The Sage Group Business Information, Profile, and History

Company Perspectives:

At Sage, we see our business as helping small and medium-sized businesses to automate their business processes and transactions. Our origins are in accounting and payroll software, but today we offer a broad range of integrated business applications, including e-business solutions, CRM (customer relationship management) software, human resource management solutions and time recording and billing products.

History of The Sage Group

Within 20 years The Sage Group plc has grown from its humble roots in the northeast of England to become the world's largest supplier of mainstream personal computer accounting software for small and medium-sized businesses, with more than 2.5 million customers around the globe.

Established in 1981 in Newcastle-upon-Tyne, the company has grown rapidly through business expansion and an aggressive program of acquisitions. The group's companies are market leaders in the United Kingdom, France, Germany, and Portugal, and its products are market leaders in the United States.

Sage started out when David Goldman joined forces with Graham Wylie to begin creating and selling accounting software programs in Newcastle at the dawn of the personal computer age. Goldman, who was born in Sunderland in 1937, took articles in accountancy after leaving school at the age of 16. In 1963 he joined a printing company, Campbell Graphics, and quickly rose to the position of managing director.

With computers becoming increasingly available and affordable in the early 1980s, Goldman became interested in the emerging microcomputer industry. He wanted to computerize the estimating, job costing, and invoicing work of his printing business. In 1981 he linked up with Paul Muller, a visiting American lecturer at nearby Newcastle University, to investigate the idea.

Graham Wylie wrote the first Sage accounting program, to run on the Intertec Super Brain machines with the CP/M operating system, while still a student at the University. Using a government grant, Goldman helped Wylie to develop the program for his printing business.

Goldman, Wylie, Muller, and Phil Lever, a partner in Campbell Graphics, saw the potential for selling the software and hardware to other businesses. They formed a new company, Sage Systems, for that purpose. During the next two years, Goldman and Wylie traveled the United Kingdom demonstrating and selling the integrated systems to customers in the print industry.

This fledgling business was taking up more and more of Goldman's time. So, with the British printing industry in massive upheaval, he decided to close Campbell Graphics and concentrate on Sage. The print industry system was sold off and, with Wylie taking the technical lead, the company used the proceeds to develop a new financial accounting system for small businesses.

The company continued developing and updating the accounting program, making versions to run on the MS-DOS operating system first released on the IBM personal computer in 1981. Sage also began to develop a network of resellers across Britain and built up sales of the software package to about 30 copies a month.

Business Takes Off in 1984

It was in 1984 that the business really took off when Sage took advantage of the launch of Amstrad's PCW computer/word processor. Using the CP/M operating system, this was the first real mass-market machine that made ownership of a computer feasible for small businesses and the home.

The PCW proved to be very popular. Goldman recognized and seized the business opportunity it presented. He pushed Sage to quickly repackage and relaunch its accounting software, and the company formalized and expanded its reseller network. Sales soon leaped up to 300 copies a month, and driven by Goldman's marketing savvy, had reached about 6,000 copies a month by the beginning of 1986.

Over the next three years the steady growth of Sage under the guidance of CEO Goldman continued. By 1989 the company employed 50 people, annual turnover had risen to £9 million and profits were £2 million. In December of that year, Sage was floated on the London Stock Exchange with a market capitalization of £21 million.

Expansion Through Acquisition Begins in 1991

At this time, Sage embarked on an aggressive strategy of expansion to strengthen its position as market leader. It acquired a number of leading software companies in Britain and overseas, beginning with the purchase in May 1991 of a 95.1 percent stake in the American company DacEasy for $18 million. Like Sage, the Dallas, Texas-based company produced low-cost accounting software for smaller businesses. The acquisition opened up markets and distribution outlets outside Britain—most importantly in the United States—for Sage software products.

In 1992 Sage acquired two more overseas companies: Ciel in France, which produced "entry level" accounting software for small firms, and Dallas-based TeleMagic, which produced programs for sales support, contact management, and other business activities. At the end of that year, Sage acquired British company Dataform.

Sage was continuing to perform well, despite the global recession of the early 1990s. In 1993 the company recorded an operating profit in the U.K. of £5 million, up 18 percent on the previous year. DacEasy, the main U.S. subsidiary, recorded a 100 percent increase in operating profit to £1.4 million.

Paul Walker was appointed chief executive officer of the company in 1994. He had joined Sage a decade earlier and took the post of finance director in 1987, overseeing the flotation two years later. Goldman became company chairman.

Walker oversaw a significant increase in the pace of acquisitions, with 14 companies being acquired by Sage between 1994 and 2000. In 1994 Sage acquired Multisoft Financial Systems in the U.K., Timeslips Inc in the USA—producer of the industry standard software for time tracking and reporting and billing—which became the Time division, and Saari in France. Another French company, Sybel Informatique, was brought into the fold the following year.

Sage took a short break from acquisitions in 1996, then continued the next year by snapping up KHK, Germany's largest single vendor of PC accounting software, and Carpe Diem in the United States. In early 1998, Sage took over State of the Art, a California-based company producing PC software for mid-sized companies, for $263 million, and so gained an important strategic presence in the U.S. market. Two smaller British companies that made software products for accountants, PACS Holdings and PASE, were also bought that year.

Conversion to The Sage Group Brand in 1997

Sage was working hard to integrate all of these acquired companies and their products into its business, and in 1997 decided to rebrand all of its operations around the world and rename itself The Sage Group. Described by the company as its "most important development," this strategy enabled Sage to present itself as a truly international organization, with a name recognized by customers around the world. From this point, all promotion and marketing emphasized the "security and reassurance associated with buying from a company with international credibility" that research had shown was desired by the small and medium-sized businesses that were Sage's customers.

The Sage Group brand embraced the Multisoft operation in the U.K., which was merged into the Sagesoft subsidiary that had Graham Wylie at the helm as managing director, and was launched in France and Germany in 1997. State of the Art in the U.S. was renamed Sage Software Inc. in 1998.

David Goldman retired in 1997, having used his marketing skills, entrepreneurial flair, and strategic vision to lead the company to the point of being a major force in the accountancy and business software industry in Britain, Europe, and the United States. He had seen The Sage Group adopted as the company's global brand, and profits rise to £37.6 million, up 25 percent from 1996, from a turnover of £152.1 million. Michael Jackson, who had been a member of the board of directors since 1984, replaced Goldman as chairman. Another retiree that year was Tom Maxfield, who had been the U.K. sales director since 1984. David Goldman died in 1999.

The next major acquisition by Sage, completed early in 1999, was the takeover of Peachtree Software, based in Atlanta, Georgia, for $145 million. This company gave the group a huge haul of one million customers, providing Sage with a strong presence in the U.S. market for entry-level accounting software for small businesses. Peachtree products complimented the products of the Sage Software subsidiary, which were aimed at larger customers.

Another acquisition in Britain followed within two months. Tetra International brought Sage a range of products suitable for mid-sized customers, further expanding the group's customer base. This company was renamed Sage Enterprise Solutions, and repositioned to provide wide-ranging business support software systems. The purchase in late 1999 of Infologia gave Sage a presence in Portugal.

Internet Strategy Launched in 1999

By this time Sage was clearly dominant in the market for accountancy software for small and medium-sized businesses in the U.K., France, Germany, and the U.S., and the rapid rise of e-commerce was in full force.

Sage recognized that its customers would want products to help them implement e-commerce. In May 1999 Sage announced the Internet strategy that was to become a core element of its business operations. The group formed a partnership with IBM. Sage's CEO, Paul Walker, told the press the objective was to get all of the group's two million customers hooked up to the Web.

A portal site, www.sage.com, was launched, making a range of products and services accessible to business customers on line, and Sage embarked on a process of integrating IBM e-commerce tools into its products. It also made tools available to customers to create their own web sites free of charge—WebSiteCreator—and sell their products on the web—WebTrader. An acquisition tied to this strategy was French company Ubiquis, bought early in 2000, which provided small businesses with web trading tools.

Chairman Michael Jackson declared in the 1999 annual company report: "Our ambition is to become a leading marketer of on-line products and services to the small to medium-sized business community."

The Internet and e-business strategy, recently acquired businesses, and the high demand from customers for Year 2000 compliant software, helped generate a huge surge in turnover and profits. Figures for 1999 showed the group's turnover had increased by 60 percent to £307 million, and pretax profits had grown by 56 percent to £74.3 million. The Sage Group entered the prestigious FTSE 100 share index in September 1999, and enjoyed the accolade of Britain's best performing share price of the 1990s after rising an amazing 28,000 percent over the decade.

In early 2000 Sage substantially expanded its presence in the United States with the acquisition of Reston, Virginia-based Best Software, for $445 million. This added asset management software, including human resources and payroll programs for mid-sized companies, to Sage's modular and integrated range of products.

Sage took a hold in Switzerland in 2000 with the purchase of Sesam, the country's leading supplier of accounting software. Two British companies providing software to accountancy firms, Hartley International and CSM, were added to the Sage family, and within months, another U.K. firm, Adaptus Software, was bought.

The acquisition in May 2000 of Apex Software, which supplied software packages to accountants, gave Sage a strong presence in Ireland. This was followed later in the year by the purchase of another Irish company, Computer Resources, which produced payroll software.

A major initiative introduced at this time to continue driving the Internet strategy was the Sage Developer Program. This program provided external developers with access to the same knowledge base of development data as the group's own researchers and engineers, and enabled them to create complimentary tools and products.

In Britain the group also started building a network of 500 Sage Solutions Centers, providing support, implementation, and training to small and medium-sized businesses that were buying Sage products. Since 1998, the Sage Accountants Club had been offering support and benefits to the important community of professional customers, encouraging them not only to use Sage products themselves, but also to recommend the products to their clients.

In the spring of 2000, the high-tech industry, particularly in the United States where much of the group's expansion had been focused, was hit by a sudden downturn, with many e-commerce companies going out of business and stock prices sinking. However, Sage, which had grown to 5,000 employees around the world, was well placed to weather the storm of these difficult trading conditions, which also included a drop in software sales in the wake of the very high demand for Y2K products, thanks to its solid base of customers and its wide portfolio of products and services.

Through its ongoing acquisitions, Sage had steadily diversified over the course of 20 years from being an unglamorous provider of accountancy software products, to become an international powerhouse in the business software industry. The group's extensive range of products for small and medium-sized businesses offered accounting, payroll, forecasting, job-costing, and personnel management tools. The newer Internet software packages enabled smaller firms to build web sites and trade on line, and offered larger firms more comprehensive e-business tools, including on line catalogues and payment systems. Sage also offered a variety of tools for accountants, including tax management and time management products.

The group's figures for 2000 showed the pace of growth had slowed slightly, but was still strong. Sage's operating profit was up by 40 percent to £111.9 million, from turnover of £412.2 million, which had increased by 34 percent from the previous year.

Chairman Michael Walker said in the annual report, "Our commitment to developing relevant e-business products and services for the SME [small and medium enterprises] market is as strong as ever and, despite the challenging market environment, we invested heavily during the year in the development, marketing and support of our e-business products and services. This investment, we believe, is to the long term benefit of the Group."

As he made clear, Sage had its sights firmly set on continuing its success into the first decade of the 21^st century. Through a number of communications efforts, including a £6 million series of 500 seminars across Britain in partnership with companies including Cisco Systems and Compaq, it was taking a strong lead in bringing smaller businesses into the new age of e-commerce.

It was also working on a long-term objective of providing customers with a comprehensive range of business management products and services. To this end, acquisitions continued on both sides of the Atlantic.

Early in 2001, a small British firm, TAS Software, was snapped up. This was quickly followed by the $263 million purchase of Interact Commerce, based in Scottsdale, Arizona. A leading player in the U.S. market for customer relationship management programs targeted at small and medium-sized businesses, Interact gave Sage a strong presence in one of the fastest growing sectors of the business software market.

This purchase increased Sage's invaluable group of registered customers around the world to 2.7 million. While the high-tech industry was still struggling and the group was not immune to the difficulties, Sage's interim 2001 figures showed continued growth. In the six months ending March 31, pretax profits were up 10 percent to £59.3 million, from a turnover of up 13 percent to £229.6 million, supporting the assertions of Sage's senior management team that the group has a bright future.

Principal Subsidiaries:Sage Software Ltd.; Sage Enterprise Solutions; Apex Software Systems Ltd. (Ireland); Sage Software Inc. (USA); Sage US Holdings Inc. (USA); Peachtree Software Inc. (USA); Best Software Inc. (USA); Ciel SA (France); Sage France; Ubiquis SA (France); Sage KHG Software Gmbh & Co. KG (Germany); Softinc Ltd. (Switzerland); Interact Commerce Corporation (USA).

Principal Divisions:Sage Software; Sage Enterprise; Ciel (France); Sage France; Sage KHK (Germany); Sage Spain; Sage Infologia (Portugal), Sesam (Switzerland); Sage Software Inc. (USA); Peachtree Software Inc. (USA); Best Software Inc. (USA); Best Canada; Time Division (USA); Sage Canada; Sage Middle East (UAE); Sage International Asia Pacific (Singapore).

Principal Competitors:Intuit; Lawson Software; Cyborg Systems; Oracle; The Ultimate Software Group; FrontRange Solutions; salesforce.com; Siebel Systems; Epicore Software.

Chronology

• Key Dates:
• 1981: Sage Systems established in Newcastle-upon-Tyne, U.K.
• 1984: Launch of Sage software for Amstrad PCW word processor.
• 1989: Sage Group plc floats on the London Stock Exchange.
• 1991: DacEasy in the USA is acquired.
• 1992: Telemagic (USA), Ciel (France), and Dataform (UK) are acquired.
• 1994: Paul Walker is appointed chief executive of Sage Group.
• 1994: Multisoft (UK), Timeslips (USA), and Saari (France) are acquired.
• 1995: Sybel (France) is acquired.
• 1997: KHK (Germany) and Prosoft (USA) are acquired.
• 1997: The Sage Group brand is adopted and launched in France and Germany.
• 1997: Joint founder David Goldman retires and Michael Jackson becomes chairman.
• 1998: State of the Art (USA), PACS (UK), and PASE (UK) are acquired.
• 1999: Sage enters the FTSE 100.
• 1999: Peachtree (USA), Taxsoft (UK), Tetra (UK), and Infologia (Portugal) are acquired.
• 1999: E-commerce strategy is launched.
• 2000: Best Software (USA), Hartley (UK), CSM (UK), and Apex Software (Ireland) are acquired.
• 2001: TAS Software (UK) and Interact Commerce (USA) are acquired.