughter’s hamster, Eric.

Both Sage and of course Eric are still alive and well and my most recent meeting with Microsoft’s Simon Edwards in the Wimbledon Village Starbucks, convinced me that Sage may survive Eric by a couple of years at least.

There’s no doubt, that Microsoft is serious about its plans for a Web Services business platform on which a host of third-party ‘Biz Apps’ can “Add value”. The best analogy that came into my mind was the Lotus 1-2-3 ‘add-in’ manager in the eighties. Lotus 1-2-3 was of course the de-facto industry standard before Microsoft started experimenting with its own applications and having edited the Lotus buyers guide at the time, I vaguely recall some two hundred or more applications that could be attached to what was after all, ‘The’ PC platform at the time.

Last week, Sage announced pre-tax profits up 14 % to £74.3 million on revenues - up 4% cent to £281.1 million. Bearing in mind that a healthy proportion of Sage’s revenue is service revenue, showing double digit profitability at all in the current economic climate has to be seen as a good result, particularly if the competition on the radar happens to be Microsoft.

Microsoft is however biding its time. Buying Navision and Great Plains Software were only a first step in a bid to dominate the next generation of small business applications and Microsoft, which is reportedly spending $2 billion a year on developing this market, can afford to wait until the time and the technology are right for it to strike. When it does, it will be the software equivalent of parking an aircraft carrier across Sage’s doorstep.

Let’s be honest. The UK software industry is disappearing fast and last year, I was an advisor to a company that tried to sell itself to both Sage and Microsoft. It had undeniably better software than both but that didn’t prevent the company disappearing and being sold for a fraction of its true intellectual property value. Like the light bulb that runs forever or the car that runs on water, there was no place for it and the venture capitalists take one look at the competition and are never seen again.

Sage are rather larger and more successful than most but these two qualities have never been enough to save British companies in the last twenty years. After all, if Microsoft shows an interest in your market, whether it be flight simulation software of accountancy software, the inevitable is only a matter of time, a Hamster’s lifetime even...!


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