That’s the view of a top Sage partner who vented in the wake of the failure of Sage’s largest partner, MIS Group of Dallas, Texas.
The partner points to shrinking reseller margins and Sage’s failure to keep its MAS90/200 product current. “They are years behind on the 4.x rewrite and have not added any of the market demanded features like multi-bin and multi currency,” says the partner. “Instead they keep claiming how much money they spend (without any progress). In the mean time they are shrinking resellers margin and cutting the reseller maintenance margin. It’s no wonder that MIS group failed when you add obsolete product to a market where new sales are dramatically off. Expect this to play out for more resellers. Sage is totally destroying its reseller channel at an alarming rate.”
The Sage partner says that even Sage employees are worried and acknowledge the problem, but “no one in management does anything to make it better.”
“They do continue to promise to be profitable by cutting reseller margins but that isn’t going to work,” says the partner. “Their coveted maintenance revenue stream is about to constrict it a manner that will cause a large drop in revenue and there won’t be anything they can do about it because their resellers and probably more importantly the end user customers are fed up with Sage’s bullying behavior.”
That “coveted maintenance revenue stream” is under fire from both customers and solution providers. “The VAR has to mostly make money from new license sales and implementations - support alone certainly won't keep the lights on,” says another solution provider in a ChannelWeb Connect post. “But the publisher keeps nearly 100 percent of the highly lucrative ongoing maintenance stream- which is where the fat publisher operating margins come from. When new sales evaporate, the VAR's business model can turn bad in a hurry.”
“I do think that the channel will shift to the subscription model - where the VAR keeps a percentage of ongoing subscription fees forever,” says the partner. “Think about the difference in a VARs business model when you can keep 30 to 50 percent of the ongoing subscription fees of every client you have ever signed up - you'd build a significant ongoing revenue stream, so you could weather a storm like we are having now. Why should only the SAP's, Microsoft's, Oracle's and Sage's get to benefit from ongoing, 90 percent plus margin ongoing revenue streams?” Good question. Sounds to me like a clarion call for a recurring revenue managed services model which begs the question: why aren't more vendors bringing a managed services business model to the channel table?
