Standing out from the old school - how Sage is steering its own course

Brian Sommer Profile picture for user brianssommer November 24, 2023
Summary:
Sage’s holiday gift to industry analysts included the usual servings of AI news but it also stood out from ERP competitors in the way Sage is continuing to enhance all of its products. Some competitors are going the opposite direction and saving the AI stuff for the cloud solutions – a strategy that triggers time-consuming, risky and expensive forced upgrades to other products

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The Sage Group PLC, makers of Intacct and many other software applications, had an analyst briefing this week. As you’d expect, it had its share of AI announcements and other product news. However, it’s the way Sage is approaching its product evolution, customer upgrades, etc. that makes this briefing different. 

To understand why Sage’s approach and news are different, let’s first look at what lesser vendors are doing.

What old school vendors can get really wrong

Let’s stipulate these three things about human beings:

  • People hate being told what to do and they hate ultimatums
  • People hate having  to spend money they hadn’t intended to 
  • People don’t like buying things with unknown costs

Now, since so many of us know these things about ourselves and others, you’d think a savvy tech vendor would go out of its way to avoid these issues. Nah – they run right to these things. 

Right now, there are a couple of major ERP vendors who are delivering ultimatums to their own customers. Their message is essentially: 

Get off that old on-premises software of ours, now, and move to our cloud-based solution. If you don’t, you’ll be running an unsupported, obsolete product. But, to do this, you’ll have to pay to get the subscription (even though you have a perpetual license for the existing product), pay for another implementation, and, also pay for all-new hyperscaler and AI costs which we can’t estimate for you. Of course, we’ll leave you no other options no matter how inconvenient and expensive this is. Are we a grand software firm or what?

Those old school vendors have finally decided that on-premises customers are a drag on development, costly to support, have a ton of customizations, and, are a laggardly bunch when it comes to adopting new technologies. Those older customers also make it hard on the vendor to sell them upgrades, new capabilities (e.g., RPA, AI, etc.) and net-new cloud apps. Wall Street has been hammering on these vendors to get more of their customers onto the cloud and sell them more subscriptions, modules and services (Wall Street wants to see subscription revenues not maintenance revenue). When vendor executives can’t explain why their old customers won’t move to the cloud, they look bad before the Wall Street crowd. 

Naturally, affected customers are not loving this. They weren’t looking to do another implementation. They’ve no budget for this and may have higher priority initiatives that take precedence over a forced software project. These customers will go through predictable stages in dealing with this news: denial, bargaining, and, then later, acceptance. Some may never accept this new situation though. They may decline the upgrade/replacement demand outright or switch to an alternative vendor’s offering. 

A different approach

Sage isn’t threatening to drop product lines or force march users of one product line into another product line. They have no problem letting customers remain on some of Sage’s legacy solutions because they have found a way to deliver advanced capabilities to these customers without requiring them to move to a different product line. 

Sage is working on five strategic priorities (see image below). Three of these go straight to their strategy of extending the value of existing product lines:

  • Building the small business engine
  • Scale the network
  • Learn and disrupt 

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One tool to build the small business engine is Sage Assistant. This is a smart tool/digital assistant that can reside inside Microsoft Excel. It allows users to ask questions (e.g., What will be our cash forecast for the next couple of months?) in a sidebar. The assistant will not only infer the changes in cash receipts and  disbursements based on the spreadsheet data but can also suggest potential options for the user to consider to bolster the available cash on hand (e.g., Have you thought about factoring some of the firm’s receivables?). The assistant can even explain how it derived the values it came up with.

Sage Assistant can be used with several Sage products. It will likely add value to customers across the full spectrum of users (i.e., from small businesses to larger mid-sized firms). I actually saw a variation of this capability demonstrated back in 2018 by another firm, Aera Technology. Simply put, it blew away the audience of accounting executives back then. Today’s SMB users will likely love this tool. 

Sage started building out its AI team approximately five years ago. Sage is using these skills in one tool that detects ‘outlier’ transactions in their general ledger applications. This tool spots journal entries or balances that are atypical. It can detect situations where the credited account doesn’t seem to fit the debit account. Likewise, it can identify journal entries where the dollar amounts are well outside of the usual range of values in other similar transactions. The software points out the anomalous entries and then offers textual commentary to explain why it flagged the amount, account and/or transaction. 

The Outlier technology is already being used by almost 1,900 customers. This AI-tool is reviewing 15 million transactions per week and flagging about 2,000 transactions per week. 

Another tool is the Sage Network and its Inbox. This capability goes to ALL Sage customers regardless of their base system. This inbox handles all manner of communications between the Sage user and their customers and suppliers. The software’s AI looks at the intent of an email and creates suggested language for the user to accept or reject. It will attach the requested documentation, like an invoice or statement, on the user’s behalf. This can materially speed up responding to emails or sourcing the correct attachments from the accounting system. This technology will provide a portal-like functionality (in January 2024 for UK and International customers) for users to check invoice status, payments, etc. and even assist in automated workflows. We’ll need to see more on this in the future.

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Other tools that can work with one or more Sage product lines include banking technology. These tools enable automated account reconciliation, payments, etc. Sage has some 34 banking products that help customers in 11 countries. 

It’s the data exhaust of the communications, transactions, etc. within the Sage Network that permits the AI tools to get smarter over time and to make the processes/workflows ever more efficient. 

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Some of the customer/vendor workflows include: AP automation, collections management, AI-suggested responses, AR workspaces, AP workspaces, approvals management and aging of receivables and payables.

In addition to the smart add-on capabilities mentioned above, Sage also offers HR, Payroll and several vertical apps/extensions for many of its product lines (i.e., Sage Intacct, X/3, Sage 200, Sage 50, Sage Active and Sage Accounting (a solution for accounting firms)). 

There were also mentions of new AI-powered modules: 

  • Sage Earth -  An AI tool that classifies carbon emissions tied to specific transactions. The transactions for each customer are in the Sage Network. The training data for this AI-tool contains 870 million transactions that represent approximately $5 trillion in spend. This solution is targeted for SMBs (a market segment that is underserved by many ESG-related technologists and vendors). 
  • Sage Intelligent Time – This AI tool “captures and categorizes time for billable employees”. This is a boon for both employer and employee as it can capture up to 17% more billable time and saves employees from tedious administrivia.  

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Another cross-product line example of sharing is that Sage Intacct’s Planning module will become available to users of other Sage product lines. 

My take

This was an interesting analyst/vendor interchange as most events go product line by product line and cover the product roadmap for the applications within each. In that kind of briefing you can quickly assess which products the vendor is heavily focused on and which ones are getting starved for attention and capital. In a nutshell, analysts can ascertain which products are headed towards and end of life (or minimal support) future and which ones the vendor is betting its future on.

This briefing was different as the discussion predominately hinged around AI-based capabilities that could be added to a customer’s existing Sage product(s). The future of the individual product lines still looks vibrant – a situation that some other large vendors can’t claim for some of their old-school product lines. 

Another key observation is that the proposed AI capabilities seemed to have passed a ‘reasonableness’ test for the kinds of business (e.g., small or mid-sized) they serve. In other words, Sage didn’t try to place some opaque black boxes with its SMB customers that require an army of data scientists to understand and maintain. These new capabilities seem to be risk-appropriate for the size, risk tolerance and sophistication of their intended users. 

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