"We are still solid in the SMB space. We still have 5.8 million customers around the world," he said. "Given that, you can imagine there will be a few who switch."

But Sage might gain just as many customers from those have tried a software-as-a-service offering such as NetSuite and found they don't like it, he added.

As for Sage Live, Sage "didn't want to risk [its] brand and legacy by making a mistake in a new market," Palsule said. Once the security problem was found, the company "took the most responsible course of action" by taking down the beta test site, he said.

Sage customers are definitely the right target for NetSuite, but not all will be receptive to the discount offer, said Forrester Research analyst Ray Wang.

"In the SMB deals we are [involved] in, there are just as many people who are on-premise as SaaS," he said, adding that this could change over time.