Peachtree 2012 Annual Report Download - page 18

of accounting software customers is a compelling strategic opportunity
and is our measure of progress. Our North American business continued
to demonstrate good momentum with integration, with an 18%* increase
in cross-sell revenue and over 9,700 customers have now adopted
integrated payments.
The benefits of subscription
The third cornerstone of our growth strategy is migrating our customers
to a subscription pricing relationship. Subscription represents a signicant
opportunity to deliver greater value to our customers and to capture the
benets of a more active relationship with our customers. Technology is an
important enabler of this strategy, both as a catalyst for changing the needs
and requirements of our customers and providing us with opportunities to
offer greater features and functionality which will drive adoption. Subscription
pricing is a relatively small part of our business today but to reect its strategic
importance, we have introduced the annualised value of our subscriber base
as a measure to track progress. 2012 is the base year for this measure, with
a value of £80.5m.
The move to subscription pricing reects the evolving nature of our relationship
with our customers and builds on the success we have had in transitioning
customers to premium support. This will continue to be an important feature
of our business model, as evidenced by the proportion of our contracts which
are premium in nature increasing to 71%. This increase was driven by the
success of Sage Business Care in North America and premium support
packages in the UK.
During the year, we have launched a number of subscription pricing options for
selected products across the Group, alongside traditional licence and support
alternatives. In April 2012, we launched subscription pricing options for certain
North American mid-market ERP products. The early evidence of the dual
model approach is in line with the measured adoption we are targeting, with
approximately 20% of sales being made on a subscription basis. Further
subscription pricing options have been launched in North America, Europe
and South Africa. We will continue to develop subscription pricing offerings
for other key products across the Group.
Summary and outlook
We delivered a solid performance in the context of a macro-economic
environment which remained difcult in most of our markets. We achieved
strong growth in recurring revenue and focused on disciplined resource
allocation, protecting margins at the same time as investing for growth. We are
committed to driving strategic change and I am pleased with the momentum
we have established with our growth initiatives.
A feature of the year has been the variable trading performance by geography.
Europe’s performance reected good growth by the UK and Germany, offset
by the impact of weaker markets in France and Spain. North America delivered
the anticipated improvement in the second half of the year while AAMEA
continued to deliver very strong growth.
As we look forward, the global macro-economic outlook remains uncertain and
we are watchful of the environment in Europe, particularly in France. We are
making good progress with our strategy for accelerating growth and remain
condent we will continue to deliver on our strategic and nancial goals.
As we look forward, the global macroeconomic outlook remains fragile and we
remain watchful of the environment in Europe, particularly in France. However,
we remain condent that we will continue to deliver on our strategic and
nancial goals.
our technology, our platforms and our products to capture the trends that are
important to our customers, particularly the move to the cloud and the need
for solutions that fully integrate and support mobility.
Sage One is the focus of our online investment for the start-up and small
business segment. Sage One is a SaaS solution providing online bookkeeping
and business management software to customers. It has been developed on
a global technology platform which can be efciently and effectively tailored
to local market needs. We are satised with the momentum of Sage One in
the UK & Ireland, with over 6,100 paying customers at the year end. We also
launched Sage One in the US. We expect to establish momentum in the US
during 2013 as we further enhance the solution and create the necessary
distribution channels to drive customer adoption. We are also focused on
growing the number of customers in the UK & Ireland as we benet from the
build-out of our channels and by targeting the 5 to 25 employee segment with
a more advanced solution. We are also rolling-out Sage One to more countries,
starting with Germany in early 2013 and to be followed by Canada, Spain and
France. These priorities drive customer adoption which is the key measure of
our success with Sage One.
Hybrid cloud is the focus of our investment for small to medium sized
businesses (“SMB”), providing customers with compelling cost of ownership
whilst retaining the choice of deployment, data control and tailoring their
solution to their specic needs. Our partnership with Microsoft Azure,
announced in May 2012, is a very signicant development in delivering our
hybrid cloud strategy. Building on the Azure platform allows us to speed up
development of customer solutions, accelerate time to market and reduce
duplication. The focus of development started in Europe with Sage 200
“hybrid” in the UK and Sage Murano in Spain which will both be released
to market in 2013. North America is also working closely with Microsoft to
develop a new generation of Sage ERP hybrid cloud products on Azure. The
number of SMB customers adopting hybrid cloud solutions is an important
measure of progress with our technology strategy. The 115 customers reported
for this year’s results principally reect existing customers on SageCRM.com.
We expect to see that number grow as hybrid cloud accounting and ERP
products are released to market during 2013 and beyond.
Sage ERP X3 is the focus of our investment at the mid-market level and
revenue growth of Sage ERP X3 is the key measure of our success with this
segment. We are pleased with the progress of the international roll-out of
Sage ERP X3 which has been a driver of its recent growth, and demonstrates
our capability to develop products which are successful on a global scale.
Sage ERP X3 revenue grew by 5%* in the year, with revenue outside of France
growing by 17%* and now contributing 43% of Sage ERP X3 global revenue.
Notable developments during the year include the launch of a subscription
pricing option in North America and the recent launch of Sage ERP X3 v6.5
featuring integrated payments and other connected services.
We see mobile technology as a particularly compelling opportunity to develop
more active relationships with our customers and to expand the number of our
paying customers. We are evolving our product architecture to capture this
growth opportunity. In October 2012, we launched four of the rst business
apps for Windows 8, namely Sage 50 Accounts Pulse in the UK, Sage eFactura
Online in Spain, Sage Mobile Salary Calculator in Germany and Sage 100
Business Mobile in France. In the UK, we also launched the Sage Record
Keeper app, co-developed with HMRC. North America is also developing
mobile solutions. Working prototypes for two of these, Mobile Sales and
Mobile Service, were showcased at the Sage Summit in July 2012, as
examples of products which expand our addressable market and will be
integrated into our key accounting products and payments.
Payment services represent our largest connected service and our payments
businesses in North America, the UK & Ireland and South Africa continue to
deliver strong revenue growth. Integration of payments to our installed base
Chief Executive’s review continued
* Underlying gures neutralise the impact of foreign exchange movements and exclude amortisation of acquired intangible assets, acquisition-related items and imputed interest
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