Photography by Julian Dodd

Sage CEO Stephen Kelly is on a mission to make some noise

THE MT INTERVIEW: There'll be no more hiding of Sage's light under a bushel, says the accounts software outfit's high-energy boss.

by Andrew Saunders
Last Updated: 10 Jun 2016

If you want to make a statement, there are few better places to hang out your shingle than The Shard, the biggest and blingiest of the capital's many new skyscraping megastructures. And sure enough it is here that Sage's London office is to be found, looking out across the Thames to the financial powerhouse of the City.

It may seem an unlikely spot for a quietly spoken software firm specialising in SME accounts packages and firmly rooted in the north-east (its HQ remains in Newcastle). But Sage's boss, Stephen Kelly, is on a mission to get the firm, the largest of only two tech stocks in the FTSE 100, noticed. 'We have twice the revenues of a company like ARM,' he says, pointedly referencing the other, rather better known, one. 'We employ 2,000 engineers and 54% of UK businesses pay their wages with Sage products. We're market leaders in France, South Africa, Ireland, Canada and Spain as well as the UK. But we have underpunched our weight, we are the UK's best kept tech secret.'

And so Kelly, who despite being born in Folkestone, has spent much of his career in the brasher culture of the US, thinks it's time for Sage - purveyor of accounting and payroll software to three million or so SMEs globally - to stand tall and make a bit more noise. So last August it moved into The Shard, albeit 'only' on the 17th of 72 habitable floors. Kelly splits his time between there, Newcastle and foreign trips. 'We're like the people we serve, entrepreneurs who work their socks off building their businesses. They just get on with it and you hardly ever hear from them.'

Stephen Kelly at Sage’s office in The Shard. Photography by Julian Dodd

But how to do it? Sage's products may be invaluable to its customers - from restaurants to retailers, accountants to wholesalers - but glamorous it isn't. Nor does the fact that it's also a global top 10 supplier of Enterprise Resource Planning systems, alongside the likes of Oracle and SAP, add much in the way of showbiz. In a world where the public think tech is Apple, Uber and Facebook, grabbing a bigger piece of the PR action is always going to be an uphill struggle.

So Kelly - whose eclectic career has embraced everything from multinational megacorps to West Coast start-ups and even a stint as COO of the UK Government - is hitting the campaign trail to drum up interest. Sage is going to 'raise the voice of small businesses', campaigning on the issues that they don't have time to and boosting its own rep in the process. 'These guys are the heroes of the economy, creating jobs and prosperity. They deserve a higher profile and we can help them get it.'

It may not be the most original strategy, but it plays not only to Sage's undoubted strength in the SME market but also to Kelly's personal talents. He is persuasive and possessed of Duracell-bunny levels of energy and enthusiasm. His LinkedIn page (an official Power Profile no less - one of the most viewed in the tech sector) is littered with testimonials to ceaseless endeavour and a penchant for punishing early morning gym sessions. 'If motivation, energy and a near suicidal desire to turn projects around is what you want, then look no further' goes one.

The 14,000 followers for his @SKellyCEO Twitter account (he's one of the FTSE's most followed bosses) will also help get the word out to SMEs that they have a new champion. Take business rates. Yes, the chancellor has just exempted 600,000 of the smallest UK firms in his latest budget, but there's more to do he reckons. 'A property-based tax invented in the 16th century is not fit for the digital age in 2016. There are 5.4 million businesses out there who don't have a voice, they don't do any lobbying, but they are not only subsidising the likes of Amazon (via the rates system), they are also paying them commission for using them as a distribution channel. You couldn't make that up.'

Sage itself is now very far from being a small business, it operates in 23 countries and employs getting on for 13,500 people. In 2015 - Kelly's first full year in charge - it made sales of £1.44bn, up 10% on 2014, although profits were broadly flat at £276m. His earnings for the same period were around £1.5m, a pretty middle of the road stipend by FTSE 100 standards.

He's committed to maintain 6% annual sales growth, 28% margins and to keep paying a rising divi. Not bad, but tech stocks need to produce generous double digit annual growth if they are going to wow the City.

It's been slow to capitalise on the massive expansion of the cloud - a big problem not least because Sage's older desktop systems don't lend themselves as readily to bundling-in lucrative extra online services. Nor have its cautious clients been as keen to go web-only with something critical like payroll as they might be for CRM or email applications. In comparison with more digital-forward rivals like Intuit and Quicken, which earn around 50% of their revenues from add-ons, Sage remains heavily reliant on its core accounts packages.

'When I joined, everyone told me it took five years to develop a new product. So we did the latest product - SageLive - in 15 months, just to show it could be done.'

That's the kind of agility needed to cope with a brave new world where customers will increasingly want to access their accounts, HR and forecasting systems on the go, he says. 'Entrepreneurs will be running their businesses from the palms of their hands in future, whether they are on the train, in the office, or down at the gym. Just as consumers' lives have been changed through technology, that will now happen to small businesses.'

In essence, he wants to combine the solid virtues of Sage (dependable, expert, customer focused) with the rocket-fuelled performance of his Silicon Valley heroes like Tesla and SpaceX boss Elon Musk - or closer to home, Salesforce's evangelical founder and CEO Marc Benioff.

The pair have signed a strategic partnership to bundle Salesforce's CRM and Sage's accounts together on a cloud-based platform, and now Kelly wants to borrow some of its razzmatazz too. (Salesforce outspends Sage massively on marketing and its $6.6bn revenues dwarf the Brit firm's.) Inspired by its 'Dreamforce' high-octane customer events - at which upwards of 150,000 Benioff disciples have been known to congregate - he's launched his own version, Sage Summit.

Seven thousand punters attended the inaugural shindig last year in New Orleans, which the company dubbed the largest entrepreneurs' event in the world. They were treated to appearances by General Colin Powell, YouTube founder Chad Hurley and even actress Jane Seymour, not to mention a closing concert by Walk The Moon.

At this year's do in rather better connected Chicago, he's expecting to welcome nearly three times as many 'Sage enthusiasts'. 'We used to do separate events for each country with different content, very federated. But the issues are the same - the same things keep US and French entrepreneurs awake at night.'

Of course, all this hoopla doesn't come cheap and the flipside is much more careful attention to back office costs. 'When we did the accounts we had to consolidate 105 management databases, and this year 19% of our revenues went on G&A - that's admin costs to run the business (around 10% is the usual corporate benchmark). Every point of that cost is about £14m. So if we can take it down even 1% that's £14m more to invest.'

The first outsider to get the top job at Sage, Kelly is keen to prove that the firm's ingrained low-key culture can be upgraded, even if there's some pain involved. No fewer than 40 out of the firm's top 100 managers have been, as he puts it, 'transitioned' - 24 new hires and the rest promoted internally. He's also launched the Sage Foundation, a charity which encourages employees to pledge up to 2% of their working time to good causes, backed by donations of 2% of free cash flow from the company.

He describes himself without irony as 'innately optimistic', 'blessed' and 'lucky'. Coupled with the transatlantic drawl, slicked back hair and gleaming white smile, it could all get a bit wearing - except that it clearly isn't fakery, it's just who he is.

He also has an engagingly down to earth side, perhaps a result of childhood upheavals. He comes from an unassuming background - his parents ran a tea shop and coffee trading business in Folkestone, and his school friends typically ended up as postmen and railway clerks, he says. They were modestly but comfortably off. 'But then in my teenage years my dad became ill. It was a meltdown. My mum had to run everything, we had to downsize the house, my sister's horse-riding lessons had to stop and we all had to go out and get jobs. I did a paper round, labouring, worked in Sainsbury's, sold ice creams on Folkestone seafront.

'It was a seismic time for us. The value of hard work was embedded in me, that there is no free lunch and that the only way to create something special is through hard graft.'

He went on to study business administration at Bath ('probably only one in three from my school went to university. The idea of Oxbridge was a fantasy world') before starting his career at ICL. He then spent nine years at Oracle, whose tone - set by the hard-charging founder Larry Ellison - suited Kelly down to the ground.

He left to join Chordiant, a tiny West Coast start-up, just in time for the dotcom rollercoaster ride. 'That was my first public company CEO gig. We went from $0-$100m in four years. It was great but the company went through the whole boom and bust thing. One week the NASDAQ was at 5,000, the next it was 800.'

In 2006, he returned to the UK to rescue another small business, Micro Focus International, after a disastrous IPO. Then he made his most abrupt change of direction yet and joined Her Majesty's Government in 2012 as COO.

It was a risky move - as his boss at the time, the then cabinet secretary Francis Maude points out, the corridors of power have proved to be the undoing of many big private sector beasts over the years. 'It is very difficult for business leaders to move into the public sector, and the list of people who have done it successfully is a short one. The culture of the civil service in particular can be hostile and many do not want outsiders to succeed.'

But the slick tech exec won the sceptical Sir Humphreys over - or enough of them to do the job at any rate. How come? 'Stephen is a proper and committed leader, he gives himself entirely to it and engenders enormous loyalty. He's also a brilliant salesman and a compelling personality,' says Maude.

Kelly is clearly proud of his stint, and of having boosted the cause of his beloved SMEs while he was at it. 'The government spends about £40bn a year on goods and services. In 2010, only 6% of that was going to SMEs, by the end of the parliament it was 25%. From £2.6bn to £11bn - and those businesses are all located here, creating UK jobs and paying UK taxes.'

Now he lives in Esher with his wife of nearly 30 years, Siobhan, their three daughters, aged 22, 19 and 16, and a Norfolk Terrier. 'I'm not very good at relaxing but I love family time. As fathers, we're here to create memories. Amazing holidays, incredible birthday and Christmas parties - that's what they really remember.'

Thanks to that glitzy Shard office and the Sage Summits, his professional legacy will probably also include a few good parties. But will he also be remembered as the author of the biggest and fastest turnaround in Sage's history?

If hard work, determination and relentless enthusiasm can do it, then Kelly must be in with a fighting chance. 'The thing about me is,' he says, 'that if somebody tells me that something is impossible, I'm all ears.'


To put Sage on the marketing map without alienating its core base of loyal local businesses.

To unite the firm's many disparate units and territories, without weighing them down with corporate bureaucracy.

To go properly global, without losing sight of its roots in the north-east.


1962: Born in Folkestone, Kent. Local state school, degree in business administration at University of Bath

1988: Joins Oracle shortly after its IPO. Becomes director, EMEA Alliances

1997: Chordiant, head of international operations, then COO and CEO

2006: Returns to the UK as CEO, Micro Focus International

2012: COO, Her Majesty's Government

2014: (November) CEO, The Sage Group

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