By Tim Ferguson, 28 April 2009 17:34
COMMENT
Sage chief executive Paul Walker talks to silicon.com about the software company's tactics in the recession, its approach to cloud computing and what happens when the Facebook generation turns entrepreneur.
Paul Walker has been chief executive of Newcastle-based business management software company Sage since 1994. He joined as an accountant three years after the company was founded in 1984, rising to finance director in 1987.
With 5.8 million customers, annual revenue of nearly £1.3bn and as a member of the FTSE 100, Sage is, along with Autonomy, one of the success stories of the UK software industry.
In an exclusive interview with silicon.com, Walker discusses how the company is facing the economic downturn, what he thinks of cloud computing and how he hopes Sage can make an impact in developing markets.
silicon.com: How is Sage placed to weather the economic downturn?
Paul Walker:I suppose compared to a lot of consumer-led or heavy manufacturing businesses, one of the great things about our model is that the support revenues - that are well over of our half of our business - continue to be pretty stable in this economic climate. Obviously selling new licences and new systems is more difficult - although probably arguably not as difficult as if you're in the very big corporate end where IT spend has been frozen.
How has the recession impacted the small business sector?
I think the higher up you go, the more you see people saying 'we'll stick with what we've got'. Obviously the number of companies starting off or [buying] software for the first time, that market is very, very small at the moment because a lot people aren't starting businesses - or indeed I should say history tells us from previous recessions that as you start to [come] out of a recession, you see a lot of small business formation which is very important for our small business products. So the trend normally is to see a lot of new businesses formed as you come out of a recession.
New business formations are a big stimulus for Sage as and when you start to come out of a recession. If you look back to the early 1990s you saw a lot of new business formation as we came out of the recession then. And to some extent it's part of the dynamics of any economy that people lose their jobs, people who've been in business start to look for other options, particularly if their businesses have gone bust - a lot of entrepreneurs see this as an opportunity.
What are your short term objectives for Sage?
Clearly maintaining our margin, maintaining our very strong cash flow - we've got a very strong balance sheet - are all part of our objectives. I think making sure we provide outstanding support to SMEs in this type of climate is also a big objective. Back office finance is more critical in a recession in terms of the information it provides. So alongside support, looking to provide new reporting tools, better ways of looking at your business information, analysing data is also part of our objectives over the next year.
Having said that, we're still continuing to invest in the business in putting new functionality, new technology into our products, starting to anticipate when we'll see more businesses wanting to go the cloud computing/software-as-a-service route. So we are still investing in the business.
What impact is cloud computing having on the company?
In the back office accounting area, business solutions, we're seeing very small, slow growth in terms of demand [for cloud computing]. We have a number of products that meet that demand that so far is relatively modest. Our view is that new businesses coming into the market, particularly people who are used to Facebook, used to the web world, as they start businesses they will clearly think more about online solutions and so our job is to make sure we've got products for that set of people who want to go down that route.
And so we think if you look at the dynamics of new businesses coming in
For more from this interview, click here for page two
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