Sage boss Stephen Hare pledges to keep tech company on Tyneside
Sage is as much a part of Newcastle as Brown Ale, Stotty Cakes and St James’ Park. An unlikely achievement, perhaps for a software company FTSE100, but of which its boss, Stephen Hare, is extremely proud.
The company, a market leader in technology helping small and medium-sized businesses manage their finances, was founded in 1981 as a spin-out from Newcastle University.
It is probably also famous, however, for supporting the Sage Gateshead Concert Hall, whose gleaming curves adorn the south bank of the Tyne and can seat over 2,000 spectators. Other UK tech companies are threatening to shun the UK, but Hare thinks Tyneside is just as good for tech as Silicon Valley.
Proud: Sage software boss Stephen Hare says the company is ‘rooted’ in Newcastle, where it employs 2,000 people
In London, the City has been riven by controversy over the future home of Cambridge-based Arm, the world’s biggest chip designer. The Japanese Arm owner wants to list its shares on the US Nasdaq market, pushing back the UK.
But Hare, 60, dismisses the implication that Britain is an inferior country for technology. On the contrary, he insists that the Tyneside base is integral to Sage’s success.
“The culture at Sage is amazing. We come from the North East and we are proud of our roots. Our culture is not purely transactional and money-based.
“Heritage matters. Where your roots are matters. In the United States, it is quite common for wealthy individuals to buy a sports franchise and move it elsewhere. I’m a rugby fan, but can you imagine someone trying to move Newcastle United football club to another location?
“It’s a ridiculous concept. Sage is rooted in the same way. We serve small businesses and our customers care about those things. If we uprooted ourselves from the Northeast, it would be experienced as a betrayal. People would see him as motivated by greed. It would be difficult to justify why this was in the interests of customers.
Having started life as a start-up, with a team of Newcastle University students developing software, Sage is now valued at £7 billion. It employs 11,000 people worldwide, including 3,000 in the UK, including 2,000 in Newcastle.
In the UK, 43% of businesses pay their staff through Sage products and a quarter of UK employees – seven million people – are paid through Sage.
But if a wealthy foreign bidder showed up, offering a big price to take over Sage, what would he do?
“If we had an opportunistic approach that significantly undervalued the potential of this business, I would fight very hard.”
“You get informal approaches all the time to test if you’re open to it. When I get them, I just say no.
His software engineers in Newcastle are, he says, “as good as anyone in Silicon Valley,” California’s tech epicenter. “We put our money where our mouth is,” he adds, investing in a range of initiatives across the North East to help young people learn science, technology, engineering and math skills. “There are brilliant people here who somehow don’t realize their potential. We must not abandon them.
He’s too diplomatic to directly criticize Arm’s owner for chilling the UK market, but his position is clear. “I would like to see Arm listed in London.
I would like to see a lot of tech companies listed in London.
He sees no need for Sage – and by extension other software companies such as Arm – to seek a Nasdaq listing. There’s no guarantee of a higher valuation in the United States, he says, citing examples of stocks that have fallen sharply, including exercise bike company Peleton.
It also belies the widely held claim that the United States is less regulated. “This is the country that introduced Sarbanes-Oxley,” he says, referring to the draconian laws introduced to stamp out accounting fraud after the Enron disaster. ‘It may be easier to get your ad. But once you’re signed up, it’s not a bed of roses. Warming to his theme, he said: “We can do whatever we need with a London listing – that’s never a problem. We don’t have a Nasdaq listing and don’t feel the need to.
Hare himself is a Northerner, not a Geordie but a Yorkshireman, born in Withernsea in the old East Riding. Aged six, he moved with his parents to Hong Kong but returned aged 11 to go to boarding school in Pocklington, near York, close to where he currently lives.
After studying economics and accounting at the University of Liverpool, he joined the auditing firm EY before going into industry.
He cut his teeth as chief financial officer of telecommunications company Marconi, which he joined in 2001 just before it became a spectacular victim of the dotcom crash. “It was very difficult, but I learned a lot, which is often found in adversity.”
After several years at the head of his own consulting firm, he became financial director of the industrial company Spectris, then of the engineering company Invensys.
Just before Sage, he worked in private equity for Apax Partners where he “saw with his own eyes how private equity works”.
“They never accept barriers. There are a lot of obstacles and I think people create their own as well.
He does not respond when asked about his personal barriers, but responds obliquely.
“The smarter you are, the more you tend to see others as slowing you down. With super-smart people, they sometimes don’t have the patience to take everyone with them.
He is, he says, “a team player”.
Sage’s relationships with small and medium-sized businesses mean that Hare is ideally placed to gain insight into how they are doing.
He has conducted research, which will be published tomorrow, showing that a new generation of “hardened” entrepreneurs has emerged from the pandemic.
Having survived Covid-19, they have gained self-confidence, but fear inflation, and now no doubt the consequences of Russia’s aggression against Ukraine.
Almost 80% of small and medium-sized businesses in the UK expect to return to pre-pandemic profitability within the next 12 months.
But more than two-thirds are not yet operating normally and a minority of 10%, or 650,000 businesses, are at urgent risk of bankruptcy.
This, in theory, would put 1.1 million jobs at risk – although unemployment is at historic lows and there are a record number of vacancies.
“Where the government can help is to encourage investment in digitalisation. The pandemic has shown how important that is,” he says.
Companies have, adds Hare, “shown incredible resilience throughout the pandemic.” But their confidence cannot be confused with invincibility.
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