UK companies have complained about the tactics used by Sage, the UK’s largest publicly traded technology company, to force them to accept more expensive subscription services or turn off access to existing accounting software packages. increase.
Small businesses across the UK use Sage50 software from FTSE 100 companies to help with bookkeeping, sending invoices, processing orders and paying taxes.
However, in recent months, Sage has urged customers who used to sell single-pay long-term licenses of its software to switch to monthly subscriptions, which will be more expensive in the long run, and discontinued the licenses for security reasons. I said I would turn it off. There is a reason, even though there is no specific reason for doing so in the terms and conditions.
Kate Burton, owner of model railroad company Reeves 2000, said in January 2019 it last upgraded its so-called perpetual package to a license that it expected would be valid for 15 years.
Barton is currently facing a monthly payment of £155 on a subscription model. “It’s the big picture of the situation where we’re forced to subscribe to everything,” she said. “It’s pretty scary.”
Under the leadership of CEO Steve Hare, Sage’s focus on subscription software forms part of its plan to achieve more regular recurring revenue. This reduces vulnerability to income shocks that can result from over-reliance on new customers making one-off purchases. .
The business’s cloud revenues will grow 24% in 2022 from £1.02 billion to £1.26 billion, making up the majority of the company’s annual revenue of almost £2 billion.
Small businesses that have become dependent on Sage’s software have complained to the FT that the switch to monthly subscriptions was just a way to increase the cost of the package — Sage has made this claim. I deny it.
Perpetual licenses are valid for 15 years, as stipulated in Sage’s terms and conditions. But when Sage announced that he would stop accessing the software by September 30, many customers upgraded to monthly subscriptions to avoid the risk of losing access to their data.
Sage said there is “nothing specific in the T&C” that allows disabling software for customers with years of license left. But the company said it was doing so for security reasons to “protect consumer data,” adding that “because it no longer sells perpetual plans, a small number of customers will be affected unless they move to a subscription product.” It would,” he added.
Billy Davis, who runs Birmingham Mailing Case, a manufacturer of corrugated tubes, paid £815 for a Sage50 perpetual license in 2014 and upgraded in January 2017 for another £460.
But in April, Sage informed him that by September 30th, he would be shutting down his software because the security protocols by which Sage checks users’ licenses were out of date.
Davies said he felt compelled to accept a monthly payment of £90 in a subscription model, but said, “. to £50,000, “these additional costs could have been avoided,” he said.
Monthly subscriptions offer additional benefits such as maintenance and training webinars, Sage says. But eight companies, speaking to the FT, said they don’t need these cloud capabilities. “Double-entry bookkeeping hasn’t changed much in hundreds of years,” said one client.
Some users are looking for ways to avoid upgrades, such as disconnecting their desktops from the internet, while others are looking at other providers. But the challenge of transferring historical accounting data to another system means many business owners feel they have little choice but to stick with Sage.
“I feel bullied into upgrading to the cloud,” says Ian Nelson, owner of accounting business VFM direct2U, which manages accounts for multiple companies that have upgraded.
Sage says: We also advised them on what actions to take and how we could support them. ”
Cloud-based subscription software brings smoother revenue streams and reduces the support businesses need to provide to customers with older desktop products. This model matches Sage with other competitors such as his Xero and QuickBooks, which offer subscription-only options to customers.
Dan Risdale, Head of Technology, Edison Investment Research, said: “Analysts were prepared to allow for a more volatile perpetual model and lack of predictability. Now the city expects it.”
As a sign of Sage’s determination to grow its cloud user base, it offered holdouts a significant discount on free subscriptions for up to a year. Burton was offered a refund for the 2019 package and he was offered a one-year free subscription. One customer said they sent him a bottle of wine when Sage’s customer service team agreed to his six-month discount.
“Every time they called, there were slightly better offers.
Sage declined to acknowledge that increasing recurring revenue was the purpose of phasing out software, saying it was “not material” to the business, but shareholders could see an 8% increase in the stock price since Sept. 30. supported by
One Sage-affected customer and private investor said it was Sage’s ‘my way or the highway’ tactic, despite being a “strong weapon.” . . I chose them. I am also a shareholder and the funny thing is their stock has gone up since they did this. The fact remains that I do not believe this is good business practice. ”