Facing challenges, the venerable midmarket vendor beheads its North American operations.
Posted Oct 11, 2007
The Sage Group, the British parent of Sage Software, today announced the preliminary results for its fiscal year ending September 30. Substandard performance by the North American division has led the company to opt for a change in leadership: Ron Verni, chief executive officer of Sage Software, and Jim Eckstaedt, its CFO, were dismissed.
"Following a review of its North American business, the Board has concluded that a change in leadership is required to realise the full potential of this business," The Sage Group said in a statement. "With immediate effect, Ron Verni (CEO, North America) and Jim Eckstaedt (Chief Financial Officer, North America) have left the business. Mr. Verni has also resigned as a director of the Sage Board."
The remaining North American senior management will report to Paul Walker, Sage Group's chief executive, until such time as a replacement can be found for the North America CEO position. Andrew Griffith, group director of treasury and mergers & acquisitions, will be acting CFO, North America, effective immediately. The search is already underway for a new CEO and CFO, according to the company.
Sage cited disappointing financial performance as the reason for the departures of Verni and Eckstaedt. While preliminary results showed revenue of GBP 508 million ($1.03 billion) and earnings before interest, tax, and amortization (EBITA) of GBP 100 million ($203 million), the EBITA margin was only 19.7 percent and organic growth only 4 percent, both the lowest of any Sage operational division, according to David Bradshaw, principal analyst at Ovum. "We should not be surprised that Sage has taken drastic steps when results continue to be disappointing, especially after some of the exchanges when it announced its interim results in May and the 5 percent fall in share price," Bradshaw said in a statement.
Despite that, Bradshaw noted that there were certain challenges inherent to the unit and the overall North American market. Rising stock prices for software companies have made corporate acquisitions impractical for Sage, forcing the company to rely more on organic growth--the area where the unit fell short, he said.
"Sage also faces far stronger competition in the U.S. than in most other markets," Bradshaw continued. "In particular, we see Microsoft Dynamics competing ever more strongly at the top end of Sage's market. SAP is also re-doubling its efforts here," he said, referring to the German company's recent announcement of Business ByDesign, a midmarket challenger for Sage SalesLogix.
Verni, according to a biography no longer available on the Sage corporate Web site, joined Peachtree Software as president in 1996, and led that company's integration into its U.K. parent company, The Sage Group, in 1999. He became chief executive for Sage's combined U.S. operations in October 2000, and led the division through four major acquisitions in four years, and through a name change from Best Software to Sage Software.
A 2002 Sage press release regarding Verni's appointment to the Sage Group's board praised him and his team for "improved branding, sales incentives and customer analysis," and for "expanding Sage's industry-specific offer." But in the end, it seems, the corporate view shifted. "With the wisdom of hindsight, the disappointing results made it inevitable that Sage had to make a management change," Bradshaw concluded. "But one has to ask to what extent it was the now departed North American management's fault, or simply their misfortune at being in the wrong place at the wrong time."
The 2005 Influential Leaders
Since becoming CEO of Sage Group's North America operations in October 2000, Ron Verni has presided over a number of high-profile acquisitions, including SalesLogix, ACT!, and ACCPAC.
Feature: The 2007 Market Awards: Midmarket Suite CRM
Perennial entrant Sage Software is named a Leader, though with the usual analyst ding about too many product offerings in one space.
Feature: The 2007 Market Awards: Small Business Suite CRM
A midmarket and SMB staple, Sage Software is named One to Watch; its big challenge is to bring a more unified message to the market.
Sage Delivers Insight on Changes [May 2007]
Insight '07: The company's annual partner and customer convention kicks off with talk of the future, growing from recently announced structural shifts.
Sage Makes Commitments to Customers and Partners [May 2006]
Insight '06: The company reveals a score of new applications, and renews its allegiance to the channel that supports it.
Best Software Yields Sage Insights [May 2005]
Insight '05: The company announces at its annual partner conference new initiatives and a name change to signal alignment with its international brand.
Wise Move: Sage Software Undergoes a Restructuring [May 2007]
The CRM vendor realigns its corporate foundation to create two new divisions that will better serve their customers' needs.
Sage's New Global Strategy [Oct. 2005]
Restructuring Sage's CRM delivery strategy is part of an ongoing effort to rebrand and unify Sage's SMB products.
Sage Taps Experience to Lead Its Midmarket Segment [Aug. 2005]
Elvin Monteleone returns to manage the company's ongoing rebranding drive, but the reseller-only delivery model may stymie efforts.
Best Software Unveils Triple-Barrel Midmarket CRM Strategy [June 2004]
ACCPAC CRM to take on the hosted market; SalesLogix is refreshed.
Best's Road Ahead, After its ACCPAC Acquisition [March 2004]
Analysts sound off on what The Sage Group needs to focus on after completing today's acquisition.
|Learn more about the companies mentioned in this article in the destinationCRM Buyer's Guide:
Sage Software's latest CRM shift promises one step up in mobility and another toward integration.
SalesLogix version 7.5 offers extended Web access and customization features.
Sage Summit '08: Keynotes reveal inaugural customer awards and encourage customers to fight through the recession like champions.
Sage Summit '08: Sage CRM General Manager David van Toor fields questions on social CRM, the recession, and collaborative communities.
Sage Insights '10: Company executives convey Sage's commitment to customer experience and to uniting the brand's business solutions.
Sage Insights '10: After months of readying partners, Sage announces the June availability of SalesLogix for the Cloud.