I recently attended Sage Transform 2022 in Orlando, Sage’s flagship event in North America. As with most major events, Sage Transform featured a barrage of news and announcements.
I’ve been following Sage for a long time. I went to Orlando thinking about how its annual revenues have been stuck at around $2.5 billion for several years. Over the years, Sage has made many acquisitions, and also divested itself of many products. It has attempted to reconcile, rationalize and rename its solutions multiple times. Different parts of Sage often seemed to be working at cross-purposes, resulting in several false starts as it tried—unsuccessfully—to reinvent itself for the cloud era.
Then, in 2017, Sage made its most substantial move towards creating a cloud-centric portfolio when it acquired leading cloud-based financial software provider Intacct (now Sage Intacct). This was followed by several other cloud-native acquisitions, most notably HR solutions Fairsail (now Sage People) and Cake (now Sage HR); Brightpearl for eCommerce, and Lockstep for accounting integrations and automating accounting workflows.
At the event, I was most interested in finding out how these past developments have been progressing, and about new avenues that Sage is pursuing to transform and accelerate its growth. With that in mind, here are my top takeaways.
Sage’s leadership team is aligned on a shared vision. Sage has historically seen quite a bit of turnover in its executive ranks. The vendor has also suffered from turf wars between those responsible for its legacy, on-premises solutions (which still account for the majority of Sage’s customer base) and those responsible for its cloud offerings (which are the fastest-growing solutions in Sage’s portfolio).
But it looks like CEO Steve Hare, who stepped up to this role from his position as CFO in 2019, now has an executive team that is aligned on a shared mission—which is that Sage’s growth opportunity lies in providing customers with an interconnected, digital network. The Intacct DNA is clear, with Aaron Harris, former Sage Intacct CTO serving as CTO for Sage worldwide since 2019, and Dan Miller, who had been Senior VP of Products for Sage Intacct, as EVP for Sage since 2020. In 2020, Hare brought on Cath Keers as Chief Marketing Officer, and then in 2021, he added Walid Abu-Hadba as Chief Product Officer, as well as Microsoft channel veteran Aziz Benmalek to drive global partner strategy – before elevating him to President of Sage North America earlier this year.
Combined, this team brings a level of business, technology, channel, and market acumen to Sage that was lacking before Hare took the helm, and take the steps it needs to take to accelerate growth. For instance, under their leadership, Sage has boosted its level of investment in R&D from 12% to 17%. In my one-on-ones with each of them, it was also clear that they are aligned on corporate strategy and priorities as discussed in the takeaways below.
Sage is affirmatively leading with Sage Intacct—and the cloud. In the past—even after the Intacct acquisition—I always got the feeling that Sage was hemming and hawing when it came to the cloud. Not the best strategy in a world where 75% of SMBs say that they will likely buy cloud software the next time they need a new financial application.
But now, Sage has acknowledged that the most net-new customers to the brand are buying cloud-native solutions, led by Sage Intacct. As important, the vendor is positioning Sage Intacct as its flagship solution and affirming that the cloud is the company’s main engine for growth.
However, the company isn’t going to leave its on-premises customers (using applications such as Sage 50, Sage 100, Sage300, etc.) in the lurch. It will continue to invest in and support these solutions, but bring customers additional new functionality through cloud-connected applications in Sage’s Digital Network, as explained below.
Sage’s Digital Network provides all of Sage’s customers with access to new cloud applications and services. Sage’s Digital Network is an API-based development platform that enables both Sage and its partners to create applications and services that any Sage customer can use—whether they’re running on-premises, cloud-connected or native-cloud Sage products.
Through the Digital Network, customers can find—and easily integrate—the new applications and services they need to connect, collaborate and run their businesses. Sage itself has developed several solutions that are now available on the network, including those for payroll, inventory, human resources, and accounts payable—and more are in the pipeline. Sage partners can build and deliver their solutions via the Digital Network as well.
This product-agnostic platform provides Sage with the ability to fuel add-on business from both its large (but slow-growing) base of on-premises legacy customers and those running Sage Intacct in the cloud. It also and makes it a much more attractive partner for third-party developers, who market the applications they create for the Digital Network to all of Sage’s customers.
Stepping up to the plate to boost awareness and consideration in the U.S. market. The Sage brand is well-known in the U.K. and Europe. But from my perspective, Sage has never invested enough to market its brand in the U.S. (which accounts for almost 60% of Sage’s total addressable market). As a result, Sage has struggled to ratchet up awareness—and in turn, consideration—for Sage products in this very large market.
At Transform, Sage announced a new partnership with Major League Baseball to address this in a more substantial way. Through the three-year partnership, Sage will sponsor pitching decisions and manager interviews, providing insights into what’s going on during the games. The Sage brand will appear across various media platforms covering games league-wide, including on Apple TV+, MLB Network and MLB.com, beginning with the 2023 regular season. It will also back MLB’s Diverse Business Partners (DBP) Program, which supports minority-owned businesses across America, and provide Sage members and partners in the U.S. with access to MLB tickets and experiences. This marquee partnership—coupled with other complementary ones, such as with The BOSS Network (a community of career and entrepreneurial women of color), should help Sage make some inroads towards building its brand on this side of the pond.
Sage makes a timely entrance into the sustainability space. Sage announced that it has acquired Spherics, a U.K.-based carbon accounting vendor to help SMBs understand and reduce their environmental impact. The solution ingests data from a customer’s accounting software and matches transactions to emission factors to create an initial estimate of the customer’s carbon footprint. Customers can augment this initial estimate with additional data to get a more accurate calculation. As important, Spherics also helps SMBs apply carbon emission factors to procurement categories (such as delivery, accommodation, electricity, and travel) to estimate the associated carbon footprint of a transaction. As sustainability initiatives become more mainstream among SMBs, many will look for solutions that easily integrate with or are part of their core financials and ERP systems. Meanwhile, Sage can test the waters and learn more about what SMBs want in this area.
Sage is expanding its industry footprint. Following the release of Sage Intacct Manufacturing in France and the UK earlier in 2022, Sage announced that this solution will be available for customers in the US from 2023. Sage Intacct is also extending vertical capabilities for the construction industry, with new financial, operational, and pre-construction modules for payroll, property management, field service operations, and construction estimating. Sage has years of expertise in these industries via its legacy on-premises solutions, but the next generation of decision-makers will increasingly turn to cloud solutions to streamline and modernize their businesses. By adding and deepening industry-specific capabilities for Sage Intacct, Sage is well-positioned to tap into these new opportunities.
Combined, these developments (and others from the event not covered here) represent significant progress by Sage in addressing some of the issues that have stifled its growth in the past. Although you never know what might happen when one company acquires another, in this case, Sage Intacct has—fortunately–become the catalyst for Sage’s transformation.
Sage’s Digital Network, and its ability to connect all Sage customers with new capabilities, is a powerful one. And, Sage’s focus on providing deeper vertical capabilities for Sage Intacct should appeal to many prospects who want—and need—to get more of the functionality they need, the way they need it, faster than they could with horizontal solutions.
But Sage is competing in a very noisy and ultra-competitive market. At the brand awareness level, it will need to surround the MLB deal with campaigns with secondary influencers and media to amplify brand recognition.
In addition, while the Spherics acquisition is timely, many SMBs are just starting to learn about environmental, social, and governance (ESG), and don’t yet understand why and how it can benefit their companies. Meanwhile, many other vendors already have or will come up with similar offerings. Sage will need to educate the SMB market on this topic and act quickly to extend product availability beyond the U.K.
Sage will also need to refine its HR strategy. When it acquired Fairsail and Cake HR, it seemed like it had the opportunity to meld financials and HR into a unified solution, like Workday’s, but for SMB customers. But Sage’s ability to upsell its financial customers on these solutions is unclear, and the vendor still has work to do to make its HR story a compelling one. Based on a couple of the conversations I had with executives at the event, I believe that they are trying to work this out—and will stay tuned.
However, my overall impression is that Sage’s strong embrace of Intacct’s expertise and leadership in the cloud has put it on a much better path to revitalize the company and put it on a growth trajectory.
© SMB Group