Sage recently held an analyst summit to take a deeper dive into its product and technology roadmap, complementing sessions it held at its 2024 user group conference that I commented on earlier this year. ERP systems have been central to the operational and financial management of enterprises since they first appeared in the 1990s. They are so familiar that they have become part of the background and only noticeable when something fails. We are now in a major transition to a new era of artificial intelligence (AI)-infused ERP that is forcing software providers to quickly reshape their product strategies to take advantage of technologies that provide greater value to users.
With all the attention paid to them, AI and generative AI (GenAI) may seem like bright shiny objects that have been endlessly hyped by technologists, but because they enable existing software to perform most operations faster
Like client-server computing before it, AI and GenAI, along with natural language processing, are transforming how work is performed throughout an enterprise. I use the present tense because these technologies are already at work. Sage’s analyst summit presentations summarized what’s already available in its product and what’s coming shortly. In the former category is outlier detection, which identifies anomalies to reduce errors at the source, as well as features that reduce the need for manual data entry such as automated transaction matching and coding. What’s coming includes customer-specific agents that can assist in expediting the accounting close, producing flux analyses and generating financial statements.
I covered the AI and GenAI aspects of Sage Intacct in my earlier research note, so I will focus this one on three other topics: The application design built around continuous accounting, the importance of the Sage Network as a differentiator and the company’s focus on expanding its total addressable market.
Sage Intacct is designed to support “continuous accounting,” which the company defines as incorporating a continuous close, continuous assurance and continuous insights. The ideas here are similar to our conception of continuous accounting, where the objective is to execute traditional period-end tasks as continuously as possible to avoid spikes in workloads. It uses technology to promote a total quality management approach to managing transactions, so that entries are as error-free as possible. Technology can supplement internal audits to spot fraud and suspicious activity at the source, rather than having to uncover it manually, or worse. And rather than having to wait until days or weeks past month-end to be able to review results, companies can continuously monitor financial and operational performance. The objectives of continuous accounting are to make the department more productive, attract and retain the best accounting staff and, in so doing, improve the performance of the entire enterprise.
Another element of Sage’s strategy for product differentiation is the Sage Network, which can automate and securely connect transactions and workflows between parties, including suppliers and buyers, banks, governments and employees. For example, in commercial transactions it enables sharing of end-to-end electronic documentation from purchase order to payment advice, significantly reducing manual steps and the errors and delays that go along with them. Online applications for e-invoicing, accounts payable and receivable automation, bank feeds and expanded payment processor options are currently available in the U.S., Canada, U.K., South Africa, France, Germany and Spain. In the U.K., it provides value-added tax (VAT) compliance services, streamlining computation and filing, which is increasingly important as countries that use VAT are increasingly mandating payment of VAT at the time of the transaction rather than at a period end.
The organization’s Sage Connect application offers extended AR automation capabilities and online e-invoicing compliance. It available in Sage 50 software for customers in the U.K. and Canada, Sage 200 in the U.K., Sage X3 in France and Sage Intacct. Sage aims to facilitate opportunities for third-party developers to extend the capabilities of the network with software designed for complementary processes and to address the requirements of specific industries and subspecialties. These additions, and the ability to broadly link processes and data to serve the needs of individual customers, will result in a significant gain in the business performance of small and midsize businesses to close the technology gap between midsize and larger establishments. The network also reduces midsize organizations’ reliance on spreadsheets, which are excellent tools for personal productivity but aren’t well suited to support an organization’s business processes.
The enterprises’ presentations also gave an update on their longer-term strategy of expanding Sage Intacct’s total addressable market through geographic expansion and extending its scope from services companies to a focused set of product-oriented verticals. When Sage acquired Intacct in 2017, most of its sales were to services businesses in North America. It has since expanded its revenues in the U.K., Australia and South Africa, and is beginning to penetrate the French and German markets.
For addressing under-penetrated product-oriented verticals, Sage began focusing on construction and real-estate development companies in 2020 with a financial package. Traditionally, midsize companies in this industry have not adopted digital technology because of the barriers to productivity using available technology and a disinclination to try new techniques. Sage has since added payroll, construction management and estimating functionality designed specifically for this industry and specific sub-verticals, including general and specialty contractors, real estate developers and real estate owners. It also has targeted midsize distributors, another business type that can benefit from the next generation of ERP software that streamlines processes and administrative tasks while providing executives and managers with deeper situational awareness.
Sage has demonstrated significant progress in its evolution over the past seven years. It also faces a highly competitive market with many competent competitors, so there is pressure for it to continue to achieve steady advancements in its offerings, its marketing and its sales execution.
Today, CFOs that are contemplating a change to their ERP or financial management systems for the first time in decades must take a strategic approach to the buying process. They should not consider replacements in like-for-like terms but instead evaluate software providers in the context of the future shape of the organization. Technology has and will continue to make it possible to redefine how work is accomplished in finance and accounting. It’s likely that over the next five years, CFOs increasingly will be pressured to change from independent boards that compare the company’s financial operations to other, best-in-class examples by staff and prospective staff members that want the more positive and productive working environment that technology can provide. I recommend that midsize enterprises that are considering replacing their existing ERP system take a strategic approach to their purchase decision and include Sage in the list of providers they consider.
Regards,
Robert Kugel