Sage Group Plc has joined the crusade to haul small businesses onto the internet, and launched a free web-hosting service and portal site as the centrepiece of a strategy to convert its two million customers into electronic traders. The UK company announced its internet plan together with half-year results which saw operating profit climb 57% to 37.8m pounds ($61.2m), on revenue up 49% to 132.5m pounds ($214.7m). Earnings per share increased 40% to 20 cents ($0.33).
Sage has built its business around supplying packaged accounts software to small and medium-sized (SME) business, most of which employ fewer than 100 staff. The company believes SME internet awareness is growing but whereas, in the UK for instance, 35% of its 200,000 SME customers currently have internet access, only 3% have a web site. Sage’s plan, according Paul Stobbart, the company’s international business manager, is to migrate customers quickly, easily and affordably onto the internet, while positioning itself to derive increased revenue from customers as it scales up its internet activities to full blown e-commerce.
With IBM Global Services itself pursuing an aggressive e-commerce for SME strategy, Sage will offer its packaged software customers free web-hosting, including the construction of a basic six or seven page shop-front occupying up to 15Mb of disk space, with management and unlimited free email bundled in. Once equipped with a smallbusiness@www.sagehost.com address, customers will then be encouraged to access further products from the sage.com portal site, which will offer free access to services such as parcel tracking application supplied by Parcel Force, a UK courier service, an online credit checker from Dun & Bradstreet, a postal code tracker from the UK Post Office. Other paid-for services are in development, and will include products from third party suppliers, as well as Sage’s internet-enhanced packages.
Sage is treating the initial UK roll out of its internet services, hosted by Planet (ISP to the Dixons FreeServe service) as a pilot for global roll out that will commence later this year in Germany, where the company is negotiating an internet service provider deal with Deutsche Telekom’s T-Online. The company believes that Germany, where only 5% of its 250,000 customers have a web site, is another open market for an SME internet service, as is France (400,000 customers, with 5% web site penetration) and its biggest market, the US (1.1 million customers, 18% web site penetration). Local ISP and supplementary web service providers will be acquired for each national market. However, IBM GS will provide the basic web site construction and ongoing development consultancy on a global base, Sage said.
According to Stobbart Sage, which already derives more than 50% of revenue from services rather than license sales, sees its internet offering as a natural evolution of our customer orientation. But he says the company has no idea what the likely impact on revenue will be or the likely customer take-up. In some respects the company is only offering its customers the same capabilities it has always put in its products, but delivered via a different media. We see the internet as an extended order service module, said Stobbart.
The company declined to say how much has been spent on the strategy so far, but Stobbart claimed that while in the short term it will be a cost to us, in the fairly short-term we will be able to charge for services delivered. We will ensure that those services are profitable, he said.
