Sage Group benefits as SMBs continue to invest in digitization

Strong Sage Business Cloud growth of 29% underpinned a six month revenue increase of 10% year-on-year to £1.09 billion with an underlying operating profit rise of 14% to £227 million. 

The SMB target audience for the firm is driving this growth, according to CEO Stephen Hare: 

Across the group, Sage Business Cloud is delivering significant growth, and this includes not only Sage Intacct and cloud-native, but also Sage 50, Sage 200, and Sage X3 across our main markets. Demand for our mission-critical, finance, HR, and payroll solutions is robust and it's growing as SMBs continue to digitize.

He added: 

SMBs represent 98% of all businesses in our key markets and they account for almost two-thirds of private sector jobs. They are the lifeblood of the global economy and our experience over many years is that they tend to be resilient, agile, and quick to spot opportunity.

Despite the current economic headwinds, SMBs remain “optimistic and full of ambition”, said Hare: 

This is a message I hear again and again, and it's supported by our recent survey of almost 12,000 SMBs, where more than 80% say they're confident about their company's future success. And the majority are set to increase their technology spend over the next year as they continue to digitize. Overall, the number of SMBs consistently grows. Our analysis predicts one million more in our key markets by 2025 as the economy expands and more entrepreneurs pursue their dreams. 

Empowering ambitions

Sage has a role to in empowering SMB ambitions, he explained: 

We use our position to champion and lobby for SMBs, engaging with policymakers to create a more supportive business environment. The foundation of our customer proposition is our digital network, a set of connected products and services that enable our customers to transform their accounting, HR and payroll workflows. The network benefits customers by creating connections between business ecosystems, helping to automate workflows, both within and between organizations. 

From inception, it's been designed as a powerful platform for innovation in the area of Artificial Intelligence with unique scale and access to data. So, for example, we've used the digital network to develop our accounts payable automation service recently launched in the US, the UK, and France. We've brought Sage Intelligent Time, our smart time assistant to new markets. And we've expanded our outlier detection service which learns from customer behavior, and is now averaging close to 600,000 predictions per week. That's up six-fold in the last three months.

International expansion

Scaling Sage Intaact is a critical strategic priority, said Hare, with the offering now being rolled out across continental Europe, beginning with France: 

We focused on enhancing the solution and optimizing sales and marketing. and as a result, we grew Sage Intacct ARR in the US by around 30%. And outside the US, we doubled it to £25 million, building traction in the UK, Canada, South Africa, and Australia.

Across verticals, Sage Intacct construction and real estate saw new customer additions up by more than 50%. And just last week, we acquired Corecon, cloud native project management solution for the construction industry. We also issued a major new release of Sage Intacct Manufacturing and are working with customers and partners across six countries to drive growth. 

Feedback continues to be strong. I recently spoke to Phase 3, a professional and managed services provider based in Manchester, and they told me Sage Intacct saves them three days a month of manual effort. 

AI

As for AI, Sage, of course, has skin in the game here. Hare explained: 

We're scaling and leveraging the digital network to deliver innovative AI-powered solutions, transforming the workflows of SMBs…Our new AI-powered service to automate accounts payable is rapidly gaining traction. In the last three months, we processed more than 200,000 invoices for around 3,000 customers across Sage Intacct in the US, Sage 50 in France, and Sage Accounting in the UK. Now this is the same service provided via the digital network to customers of all three solutions, and it's getting some great feedback.

Hare sees AI as boosting Sage’s internal productivity as well as that of customers: 

We already have examples, historically, particularly areas like finance, where we have deployed machine learning and robotics to drive productivity. Generative AI with its ability to provide greater insights will undoubtedly assist productivity, not just in the back office but also in the front office.

But our real focus is how can we use AI to help our customers. How can we help our small, midsized customers be more productive and say, embedding within our product, which we've been doing for a number of years, but we see a number of opportunities to enhance that. Next week at our supplier conference in the US, we'll be announcing the release of a Sage Inbox, which is a product which will help all of our customers backed by AI to drive productivity in terms of how they're dealing with routine workflows.

My take

A buoyant first half for Sage as SMBs, the lifeblood of economies around the world, commendably continue with digital transformation investment.