Sage Live (renamed Sage Business Cloud Accounting) was officially dropped from the Sage lineup in Australia 12 months ago in the face of furious competition and a too-distant roadmap. A new-look Sage is now swinging its weight behind solutions for mid-market with the localisation of Sage Intacct, an ERP acquired in 2017.
However, the shakeup is not just on the product front, says Sage’s Asia Pacific chief, Kerry Agiasotis. The Intacct approach is a blueprint for a new channel strategy that asks a lot more of partners and will raise the bar.
In the interview below, Agiasotis explains why Sage bought the cloud ERP and how Intacct is changing the way Sage operates in Australia.
Digital First: Why did Sage acquire Intacct? Was this just about getting into cloud ERP as quickly as possible?
Agiasotis: No, it wasn’t just about product. Our CEO (Steve Hare) talks about how we have to be a great SaaS company. It’s about having the business model and technology leadership which, over time, has been a challenge for Sage. The new direction has been exemplified by choosing (former Intacct CTO) Aaron Harris as CTO of Sage.
Digital First: Did Sage buy Intacct to go downmarket and target small business, and compete against Xero and Intuit?
Agiasotis: No, we are not playing in the small business sector. It is a misconception to compare Intacct to small business accounting software. This is really for larger, more complex businesses that outgrow their first accounting package.
In the US a strong proportion of Intacct’s customers have come from Intuit QuickBooks. Intacct is the graduation product for these organisations.
Digital First: How does Intacct do things differently to Sage?
Agiasotis: I spent a week in San Jose at Intacct’s offices understanding how they operate and what made it successful. It’s clear that they had a strong product but what was really impressive was how they competed. They saw that they had to build a strong ecosystem, with VARs (value-added resellers).
They know where they win and where they’re not strong and they stay very close to those areas where they are strong.
I really appreciated that Intacct’s business model as important to their success as the product. In Australia we have made sure that we replicated as much of that as possible. For example, making sure we had experienced resources in SaaS through to how we built the partner program and brought to market the broader ecosystem of tech partners. We spent the time to understand what worked there as well.
Digital First: What exactly did you replicate?
Agiasotis: The go-to-market model. We stayed very similar in how we are going to market, through channels. That is a core part of their business. Intacct also sells direct in the US, but we decided not to do that in Australia.
We did decide to bring their partner program here, which is very different. There is a very strong upfront qualification to be accepted as a Sage Intacct partner. It’s not about volume it’s about fit. It comes down to understanding that the SaaS world is that you’re building a recurring revenue model on software not just by selling services.
Digital First: How is that different to the way the Sage channel operates now?
Agiasotis: The old ERP model was the complete inverse. Selling software could be lucrative but it was point in time and the vast majority of revenue in the partner model was from selling services.
Then it’s qualification beyond that. Do you have both experience and a willingness to make this a successful business? It is the go-to-market aspect – sales people that understand the subject matter, they have marketing capability so that they can proactively market themselves, and that requires investment.
There is also the commercial model – there is no preferential model for performance. You have a spirit of partnership and from the very first sale we treat all partners equally. There is no tiering.
It’s philosophically different and really interesting. Of the eight partners that we are going live with, two were pre-existing ERP partners with a very different Sage partner program. They really saw the merit of this.
Becoming part of the program requires an investment in bringing the partners up to speed and the required knowledge they need product wise. We invest resources for the first few implementations to help them get off the ground.
Those things will differentiate what we are doing here.
Digital First: What else does Intacct do differently?
Agiasotis: Subject matter expertise. Of all the things I saw this is what Intacct has done very well. I don’t know if it was from inception but it was how they grew up. They mastered winning in an industry and then moved onto the next. They did it by building strong relationships in the partner community and bringing those lessons back in to productise, while staying with a singular product and code base. They did that very well.
Many organisations that have tried to go down a vertical path potentially compromise building into a common platform and sometimes they go off into other directions. Intacct was clever about what to bring into the product to address industry needs as well as (knowing what was) going too far.
Segmentation was important and the key qualifier was finding subject matter industries.
Overall it’s a partnering philosophy rather than reseller philosophy. We won’t end up with hundreds of partners here. We will have tens of partners that will be very focused on the industry that we believe will be successful.
Digital First: Partners? Just VARs or other types?
Agiasotis: We classify them as VARs as well as ISVs. The nuance is that it’s different to the way we have traditionally seen them. It’s not that we provide a product and off they go and resell. There is an ongoing and tight relationship with these organisations. The engagement on our side means we stay much closer. Not one partner manager for 50 partners, it’s a much lower ratio.
What partners bring to the table is more than product knowledge. It’s their ability to solve business problems in key industries. That’s been a key part of the selection process.
Nunzio Giunta from Giuntabell. His business is focused on the not-for-profit sector. He walks in and lives and breathes NFP. He understands intimately the problems of an NFP. That’s the only type of company he will sell to.
Digital First: Where does this leave Sage One?
Agiasotis: Sage One or Sage Business Cloud Accounting was built and has proliferated in the UK. We haven’t taken that product out of the UK. (Ed: Sage Australia was selling a South African version of Sage One.) I made the decision 12 months ago that that wasn’t going to be a primary focus for us in Australia.
The product categories that matter in the mid-market sector – financials and ERP, HR and payroll. We are not there to serve small business (directly), we are there to serve accountants who serve small business.
When I think about the product that we have had in this market (Sage One), it has been far more attuned to the professional user. Someone that gets accounting. And we have provided it to our accounts as a tool to use for their customers, but we are not actively out there trying to win in that category.
Digital First: Has Sage One in South Africa been killed off?
Agiasotis: In South Africa Sage One is the leading product in that segment and they continue to sell that. We have an install base here that bought it from Sage. That’s how we delivered our payroll offering. So we support it.
But in terms of actively winning in the market, you won’t see us actively pursuing small business. The product continues to be invested in from our South African market.
Sage is differentiated – you still have this combination of organisations that in local markets have capability. At the same time as Sage moves its portfolio to be cloud native, it becomes a single, unified, cloud native product. The first examples of that are Sage People and Sage Intacct.
Digital First: When Sage launches productivity and efficiency tools in the UK will you do it here?
Agiasotis: This marketplace has a heavy concentration of very advanced competitors. Xero has done a great job, it has captured a lot of market share and MYOB is chasing that and Intuit is going hard as well. That segment is very well served.
How do we serve our customers and extend capability to serve those customers? We see an opportunity and have taken a payroll product and extended it to our customers and that’s how we think about addressing the needs of small business here, through accountants.
Digital First: How are you planning on plugging the payroll with Intacct?
Agiasotis: We are a market leader in payroll with MicroPay (an on-premise payroll app). Twelve months ago we added the cloud-based Sage People product and those have been doing really well for us.
Even with this launch we have built an integration to MicroPay which is integrated to Sage People. So we will be offering an integrated suite across HR, Payroll and Accounting. MicrosPay is on-premise, but we have segregated capability. It’s a back-office engine that is cloud hosted. We have spent the energy to open it up with APIs. There’s a payroll admin (desktop) that would worry about making sure the data is correct around payroll, but all of the front of house and engagement with employees is cloud native.