If you’re a Sage customer, partner or employee you better get used to the name “Intacct”. You’re going to hear it a lot over the next couple of years. Sage Intacct is an enterprise finance platform in the cloud ERP category, stronger in services-based industries rather than manufacturing or inventory.
When Sage bought the company in 2017, Intacct was just the latest of many conquests notched into Sage’s bedpost over its 38-year life. Now it is clear that Intacct is much more than that.
It is a vehicle for Sage to overcome an incumbent’s deadly inertia and propel it into the pantheon of enterprise cloud players.
Sage CEO Steve Hare has stated his ambition to turn Sage into a SaaS company. The problem is that no-one today talks about Sage like they do about Salesforce or Workday or Oracle NetSuite. (And Hare, coming from a private equity firm, no doubt wants the crazy multiples of a SaaS valuation.)
In 2015, Sage began and then abandoned a new mid-market cloud accounting product called Sage Live. Even with the leg up from Salesforce’s developer platform, it would have taken too long to catch up to the leaders. Intacct is now the key to this transformation.
Until now Intacct has only sold to companies the US. It had planned to IPO and fund a global expansion. Then Sage came knocking, with its 3 million customers, 13,000 employees in 23 countries and a total addressable market of US$34 billion. It seemed like an easier path to greatness, says Intacct CEO Rob Reid.
But how exactly will this work? Yes, Intacct is a SaaS company, but Sage definitely isn’t. Owning one doesn’t make you one.
Late one night after the day’s conference, another Intacct exec mused over a drink, “It’s almost like a reverse merger.”
I double checked the definition. A reverse merger is when a public trading company merges with a private company and the private company survives, occupying and operating in the publicly traded company's legal shell.
Quite a startling claim; I wondered how common that view is among the Sage rank and file? There is some pretty convincing evidence from the top that this is in fact the intention.
The CEO, CFO, and CTO from Sage Intacct have all joined the leadership team for the global company. Despite Sage’s history as an aggregator, only one other seat exec on that 25-person board came from another acquisition. (The chief architect and technology advisor, Klaus-Michael Vogelberg, was R&D director and partner of KHK Software, acquired in 1997.)
All the rest are external hires. So it’s quite a statement to add three execs from one acquisition to the team that sets global strategy.
Sage Intacct CTO Aaron Harris, now CTO of Sage, has taken on a role that is almost innovator in chief. As Sage president for Asia Pacific, Kerry Agiasotis, puts it, Harris “has been put in the box seat” to work out how to turn Sage into the SaaS company that occupies the dreams of CEO Hare.
Harris travelled to Australia earlier this year, just five months into his role as global CTO. I remarked then that he must be brave to take on a transformation project this size given the number of “dead bodies in the hallways”.
Sage had seen a number of high-profile exits, not least the previous CEO Stephen Kelly, ousted in 2018 after just four years and who himself fired 30 senior execs the year before he left.
Harris acknowledged that everyone in the company recognises that Sage cannot become a great SaaS company if it is perceived as an aggregator. But he countered that it was in a much better position than many realised.
“If I were a smart executive, I would have told the board, ‘Guys, it's much worse than I thought’. I would have really lowered the bar so that I could turn out to be the hero and declare a major victory with something that really is not a big deal,” Harris says.
“But the reality is that everywhere I go I'm roaming the halls and finding more examples of great innovation. I'm on a mission to change the perception externally that we're just an aggregator of old technology. We are perfectly set up to become great innovation leaders in the markets where we're competing. I'm very, very bullish.”
While bullish on potential, Harris admits that culture can take years to change. Harris plans to tackle culture by reorienting Sage’s practices and structure from one designed to sell on-premise software to one designed to sell SaaS. Cultural change will naturally follow.
“I want to call out that culture is not an inhibitor. I believe that in many cases, culture is an artefact of the organisational structure of incentive schemes, etcetera.
“Sage today is a relic of a structure that was created for a different era. And as we transition to this new era, I do think that culture is going to naturally move along with it.”
Luckily, fostering a strong culture appears to be a strong suit for Intacct, which has a passionate user base. At its Advantage conference in Las Vegas this month, customers enthusiastically appreciated new features announced during the keynote.
Long queues for sessions such as “Building Dimension-based Financial Reports”, bewildered new attendees. “I’ve never seen queues for conference sessions before,” a New York-based technology partner selling Sage Construction and Real Estate software to mid-size construction clients told me, over a heated bagel and mustard sauce. “Usually everyone just goes to the bar.”
Harris also points to the rapid localisation of Sage Intacct for Australia, launched in September, and for the UK, launching in November, as a demonstration of Sage’s ability to innovate. The project required collaboration between several Sage departments in Barcelona, Newcastle (UK), Poland, San Jose, and Bangalore.
“I don’t think Sage has lacked a culture of innovation. It has been constrained by the way it grew through M&A. The software was not platform based, so the ways of working were different,” adds Angiasotis.
“Now we are taking a singular platform that is modern and open, and localising without creating another version of it.”
The Plan of Attack
Intacct’s CEO Rob Reid says his job right now is the same as Harris’: “I’m trying to make Sage a great SaaS company”.
This repositioning is not happening in a vacuum; Sage Intacct often comes up against NetSuite when competing for business. (Reid claims Intacct wins most of these encounters and that its win rate is accelerating.)
A shorthand introduction for Sage’s customers, prospects and partners outside the US is to call Intacct “a competitor to NetSuite”. And Reid spoke at length in our interview about the differences between the two products and companies.
So how exactly will Sage turn Intacct into a global competitor to NetSuite? It already has the sales teams in place in those 23 countries. The “biggest next thing” for Intacct is to go multilingual, Reid says.
After that, Intacct will need to update statutory reporting for every country.
“One of the hardest things is understanding exactly what you have to do to meet the requirements,” Reid says. “Because Sage has been in these countries for so long, they've got the expertise and they can provide that information to us.”
Despite the attraction of a global footprint, Reid acknowledges that North America is “still the biggest market by far” in Sage’s territory.
“There's a pretty big difference between the United States and the UK, we're talking about 330 million people versus about 80 million. So we have to just continue to keep knocking out of the park here in the United States.”
Intacct is investing heavily in three areas to drive innovation in the product. At the top of the list is integrating AI into the core finance and accounting function. During the conference keynote, Intacct showed technology to automate timesheets by dragging and dropping meetings from a calendar to a timesheet.
The AI-powered timesheet also suggests entries based on the contents of a document or email. If you’re working on a Powerpoint sales presentation it can automatically create an entry for that client in the timesheet.
The second largest area is an advanced subscription billing engine, which Intacct calls Contracts. Revenue recognition has become extremely complicated for companies selling by subscription. If a customer buys a service or product on subscription and then adds or subtracts extra users or modules, the contract’s value needs to expand or reduce accordingly.
The software industry is Intacct’s number one vertical and has been for nine years, Reid says, so getting this right is critically important.
New legislation in Europe and the US (the ASC 606 revenue recognition standard) is also forcing companies to use systems that can keep up. If Intacct didn’t build this engine, it would have had to start walking away from deals, Reid adds.
I asked Reid whether Intacct was effectively building Zuora, a subscription billing system for enterprise, into its software.
Zuora was in fact a partner with Intacct, focusing on business to consumer subscription models run by enterprise, says Reid. Intacct asked for a B2B solution that was affordable for small and medium businesses, but “after two years of making no progress, we told them, ‘We can't wait any longer.’”
Intacct’s pitch against Zuora will be simple; “With Intacct you only need one product rather than two, and we’re cheaper.”
Intacct is also investing in inventory, a historically weaker module next to the advanced capabilities of NetSuite. Intacct has been slowly adding features in its quarterly releases and aims to build the best solution for small and medium sized wholesale distributors, Reid says.
One would hope that Sage partners around the world will be eager to get their hands on the company’s first, proven cloud accounting product for mid-market and start selling it to their existing on-premise customers. However, Intacct’s approach to partners is different to Sage’s – and it’s a little less forgiving.
Intacct’s partner model is quality over quantity. Partners are expected to contribute to the relationship; if they don’t, Intacct shows them the door.
“Most channels will have a long tail of partners who are mediocre and are just turning over a dollar. But they give a poor customer experience,” says Gary Katzeff, Sage’s general manager for ERP, Australia and New Zealand.
“Sage Intacct are very careful about the quality of the partners they bring in. if the partners don’t put in what they committed to they exit them from the channel.”
Sage partners will need to commit to training staff and only selling into industry and functional specialisations in which they have expertise.
“Intacct demand that if you’re not certified in the particular part of the software then you don’t sell that. That’s respecting the customer. If you have to give that opportunity to some other partner you have to do that rather than give a poor customer experience,” Katzeff says.
The upside of Intacct’s model is better quality onboarding experiences and happier customers. Katzeff points to Intacct’s ratings on G2 Crowd and Trust Radius which rate it number one for customer satisfaction.
“Who wins or loses against Netsuite or someone else, it often comes down to the individual engagement in the sales process. If you have the best VARs (value added resellers) – and Intacct have the best partners – then the client will want to go with you because they believe that you can make it happen for them,” Katzeff says.
It’s likely that every ERP company will claim it has the best VARs. Reid explains why Intacct’s model produces better results.
“The secret is treating them as part of the business. They are integral to us and our success. And we share all information with them – we tell them the good, the bad and the ugly,” Reid says. “Other organisations don’t do that.”
Intacct also uses deal registration to protect prospecting. If a VAR registers a prospect then that company is off limits to Intacct’s direct sales team and any other VAR. (This explains why VARs can’t sell functions they haven't trained for.)
“Direct won’t touch it, neither will another VAR. No-one is allowed to compete,” Reid says. This creates a culture of trust where VARs will invite each other into a deal to provide specialised services in return for a share of revenue.
Intacct has had a very solid run in the US. Two months ago it launched into its first country outside the States (Australia) and is on the cusp of launching in its second, the UK. It is likely to enjoy success based on the strength of its features and the quality of its channel.
The big question is how it will perform at turning Sage into a SaaS company. Change is always hard, and harder still for a company of Sage’s size and history.
And yet the leadership of Sage and Intacct appear to be on the same page. Sage CEO Hare’s tenure will be judged on whether he can convince his employees, partners and customers to think likewise.
Disclosure: Sage paid travel and accommodation costs for Sholto Macpherson to attend Sage Intacct Advantage in Las Vegas, USA.
Image credit: Sage Intacct
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