Sage Intacct - the macro take on post-acquisition integration

Profile picture for user brianssommer By Brian Sommer December 11, 2019
Summary:
diginomica’s Jon Reed produced a flurry of stories at the conclusion of this year’s Sage Intacct Advantage conference. Here's a macro view of the changes afoot at Sage Intacct and their impact on customers and prospects.

Business people discuss strategic transformation © pgraphis - shutterstock

The Sage Intacct story continues to evolve and most of the news is indeed positive. In brief, here are the bigger headlines and my assessment.

HR and Accounting together

Sage bought U.S.-based accounting solution Intacct in 2017 and also acquired U.K.-based HCM solution Fairsail around the same time. Now, Sage is starting to market the two solutions to mid-market buyers with a tighter level of integration between the two product lines.

Post-acquisition, Fairsail was renamed to Sage People. Sage People’s user experience (UX) has experienced a recent upgrade. Because the product is built on the Salesforce platform (Force.com), Sage People now utilizes the Lightning UX. This one upgrade alone should make the product much more attractive to prospects.

Selling Sage People and Sage Intacct together makes sense in many deals as many mid-market prospects would want a single-vendor solution that deals with many of their back-office software needs. Add this to Sage Intacct’s new budget/planning solution (see below) and Sage’s coverage of the back office broadens.

According to a Sage press release:

The new integration between Sage Intacct and Sage People brings together Sage’s native cloud solutions for the midmarket delivering a unified system of intelligence, ensuring real time accuracy of employee related data in reporting and analytics. Global workforce information will now be available instantly to finance teams, enabling consistent reporting structures and approval hierarchies, while improving financial controls.

In September, Sage indicated that there are now ten joint customers using both Sage Intacct and Sage People. That’s not a surprise as Sage Intacct was predominately a U.S.-based solution while Fairsail was U.K.-based. Today, Sage People and Sage Intacct are being sold in four countries (U.S., Canada, U.K. and Australia).

A Sage Intacct/Sage People pairing starts with the technical integration of the two product lines. However, the combined solution will gain more market acceptance once processes are reinvented/reimagined, new cross-functional metrics are enabled and analytics that cross finance and HR are in place. That, hopefully, will be a focus of Sage Intacct executives.

With the new UX for Sage People, I’d expect cross-selling activity to Sage Intacct customers (and vice versa) to pick up. The prior Sage People UX was outdated and stark while the new one should receive a more welcoming reception from prospects.  Cross-selling should also increase as more implementers of each product get trained in the capabilities of the other product line.

My take - Cross-selling and upselling these products is an additional accretive aspect of these acquisitions. They also breathe new sales energy into the Sage channel ecosystem as both are modern, multi-tenant cloud applications. A more complete back office offering will further enhance the attractiveness of Sage to mid-market firms.

Going forward, the Sage People product might benefit from having some additional ‘wow factor’ HR applications like workforce management and candidate relationship marketing as part of its suite. These could come from new development activity or acquisitions. And, for Sage Intacct, it might be interesting to see an advanced cost accounting module appear that uses labor rates and other factors from the Sage People solution.

Budgeting and Planning

In 2018, Sage acquired an Intacct partner solution, Budgeta. The software is tightly integrated with and uses the same accounting dimensions as Sage Intacct.  Market interest in this solution continues to grow and it means that customers and prospects can leave spreadsheets behind in their planning activities.

According to Sage Intacct, the Budgeting and Planning module now has:

  • “An enhanced budget wizard that features an intuitive, drag-and-drop capability for adding dimensions from Sage Intacct into the budget structure.
  • Expanded collaboration capabilities that make it easy to work together with business and department leaders to gather data and context around planned revenue and expenses.
  • Drill down from Sage Intacct dashboards and reports to the drivers of the budget in Sage Intacct Budgeting and Planning to see how the budget or forecast was created – enabling users to see what they are working on in the context of the source of the information with just a few clicks.”

My take - Many prior Sage Intacct customers have used third-party tools (e.g., Adaptive Insights) or spreadsheets to complete their budget/planning/consolidation needs. I like bringing Sage Intacct Budgeting and Planning into the fold but I believe it will need to undergo further enhancements to address the needs of the more complicated mid-market customers Sage Intacct desires.

If Sage is interested in a tool to make the financial closing process better (a la how Blackline fills this need for large enterprises), it could make an acquisition of Floqast.

Retention of Intacct leadership

After many technology firms are acquired, founders either cash out and leave or the new owners squeeze many of them out. This departure of top executives can be troubling for existing customers as a material change of control can also trigger a change in the vendor’s culture, pricing, support levels, etc.

The Intacct acquisition did not fit this pattern – and – that’s a good thing. Former Intacct executives have not only stayed on but they’ve seen their responsibilities grow inside Sage. Specifically, former Intacct CEO Rob Reid is now Sage Chairman of Mid-Market Solutions. Aaron Harris, formerly Intacct’s CTO, is now Sage Group’s CTO. Kathy Lord, formerly ran direct sales and the Customer Success functions at Intacct, now heads up Sage People. Other executives (e.g., Marc Linden (formerly Intacct’s CFO is now EVP and GM, Medium Segment Native Cloud Solutions, Sage) and Taylor Macdonald (one of the best channel people out there)) have seen their profiles increase, too.

My take - As acquisitions go, Sage got more than products with these deals – they also got a lot of solid executive talent, too.

Geographic expansion

One opportunity that the Sage People and Sage Intacct organizations get from the acquisition is access to the capital, sales channel, marketing resources, etc. that Sage Group can bring to bear. Without this, international expansion and growth would take a long longer while bigger competitors would have just kept getting bigger.

Geographic expansion is on the upswing at Sage Intacct although it will likely proceed in a measured manner. As mentioned earlier, Sage Intacct is now being sold in the U.S., U.K., Australia and Canada. These countries were likely chosen as the software is currently available in the English language only. (Accounting rules are also very similar across these countries.)

Like any vendor that wants to expand into new countries, Sage Intacct would need to add relevant compliance, banking, statutory and other country-specific requirements per market. It would also need to support a growing number of data privacy requirements that are popping up everywhere (e.g., GDPR, CCA, etc.). Other data sovereignty issues may require attention as part of their expansion requirements.

Additionally, Sage Intacct will need other resources in new markets. It may need to recruit and enable new service partners in these new countries.  Sage might also may find a number of existing Sage channel partners (that sell legacy Sage solutions) eager to join the Sage Intacct channel. Those new partners need to be vetted carefully though as Sage Intacct is clearly a solid mid-market (not SMB) solution with very strong capabilities. The key is to choose those potential partner firms that can sell and support larger and more complex prospects. One particularly challenging kind of project that will need partner support is the multi-country implementation.

New cloud data centers may be needed as global expansion plans grow. Sage Intacct is using local Amazon AWS data centers for some of this.

Australia is a brand-new market for Sage Intacct and the company has already snagged its first large customer there: an Australian Stock Exchange listed firm.  One other asset that Sage brings to the global solution capability is its global payroll functionality.

My take - Global software takes time, money and local market experts/expertise to create. Intacct will likely be more global soon and much of the credit for this is due to Sage’s ownership. Speed will be the metric to see how well Sage executes on this. Support for more languages will be a key success factor to greater global penetration.

Smarter Financial apps

Sage Intacct has always been focused on financial accounting applications. It’s what they do. Their new focus involves greater use of AI and other tools to make aspects of financial accounting less tedious, more productive and more insightful for accounting and other professionals.

Three examples Sage Intacct executives have discussed include: automated closes, continuous audit capabilities and AI-powered analytic insights. To be even more precise, Sage Intacct’s focus is to deliver smarter capabilities that their mid-market customers and prospects could actually use and value. If these capabilities require lots of data scientists, numerous big data sources, etc., then they might be overkill (and not cost-effective) for many mid-market firms.

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Anomaly detection is one area that intrigues Intacct. It can be used to spot fraudulent transactions, incorrectly booked accounting events, bribery/corruption attempts, and other items that adversely affect a firm’s bottom line and its reputation. These tools would add substantial value to Intacct’s customer base.

My take -  I like the nuanced focused that Sage Intacct is using for its smart financial applications as it fits their target market. It’s practical and market viable. The faster they roll these out, the greater their competitive advantage opportunity will be.

Verticals

Construction has re-emerged as a big vertical focus for Sage.  Some 50 micro-verticals are being pursued these days. Sage Intacct has a long-standing history in verticals like churches and oil & gas. 

My take - Selling horizontal applications, like financials, is a great approach when a software company is new. Adding vertical functionality is needed to propel future growth. The challenge with going vertical is to pick the right verticals. Many of Sage Intacct’s competitors have chosen high-growth tech firms and service firms for their initial vertical forays. I suspect some of Sage Intacct’s prior vertical strategy was driven by the interest/markets that its partners serve. Now, it appears Sage Intacct is directing more of this itself (a good thing) and Intacct is picking some underserved verticals that its competitors have ignored (also, a good thing).

Upmarket

I had a chance to ask Sage/Sage Intacct executives about their plans to move upmarket. I asked this as the product suite continues to get better and deeper and it would get more appropriate for larger, more complex prospects. 

For now, the company seems content with its mid-market focus although some firms will tempt them to move beyond their target market. The real challenge with moving upmarket may have more to do with finding great implementation partners that implement significantly more challenging installations. These projects may have operations in many countries, require lots of change management, possess layers and layers of legal/consolidating entities, etc. Upmarket deals may even require a different, dedicated sales team, too. 

My take - Sage Intacct will mostly remain a mid-market solution for the near-term.

Data Visualization and Reporting

Sage Intacct has made a number of improvements to how data is reported, viewed and made more useful. Its Interactive Custom Report Writer now has pivot table functionality and time trending. Data is now displayed in a highly visual format that helps viewers understand a narrative without pouring through reams of row and column data. 

According to Sage, it’s new Sage Intacct Interactive Visual Explorer uses visualizations to: 

enable collaborative exploration through advanced visualizations, and the ability to add annotations to reports using an innovative 'narrate' mode to find and capture insights during the analysis right in line with the reporting.

These reporting tools are not bolt-on products. They are a full component of the Sage Intacct system and thus utilize the security, permissions, etc. of the core system. 

My take - Accountants, more and more, want to spend less time double-checking accounts and audits and more time analyzing operating results so that they can provide more value to their clients and executives. Better, more powerful tools help in that regard. Better analytic tools combined with better reporting tools make an accounting system more valuable to more than the accountants and clerks that feed it data. 

My (macro) take 

I always cross my fingers when a software company is acquired. Too often, the post-acquisition experience for customers heads south. The Intacct/Fairsail deals seem to be quite positive for everyone involved. Products are getting enhanced. Key people have been retained. Addressable markets are growing and more. 

Should Sage continue to support Intacct, the near-term growth prospects for it would appear to be great. Sage may need to supplement the team at Intacct to power the growth. R&D, channel growth, global expansion and vertical additions will take people, capital and intellectual property. 

Intacct will continue to fight larger competitors, notably Microsoft and NetSuite, but should hold its own when it gets invited to participate in selection deals. Regional competitors will need to be dealt with as well. However, the market Intacct addresses is a huge one and one that no one vendor dominates yet. Execution will be the key to Sage Intacct’s long-term success. 

Further reading: