Cloud ERP success is now vertical. As data becomes a business imperative, data silos between proprietary industry software and horizontal ERP systems are no longer tenable.
Cloud ERP vendors are under pressure to deliver the right vertical functionality before their competitors do.
One of the highlights of last year's Sage Intacct Advantage show was getting a preview of AcctTwo's DrillDown application, built for upstream oil and gas Sage Intacct customers. As AcctTwo bills it:
DrillDown, brings you the first and only true cloud E&P (exploration and production) accounting system with joint interest billing capabilities for independent oil and gas operators.
Why AcctTwo has a vertical imperative
From its founding in Houston in 2011, AcctTwo has grown into one of the biggest Sage Intacct partners, with a compound annual growth rate of 70%. In December of 2018, AcctTwo bolstered its position with the acquisition of Leap the Pond, another major Sage Intacct partner.
One driving force behind AcctTwo is CEO Marcus Wagner. Wagner's passion for multi-tenant SaaS was the basis of our online introduction - a welcome debate that has led to frequent talks on how to bring a better ERP result, rather than the bloated projects that give the ERP term a legacy connotation.
With Sage Intacct Advantage 2019 just over a month away in Vegas, I got on the line with Wagner to learn more on his vertical approach - and his team's progress with DrillDown. When it comes to the impact of verticals, Wagner doesn't mince words. As he told me:
Going forward at AcctTwo, we won't really make any investments in marketing or methodology or IP or whatever that aren't vertically directed.
So why the vertical imperative?
Number one, the more vertical you get with your messaging, the marketing is just so much more effective at reaching the target audience. It resonates.
Depth of experience counts:
When you can say, "Here's the 100 other churches we've implemented," you can really add a lot of value. You may not know any one company better than they do, but you may know their industry better than they do - because they've only worked at that one church, or at that one oil and gas company, and we've worked with hundreds.
Staking out verticals helps their Sage Intacct partnership:
That also helps us carve out territories with Sage Intacct, where they know we're investing in a vertical. Oil and gas is a vertical where Sage Intacct has said, "We're never going to go after that vertical." Of course, never say never, but they're unlikely to invest in that. We've got the expertise; we've got the right geography. We've got a network, and we've built these features and functions.
It enables them to enter a new market that they wouldn't be able to go into. So it's a win-win for both parties.
Drilling into the cloud ERP vertical play
As of now, AcctTwo has four main verticals: oil and gas, faith-based organizations, residential services, and the SaaS industry itself. The key? Getting the right experts on board. A few years ago, Wagner was approached by Sage Intacct about an Intacct reseller going through an ownership transition. One of the firm's partners was looking for a new home:
She was an ex-church CFO. She'd done something like twenty or thirty Intacct implementations for churches, so we just merged her firm into ours. Along with that came a whole host of her network that we hired.
They all wanted to come work for us. The more churches we sell to, the more people we hire that come from the church world. Those peers really network a lot in that space.
A cloud ERP vertical is dead in the water without a few key ingrediencts:
- The vendor's solution must encompass that vertical's (modern) needs. That gets tricky as each so-called vertical is really a collection of smaller or micro-verticals, each with potentially different demands.
- The vendor must have an accessible platform for functionality enhancements, and, ideally, deep vertical extensions. That platform should enable all the SaaS/multi-tenant characteristics of the main ERP solution.
- The vendor (and partners) must have the industry talent to bring it all together for customers.
Wagner and team see the payoff on the ground:
When we go into a new customer, whether it's a sales cycle or kicking off the implementation, we say, "Well, here's my background," and they're like, "Wow, you're like a peer. You totally understand the world that I live in."
Building a successful vertical is not just software development. It's also about content and community. AcctTwo has pushed this forward also; one example being their annual conference for faith-based finance leaders. Sharing expertise and building community has an uncanny way of turning into customers. Even Wagner wasn't expecting how natural that would be:
The first year that we did that conference, my team kind of organized it without me. I showed up because they asked me to do the keynote. I walked in, and there were like 150 people there. There were tracks for customers, tracks for prospects. It was a proud moment for me because it was a real conference. It had a lot of organization behind it, but it was all these people that are just church CFOs.
That's how the good stuff happens:
I sat at a table. There was a lady from Los Angeles, and another guy from Chicago. Neither one of them were AcctTwo customers, but they were like, "Yeah, we're really looking at using you guys to implement Sage Intacct." So word gets out, and it's just really fascinating to see.
It's rarely a good idea for a partner to build an entire vertical from scratch. Usually, it starts with a pain point that goes beyond what the ERP vendor offers. You build and add from there. Wagner:
Some of the work we do is customer-paid development, where it's been done to address specific needs that they have. But of course, we still own the IP, because we're the ones who are creating it, and they're paying us to have access to it.
Oil and gas is one example:
There's a company we work with that's called a first purchaser, which is the kind of company that literally buys oil and gas off the wellhead from the owners and sells it to the market. I think they may be one of our largest-paid development clients, because we're building some functionality that's very differentiating for them.
They've done enhancements for their SaaS industry customers:
We built an advanced SaaS dashboard for SaaS companies... It populates KPIs for SaaS companies, basically, on a real-time basis, as orders are booked by either the sales reps for new business, or renewals are booked or add-ons. Or, if there's downgrades or churn, it calculates all that customer acquisition cost, and customer lifetime value.
Customers across industries are facing disruptions, or trying to get ahead of them. A good approach to verticals needs to have a visionary flavor as well. Wagner:
I was having dinner with a VP of Oil, that's literally his title. I said, "You guys need to decide whether you want to be a technology company or an oil company." He said, "Well, I feel like we have to be both in order to gain competitive advantage in this very challenging market that we live in."
They're a young team, and they're very forward-looking. It's just been really fun collaborating with them, because they actually see the value of building some of their own automation, if you will.
Wagner told me that they got a bit sidelined on DrillDown this spring while focusing on the Leap the Pond acquisition. But DrillDown is back in focus again now. Soon, Wagner hopes to co-innovate with a few beta customers, preferably with the type of forward-thinking leadership quoted above.
For now, they have an alpha customer via another Sage Intacct partner, whose family owns some oil and gas interests. Back to the problem of data silos - and lack of modern industry software.
This partner approached us and said, "The software in the oil and gas space, it's all dinosaurs. It's all these old client-server systems. Nobody's telling them about new cloud development."
They're collaborating with us on developing the functionality, but they're also going to be, essentially, our first customer. Kind of a captive customer, if you will, to help us get started.
The wrap - Sage Intacct Advantage on deck
Another obstacle partners must overcome in a vertical push: development and design competencies. That's foreign territory for many services firms, but AcctTwo has become proficient there. Their tech leadership includes CTO Brett Michalson, and one of the initial developers of Intacct. A development team in Romania plays an important role.
I'm looking forward to seeing an updated DrillDown demo at Sage Intacct Advantage. I'll also be watching to see if other partners pull this off. Will Sage Intacct partners be able to serve up the same multi-tenant benefits – including ease of scale out and functionality upgrades - that customers get in the core Intacct offerings?
Plenty of Sage Intacct partners have told me that Intacct's "true SaaS" approach, as articulated by Sage CTO Aaron Harris, has been a difference-maker in software sales. But can Sage Intacct extend that platform edge into industry apps? That's a story I'll be following at the Sage Intacct Advantage show in October.