Paul Stobart isn’t getting much sleep these days. It’s nothing to do with rumblings of a distant assault on the UK accounting software market by Microsoft. Nor is the £70m cost of Sage’s new headquarters preying on his mind. No, the cause of his insomnia is closer to home – the arrival of twin daughters just a month ago.
Stobart may be burning the candle at both ends, but it’s done little to dampen his enthusiasm for the challenges facing the company where he has been UK and Eire managing director for almost two years.
The technology darling of the FTSE100 – and currently the only IT company in that exclusive group – is, Stobart admits, at something of a crossroads in its 22-year history. The move into the company’s new purpose-built headquarters in Newcastle last June marked something of a turning point in its development.
From a small software start-up in 1983, the company has evolved into a multinational business with offices in 18 countries, employing more than 8,000 worldwide and generating revenues of more than £600m. After a two-year wait, the company finally moved into the offices in Newcastle Great Park, a state-of-the-art complex set in 26 acres, and the city’s largest-ever homes, leisure and business development.
‘The building emerges from what is currently an empty site – it’s like a space ship,’ Stobart enthuses. ‘It has a huge atrium with coffee shops, a gym and two restaurants. We were always short of meeting rooms and now we have 55 of them, but they’re hardly ever used because people prefer to meet in the coffee bars.’
The open-plan approach has been very powerful in changing the culture of the organisation. ‘Prior to this, we were spread out over 10 buildings and all the different departments were working in isolation. We didn’t realise how much we missed out. There’s no substitute for face to face. I think it will have an impact on productivity and the bottom line, but it definitely has an impact on the sense of community.’
It also marks a significant change from the way things were under his predecessor Graham Wylie, although Stobart is incredibly considered when passing comment, and for obvious reasons. Multi-millionaire Wylie, who co-founded Sage when still a Newcastle student and made well over £100m when he left the company in 2003, was a hard act to follow.
‘When I took on the job as managing director of Sage UK and Eire, Graham said I had to do it my way. He had a very hands-on management style, but we’re now at a size where I can’t know everyone. There are 2,000 staff in the UK and Ireland – so we need flat structures and we have a much more consultative management style.’
The change in structure is, Stobart believes, fundamental to Sage’s ongoing success as the battle for market share and the quest for continued expansion hots up. Sage is a formidable player in the accounting software market, but as rivals continue to steal a march on the company’s successes, responding to new opportunities and building on the company’s impressive customer referral record is, Stobart says, an absolute priority.
‘One of the first things I did was to take a deep breath and encourage the organisation to review our strategy. We needed a clearer view of where we wanted to go. I encouraged everyone to come up with ideas, and we devoted a lot of time in search of our new future.’
For Stobart, Sage’s main advantage over the competition hinges on its customer services record. ‘More than 46% of new business comes from word of mouth – whether it’s in chambers of commerce or on the golf course. It’s clear that we need to do everything we can to make our customers recommend us. Customer service is a given but we’ve rethought every customer touch point in the business, from credit control to support, to be fair and sympathetic without being soft.’
But drumming home your company’s core values to all staff is, Stobart admits, a significant challenge. ‘We had a series of vision roll-out events over the summer and for the first time in Sage’s history we closed down the call centre, so everyone could go through the process to understand the concept of customer recommendation. It took effort and time but it’s already bearing fruit.’
If the last review of financial and business software from the ICAEW’s IT faculty is anything to go by, the strategy has worked. Sage Instant Accounting received the highest overall rating of all the products surveyed, and a staggering 94% of Line 50 customers said they would recommend the product to others.
Stobart, understandably, is pleased with the results, not least because he claims to field calls from irate customers directly. ‘Customers are flabbergasted that I take their calls, but if they ask to be put through to me, I get their messages. It’s a good benchmark for how we’re doing – I used to get six a week, and now I get one a month. The way you manage complaints is very important. People who complain feel passionate. If you can redress the wrong quickly, you can turn that person into someone disproportionately positive.’
There’s still work to be done, however. Usability is something that, Stobart says, can always be improved. ‘We have a concerted plan this year to enhance the look and feel of all of our products. They need to be as intuitive as possible, but not using technology for the sake of it.’
Getting existing customers to recommend Sage products has also prompted the decision to set up business units focusing on specific vertical markets, a model already in use by other, albeit larger, business software companies. The project kicked off in October with manufacturing, construction and retail. Business services, not-for-profit and distribution and logistics are set to follow.
‘It’s about how we sell the products, speaking the same language as customers and customising products to meet their needs. Not having a vertical focus made our offering one dimensional. We’ve had the products for some time, but didn’t market them and the domain knowledge of our people.’
Stobart is well placed to take the company forward, having worked across a number of diverse roles. He graduated in law from Oxford and admits he hated it, although he did manage to pick up an Oxford blue for golf, much to the disgust of his tutor. ‘My tutor said to me: “You’ve read golf and played at law.” I’m clearly in the wrong job now – I’m hardly ever on the golf course,’ he jokes.
After university, he followed in his father’s footsteps and trained as an accountant with what was then Price Waterhouse. But the experience failed to inspire him. ‘Auditing was a great training ground and I liked Price Waterhouse, but I loathed the job. It taught me a sense of order, integrity, logic and how to make sense of numbers in a business context.
Similarly, a move to merchant bank Hill Samuel wasn’t enough to motivate him. ‘I didn’t like corporate finance. I was sent to New York to run the marketing operation to win mandates. I was a yuppie earning too much money. Then I made the seismic move to join Interbrand. The company was turning over £5m. I bought some equity in the company and joined as FD.’
Stobart is the first to admit he didn’t do a great job as finance director. ‘I could apply myself, but I didn’t have a passion for finance. I wanted to pitch for business. Very quickly the team realised that I would be better deployed in the front office.’
In fact, his claim to fame at Interbrand was being responsible for the team that named the Ford Mondeo. When the car was launched, an article in a car magazine featured a picture of Stobart and the headline ‘Stobart: Mondeo man’, a nickname he claims has stuck.
It was also while at Interbrand that Stobart had his first encounter with Sage, working as a consultant on a corporate identity project for the software company. ‘I loved the company so much I decided to join,’ he says.
Mondeo man continues to indulge in his passion for corporate identity projects. Sage recently paid £6m for the rights in perpetuity to the name of the Sage Gateshead, a £70m music centre on the banks of the river Tyne.
Having worked at Sage since 1996 in a number of roles including business development director and COO, he’s confident that he’s doing a better job at the UK helm of Sage. ‘The critical element of any MD-ship – and I’m not sure you can learn this – is judgement and common sense. It’s about using judgement to put people in the right positions and not to over-promote.’
Not that he always gets it right. ‘The thing I enjoy least is having to tell people when they fail. Often it’s because of poor judgement on my part, but I suspect my reports would say I’m fair and I tell it how it is. People want to know if they’re doing the wrong thing – with me they get the good, the bad and the ugly.’
SEEING OFF THE COMPETITION
With more than 500,000 customers around the world, Sage has good reason to be bullish. But the news that Microsoft is preparing to offer a version of Office that includes small business accounting software has certainly upped the stakes in the battle for market dominance.
Microsoft’s challenge is slated to ship in the US in the next six to 12 months, with a UK version to follow soon afterwards. The move into the small and mid-market for business software will pitch it head-to-head with Sage and Intuit, the UK and US market leaders respectively.
Microsoft’s assault on the UK accounting software market may be little more than ‘vapourware’, but that’s not preventing Paul Stobart from taking the issue incredibly seriously – and he intends to pull out all the stops to protect Sage’s patch.
‘Microsoft used to be a partner when we were an independent software vendor and now it’s a competitor. It is there to upset and damage Sage, so we have to take every step to counter that,’ he says.
But there is nothing like a serious competitive threat to focus the mind. Stobart won’t admit it directly, but the prospect of Microsoft going head-to-head for business has been a driving force behind a series of initiatives to prevent its already substantial customer base from defecting.
‘Customer service is fundamental to who we want to be and it’s a great differentiator between Microsoft,’ Stobart explains.
‘We have 500,000 customers using Sage. If we can serve them brilliantly then we’ll win. The market for accounting software is fairly mature, so for Microsoft to win, it’ll have to dislodge us and that’s going to be very difficult.’
He also believes that Sage’s local approach to software, and the fact products are developed by local engineers specifically for local markets, offers a huge advantage.
‘Microsoft will build its software in the US, but the way people process transactions and their terminology is different.
‘How can you cope with all those legal and fiscal changes from Redmond?’
The jury’s still out on the true impact of Microsoft’s planned attack, but one thing’s for sure – Stobart certainly isn’t going to take this one lying down.