At SCS Cloud, our team of software specialists is committed to helping our clients succeed with everything modern cloud business technology has to offer. We pride ourselves on our comprehensive cloud knowledge, the extensive expertise that allows us to devise innovative solutions to companies’ problems. Of course, the field of cloud technology is constantly evolving—to stay on the cutting edge, we must keep up with the latest news and reports in this industry.
As you may have heard, Sage, a UK-based software company, recently acquired Intacct, a cloud-based ERP (Enterprise Resource Planning) software business. This multi-million dollar deal made tech headlines around the world, with many speculating on how it will affect both parties’ financial applications. The SCS Cloud team is here to help you better understand the ever-changing world of cloud technology. In fact, we recently published an entire “Sage Advice” series to help Sage ERP users decide if it’s time for their companies to switch applications. We realize that if you use Intacct or Sage ERP, you may be wondering how this development could affect your own operations. In the following blog, find out what this merger may mean for your company and how we can help you make the most of cloud business software.
Details of the Deal
Announced on July 25, 2017, Tech Crunch reports: “the software company Sage Group has agreed to purchase Intacct, a 19-year-old accounting software company, for $850 million.” This was a surprising move on Sage’s part, partially because, as Enterprise Times notes, “this deal was kept very quiet until this announcement” and also due to the fact that “the amount that Sage paid for Intacct seems a lot. With a projected annual recurring revenue (ARR) of $96 million this is a ratio of more than 8x Price/Earnings” which is “quite high.”
The price point for this relatively small American ERP software company seems particularly peculiar when you consider Tech Crunch’s figures on Intacct: the company “said in a related statement that it now has 11,000 customers for its enterprise resource planning software. Its revenue for fiscal year ending in June 2016 was $67 million, which pre-tax losses of $23 million.” Why would Sage pay so much to acquire a relatively minor competitor (most of Intacct’s clients are American, while Sage caters primarily to British businesses) whose books are technically in the red? This seems like a financially foolhardy decision, especially for a company whose “heritage…is still firmly based in accounting,” as per Enterprise Times.
Crunching the numbers, Accounting Today reports: “the acquisition is expected to add $26.07 million to Sage’s revenue this fiscal year,” but, at this rate, it will take the company quite awhile to earn back its investment, since “Sage will fund the acquisition through cash on hand, existing credit and a new $390 million term loan.” Apparent monetary miscalculations like this may be enough to shake Sage users’ trust in its ERP and financial software.
Splintered Software from Sage
This most recent merger may make a bit more sense in the context of Sage overall as a company. This software corporation has fueled its growth largely through acquisition rather than innovation. As Software Advice points out, “the Sage Group has acquired no fewer than 40 companies over its 30-year history.” To make use of these disparate applications, Sage has segmented its services, “[supporting] over 100 products across the world” and breaking up its offerings “into four main application categories” rather than integrating them into one business software suite. According to Software Advice, “Sage products are further separated into different versions to support functional and technology requirements of different sizes and types of organizations.” Essentially, what Sage seems to do is buy out smaller software companies and sell their products to niche markets, making minimal effort to create a cohesive system and splintering its services.
Especially with this Intacct acquisition, it doesn’t look like Sage is slowing down on buyouts any time soon. Accounting Today notes that while Intacct “is Sage’s largest acquisition to date,” the company has already “made several smaller acquisitions, including Fairsail, Compass, and North American Payments Disposal, in order to fill in its so-called ‘golden triangle’ of service offerings: Payroll and HR, payments, and accounting,” and that’s just for “fiscal year 2017.” Each acquisition further fractures Sage’s financial software offerings.
Lacking a single unified business software system poses serious problems for Sage users. As we describe in our “Sage Advice” blog on stretching your software’s limits, since Sage’s ERP application only serves limited functions, it must be supplemented with other software. Running multiple business software programs simultaneously rarely goes smoothly, at a minimum requiring extra data entry and at worst, causing frequent crashes as the two unrelated applications attempt to interact.
In a recent report by NetSuite, the Managing Director for Jayex Technology described his experience with Sage’s splintered software: “we were using three different products—Sage Line 50 for accounting, ACT! for CRM [Customer Relationship Management], and Excel for stock control and the rest. With so many systems, things were disjointed and all over the place.” Netsuite notes that having to “bolt on separate applications” to handle the functions Sage software lacks creates an “ad-hoc architecture that wont’ scale, inhibits growth, and introduces errors.” These issues are likely to worsen with Intacct’s foreign code, structure, and system in the jumbled Sage software mix.
The Outlook for Intacct
According to the deal just struck, Intacct will soon be known as “Sage Intacct.” According to Accounting Today, “Intacct’s ‘experienced senior management’ will keep their roles” and continue to focus on cloud-based sales in the United States. Accounting Today also reports: “Intacct is hoped to be a platform for growth” for Sage,” funded from the company’s ongoing cost-saving initiatives.” Basically, Intacct users should expect to experience roughly the same ERP software, but with a slightly different name, and, potentially, fewer features, to compensate for these “cost-saving initiatives.” Of course, Intacct’s executives are pleased with the merger, especially to the tune of $850 million.
What to Do If You Use Intacct or Sage ERP
If you’re a Sage or Intacct ERP user puzzling over how this recent purchase will affect your programs, we have good news and bad news. The good news is that this acquisition is unlikely to have a major effect on your applications. They’ll probably run just about the same as they did before. The bad news, however, is that this buyout highlights a more general problem with both Sage and Intacct: as standalone software programs, they don’t allow you to benefit from everything cloud-based business software can provide. To truly harness the potential of the cloud for your company, you need a full suite of interconnected applications that can instantly share information, coordinate their codes, and exponentially expand your productivity. So, if you use Intacct or Sage ERP, our advice is to take a good, hard look at how well your programs are actually performing for you and consider changing to a set of applications that will truly optimize your operations.
How SCS Cloud Can Help
If you’ve been thinking about upgrading your ERP or any other cloud-based business software, our expert team would be delighted to assist you. We can consult with you to teach you more about the modern market and help you decide what is right for your company. Our skilled programmers can also custom develop a cloud solution to suit your specific needs. When you’re ready to transition to your new suite of applications, we also offer implementation assistance, as well as support and training.
Learn More About Contemporary Cloud-Based Business Software
Do you have more questions about the Intacct acquisition or Sage software? Are you ready to maximize your potential with truly comprehensive cloud-based business software? Contact SCS Cloud today to find out more and schedule your free consultation.