November 27, 2011 9:57 pm

Technology groups build on local skills

From the back room of a printing company near the River Tyne to a FTSE 100 company valued at £3.5bn ($5.4bn) with 6.3m customers globally and operations in 24 countries worldwide, Sage, founded in Newcastle 30 years ago, is the holy grail of indigenous company growth.

Named after one of the herbs featured on a poster in the local pub, the business software company was the brainchild of a printer, a scientist and a computer student at a time when personal computers and their software were in their infancy.

The development and embedding of computing and software as the heartbeat of corporate existence has grown in tandem with Sage. In the UK, the company has 830,000 customers, including one-third of the FTSE 100. One in four UK employees is paid using its software and Sage itself employs 13,500 globally.

The three-and-a-half inch floppy discs, CPM operating system and MS-DOS – which employee number five Nigel Platt, still with Sage as a business development manager, fondly recalls – are now heritage items.

A local example of the speed of change is this month’s announcement that Sunderland is to become the first UK city with a council-run cloud computing environment. Sunderland is also poised to become Britain’s first city offering wall-to-wall superfast broadband coverage.

Sage now employs 1,613 people, out of its UK 2,300 total, at imposing premises on the edge of Newcastle.

As Brendan Flattery, Sage UK and Ireland chief executive, puts it: “By building a global British business success in Newcastle, we are testimony to the fantastic skills base that exists in the region and we’ve proved that budding entrepreneurs in the north east can make a success of it.”

He insists the appointment of Guy Berruyer, a Frenchman who now lives in London, as chief executive, succeeding Newcastle-based Paul Walker, has not diluted directors’ commitment to Sage’s home city.

One of its big contributions locally has been the raft of businesses set up by entrepreneurial former employees, including Graham Wylie, the one-time computer student among the three founders. Directly, Sage’s £50m-plus annual Newcastle payroll and its local spending of more than £10m on goods and services are extremely important. The prestige of having a homegrown FTSE 100 company matters too.

Sage’s directors insist it has retained the thirst for innovation, coupled with commitment to customer service, which it needs to prosper for another 30 years. David Clayton, director of strategy and corporate development, foresees a dramatic shift to selling services and outputs. Ten years from now, he predicts, “I don’t think we will be selling software”.

Zoo Digital, based in Sheffield, another northern city with strong technology activity, has already moved to the “software as a service” model. The Aim-traded business helps automate processes in the creative industries and works with several film studios and music companies including Walt Disney, Universal, Apple and EMI.

Although Zoo has 70 administrators and salespeople in the US, its R&D will remain in Sheffield. It has just hired five new staff, bringing numbers there to 38.

Wandisco, a Silicon Valley start-up, has done the journey in reverse. It now employs 40 in Sheffield, more than the 30 it has in California. The company’s Subversion software allows staff across the world to collaborate on projects in a secure environment and has 5m users.

David Richards, its British founder, is expanding the Sheffield team, citing its low-cost base and availability of labour. He hopes to float on Aim rather than Nasdaq next year.

The cluster of Yorkshire technology groups has spawned successors. Ian Harris, of Search Laboratory, is an example. He worked at BigWord, a Leeds online translation business, and spotted an opportunity to help companies market themselves internationally by using words that would cause Google and other search engines to drive traffic to them.

The company, founded in 2005, now works with clients around the world, has more than 50 staff and turns over £4m annually.

Mr Harris said: “The lights are bright in Leeds for technology. There is no need to head to London.”

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