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Strategy-flinging No 10 civil servant Stephen Kelly turns Sage CEO

Gadfly chief gets six-year lock-in

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A top government civil servant is trading control of the nation’s IT for leadership of Sage Group, the giant accounting software firm that turns over £1.32bn a year.

Stephen Kelly is stepping down as UK government chief operating officer to become chief executive of the accounting software firm in November.

Kelly will succeed Sage incumbent Guy Berruyer, who announced his intention to retire in May.

Kelly joined the Cabinet Office in 2011 and rose to COO in 2012, working under Francis Maude – and was reportedly one of the MP’s best friends. He leaves as next year's general election looms – with a change of political leadership possible.

Maude’s signature policy has been G-Cloud, an IT supplier’s catalogue intended to favour small and mid-sized firms and cut reliance on big vendors, which is lauded abroad but under-used at home.

During his time at the heart of government Kelly was credited with negotiating new IT contracts worth millions of pounds with the likes of Microsoft, Oracle and SAP and being an advocate of the Government’s Digital Service (GDS). He spun out the 400-strong MyCSP civil service pension body, turning it into a mutual joint venture.

He also led the next generation shared services plan in 2012, to consolidate a number of shared services centres (SSC) to five run by private and public sector organisations.

However, a Ministry of Justice SSC bombed, costing the tax-payer £56m in the process. The project is currently being outsourced to Steria, the firm that botched an ERP roll-out designed to run the service in-house.

Arguably, the mission at Sage is just as big as re-organising the government’s supplier relationships. Sage is synonymous with accounting software for SMBs, but this business is at tremendous risk.

The question for Kelly is whether he can integrate Sage’s product operations, siloed by geography thanks to the company’s various merges and purchases.

He must also see off competitors such as traditional rival Intuit and more cloud-based purebloods like Xero and NetSuite, which are all taking business from Sage.

He has form in this regard; Kelly served as CEO of MicroFocus International between 2006 and 2009, where he bought Borland Software and Compuware’s application testing products in 2009 for $75m and $80m, to diversify out of the legacy COBOL core.

He helped turn MicroFocus' revenue from £140m to £450m.

Kelly was considered so integral to MicroFocus’ revitalisation that when he left suddenly in late 2009 just three-years ito a turn around plan the company’s share price tumbled. He left for personal reasons but washed up in early 2010 at No 10.

To prevent a possible repeat, Sage is locking their man in for at least six years.

Kelly will pocket an annual salary from his new employer of of £790,000; plus he’ll receive a “one-off” stock allocation award worth £987,500 over a six-year vesting period.

Before MicroFocus, Kelly was CEO of CRM vendor Chordiant from 1997 to 2006 and before that a director of vertical market solutions with Oracle for nine years.

Sage chairman Donald Brydon in a statement said Kelly brought “exceptional leadership skills combined with a passion for customers and a track record of driving growth.” He pointed to Kelly’s experience in the US and Europe, leading listed companies.

Kelly reckoned it’s a “great time” to be joining Sage, as the company has a proven business model and is “perfectly placed” to help SMEs move into the cloud.

With regards a successor in the COO role, the Cabinet Office told us it has no comment. But the department is recruiting a CEO role for the Civil Service that is due to be appointed by November, on a salary of £200,000 a year. ®

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