The Sage GroupA Strategy for Growth

Paul StobartChief Operating OfficerThe Sage Group December, 2001

The Sage GroupA Strategy for Growth

Paul StobartChief Operating OfficerThe Sage Group December, 2001

The Sage Group Mission

“To be the leading supplier of business management

software and related products and services to the small and

medium-sized business community worldwide”

The Sage Group’s Strategic Principle

“We enable SMEs to automate their business processes and

transactions”

Key Facts

Listed on LSE since 1989– market cap £3.5bn– FTSE 100 member (North-East’s first ever!)

2.8 million customers

30,000 resellers

5,700 employees

Annualised revenues £500m+

Annualised profits before tax £125m+

Market and Product Focus

We will be market leader wherever we operate

We will cover all sectors of the SME market from entry-level to mid-market

We offer integrated business management software solutions

We will help our customers transition to become e-businesses

How We Operate

We combine global reach with local operations, products, and service

We are marketing-led, providing customers with solutions meeting real business needs

We are channel-driven

We deliver excellent customer service

We believe in maximising customer lifetime value via an installed base model

Sage GroupSage Group

2,000

USAUSA

Sage Software,Irvine, CA

Best Software,Tampa, FL

PeachtreeAtlanta, GA

500

Interact US,Phoenix, AZ

Interact EMEA,Slough, UK

Interact Asia-Pac,Melbourne, Aus

Total

5,700

InteractInteract

Ciel, France

Sage, France

Sage KHK, Germany

Sesam,Switzerland

Sage InfologiaPortugal

EuropeEurope

1,500

Employees :-

Sage UK, Newcastle

Sage Enterprise,Winnersh

Accountants, Manchester

Sage Ireland,Dublin

UK and IRLUK and IRL

1,700

Sage now has over 5,000 employees

In Europe, we occupy three main segments of the SME market:

Customer size: Licence cost:Channel:

Line 30/50Instant, Ciel, PC Kauf’n,

1-25 £5m £150-£400 Retail Direct

Line 50, Line 100OfficeLine

£2k-£20k VAR25-100 £50m

Sage Enterprise Suite

Up to £100k VAR100-1000 £250m

Instant, Ciel, PC Kauf’n

Line 100

No of employees0 10 100 500+ 1000+

Line 50

Line 200

Sage Enterprise

Navision

Cegid

Lexware/Quickbooks

“JBOPS”

Systems Union

Exact

Which gives us market coverage

In the US, we occupy the same three segments of the SME

market

Peachtree, DacEasyBusinessWorks

1-25 $5m $70-$2k Retail/ Direct

MAS90Abra, FAS

$5k-20k VAR25-100 $50m

Sage Enterprise Suite

Up to $100k VAR100-1000 $250m

Customer size: Licence cost:Channel:

No of employees0 10 100 500+ 1000+

Sage Enterprise

Sage MAS

Peachtree

Great Plains

Epicor

“JBOPS”

Quickbooks

Which also gives us market coverage

The Overall Market Environment

The US economic environment was gloomy pre 11/9/01, and is worse now– Large corporates and SMEs deferring IT

spend

Danger this slowdown may spread to Europe…..

Stock markets around the world have declined sharply– Investor confidence in IT is low

Our Market Environment

New competitors are emerging in the US– Entry level: Microsoft Money, Oracle

SBS– SME: Intuit, Microsoft ‘Blue’– Mid-market: Microsoft Great Plains

E-business out of favour…..for now

But, increasingly, customers want ‘one-stop-shop’ for their software needs

But Opportunities Abound!

New business opportunities– hundreds of thousands of start-ups every

year– tens of thousands of SMEs with no

accounting software– thousands of companies switching away

from legacy systems

Marketing products to existing customers– increasing penetration of support

contracts– up-selling through the range– cross-selling additional products/modules

E-business is coming of age

In the new ‘new economy’, traditional players will flourish

customers clear on e-business objectives– ROI– streamline business processes– save costs– enhance communication with partners

our task is to build relevant web apps and web services, and continue to evangelise

Web Apps and Web Services

Web Apps are, quite simply, applications running on the web– e-commerce– e-procurement– supply chain management– e-CRM

Web Services are the tools that allow you to transact on the web– authentication and registration– data storage– app to app connectivity

CRM

Front office applications in high demand– 40% of customers to buy CRM in next 12 ms– 80% happy to buy Sage solution

But high degree of cynicism re CRM– costly to deploy– ROI unproven in many cases

Sage Enterprise Front Office Solutions– SalesLogix fully integrated with SES– Quickstart programme guarantees cost-

effective deployment

Key Strategic Issues Facing Sage

1. How do we sustain growth?

2. How do we manage growth?

3. How do we respond to the emergence of new, stronger competitors?

4. What should be the future direction of our technology strategy?

1. Sustaining Growth

Organic growth through:– primary sales growth– upgrading customers through the range– cross-selling additional products/modules

to existing customers

Acquisitions will provide additional growth:– Add-on acquisitions in existing markets– Strategic acquisitions in new markets– Vertical products/markets

2. Managing Growth

Review organisational structures

Communicate business objectives - ensure everyone in the organisation has focus

Identify key performance metrics, and monitor these constantly

Wholesale review of business processes - ensure we are easy to do business with

Be proactive in identifying and implementing best practice across the organisation

3. Responding to Competitors

Continue to invest in our brands and channel

Broaden our product/service offering to reflect ‘business management software’ positioning

Acquire as many customers/bases as possible as quickly as possible - ‘landgrab’

Establish Sage as opinion leader in SME space - the voice of the SME

4. Technology

Develop a comprehensive forward-looking technology strategy– database migration– next generation architecture– Internet technology

Continue to invest in e-business products

Continue to invest in our own e-business infrastructure– hosting centre in Atlanta

Summary

Sage has strength in depth– fast growing, profitable– financially stable - market cap of £3.5bn– international - market leader in UK, Fr, D, US

Genuinely customer-centric

Covers market from entry-level to mid-market

A leading participant in emerging technology

Top ten global software house

Global resources, but very local implementation

The Sage GroupA Strategy for Growth

Paul StobartChief Operating OfficerThe Sage Group December, 2001

The Sage GroupA Strategy for Growth

Paul StobartChief Operating OfficerThe Sage Group December, 2001