Sage, Britain’s biggest software group, provides accounting and payroll software for clients across 20+ countries.
With declining software sales, Sage decided to make the shift to a subscription business model.
The Zuora platform supported Sage’s shift to the Subscription Economy.
Sage has reported improved revenue growth and operating margins as their faster-growing subscription revenues offset a decline in their traditional software sales.
Sage, Britain’s biggest software group providing accounting and payroll software for clients in more than 20 countries, was facing increasing global competition from agile startup businesses that were offering web and cloud-based product solutions.
For 30+ years, Sage had been selling traditional on-premise software licenses and maintenance contracts to small and medium-sized businesses. At 3 million, this customer base was substantial. And, as a £1.4 billion ($1.75bn) revenue company, Sage was obviously a successful business software.
But their traditional business of installing software in the offices of their customers was becoming outdated, as evidenced by a marked decline in traditional software sales.
In response to this decline, Sage developed an ambitious plan to boost growth. At its core, the plan was to shift their conventional, product-centric business to a subscription business model.
“It’s very disruptive to an existing business model to move away from your traditional way of doing things,” says Sage CFO Steve Hare. That’s why it’s so important to have the right system to support the transition and manage the entire order-to-cash lifecycle of a subscription model.
Sage chose Zuora to help support the transition to a subscription model and to bring their business closer to their subscribers. In the years since implementing Zuora, Sage began to see some real traction with rising subscription revenues. According to Stephen Kelly, Chief Executive, the shift to subscriptions is “working, with customers embracing closer relationships with Sage.”
Sage’s 2016 annual report underlines this point, demonstrating a "strong set of results which show that we are performing and transforming the business at the same time,” as Kelly notes.
They improved their quality organic revenue growth in excess of 6% and their recurring revenue growth was 10.4%. Says Kelly, “I'm particularly pleased that we've achieved double digit recurring revenue growth for the first time this decade. This is underpinned by subscription growth of 32% up from 29% in FY15.”
Adds Steve Hare CFO, “The quality of revenue continues to improve with 70% of it now recurring and 28% of it subscription. We now have over a million subscription contracts up from 450,000 two years ago.”
Phase one of the transformation is complete and now Sage is looking ahead. As they continue to bring their business onto subscription models, Zuora will continue to serve as their key strategic partner powering their transformation.
“We’ve achieved double digit recurring revenue growth for the first time this decade.” – Stephen Kelly, Chief Executive of Sage
“The quality of revenue continues to improve with 70% of it now recurring and 28% of it subscription.” – Steve Hare, CFO of Sage