Sage Intacct: Acquisition On Track

Now more than a year post acquisition, Sage Intacct remains on a solid growth trajectory with accelerating product / technology investments and evolving distribution capabilities. Earlier in October, I had a chance to catch up with the leadership team in San Jose, CA, prior to their annual user and partner event just completed in Nashville.

Business Update

Early on in the Analyst Day meeting, it became clear that virtually the entire leadership team has remained on board, and are committed to its future – and the Intacct “get-it-done” and people-centric culture has been maintained, with the business unit intentionally left alone for the first year. Having been involved in a number of acquisitions / mergers myself, maintaining a low attrition rate across the board is a sign that things are going well.

CEO Rob Reid emphasized that the business unit continues to achieve strong 30-40% top-line growth – with Sage corporate significantly investing in marketing and product management capabilities, and helping expand Sage Intacct’s VAR distribution channel internationally (especially in Europe). Given the $850 million (8.5X trailing 12 month) valuation associated with the acquisition just prior to its planned IPO – we estimate that the unit will likely reach a $130+ million run-rate before year-end, which is a real win for Sage.

While its AICPA channel remains important to its future, the business unit has increasingly targeted a range of micro-verticals (and channel partners) since the acquisition – including SaaS and Software firms, NFPs and Professional Services firms, with plans to expand into Financial Services, Healthcare, Hospitals and Wholesale Distribution.

This evolved go-to-market strategy is apparently working well, as seventy five percent of its new opportunities are now focused around the micro-verticals versus more traditional horizontal marketing campaigns. No doubt, leveraging Sage’s traditional partners has helped grow its VAR channel – however, it is also aggressively building new micro-vertical targeted relationships as well, as it attempts to evolve its Direct / VAR deal mix from 55% / 45% to 40% / 60% going forward.

New Initiatives

While Sage Intacct made a number of new announcements at its annual Advantage 2018 conference in Nashville, TN last week (3,000+ attendees – up more than 50% from last year), the two big initiatives that I’d like to highlight are its launch of the new Sage Intacct Budgeting and Planning Solution, and its investments to embed a range of AI / ML capabilities into the product.

New SMB Budgeting / Planning Tool

While Sage Intacct continues to primarily target companies with 100-500 employees – the unit has a significant number of customers both above and below these thresholds. In fact, its new budgeting and planning offering is especially well suited for companies with 50-200 employees, a segment not very well served by the range of FP&A competitors in the marketplace (including Adaptive Insights, Host Analytics and others).

This past Spring, Sage Intacct acquired a small Tel Aviv-based software developer, Budgeta, that brought the initial version of the cloud-based financial planning and analysis application to market two years ago. Since its acquisition six months ago, Sage Intacct has been harmonizing the data models between its core Financial Management database and the acquired offering, as well as implementing “dimensions” (before launching at Advantage). Based on the demo that was provided during the Analyst Day, the product is clearly very easy to use, has bi-directional data synchronization with the core Sage Intacct data engine, and offers collaborative and what-if scenarios that make it very powerful. The offering is highly customizable, with the ability to add widgets, KPIs and dashboards.

We think this is a very smart line-extension for Sage Intacct. We anticipate rapid product adoption, well beyond the 30 or so accounts that participated in the BETA program – as this is a terrific cross-sell opportunity to expand the footprint into important market adjacencies that are under served (especially for small but complex orgs, with multiple departments outgrowing Excel). Sage Intacct believes that only 5-10 percent of its 12,000 customers have a planning tool. If it can sell even 10 percent of its customer base over the next two years, this would create a significant recurring revenue stream at $10-15K per customer per year. In fact, we would not be surprised to see the new FP&A solution potentially lead a product sale over time, with the ability to up-sell the core Sage Intacct accounting solution when the customer is ready. Everybody does budgeting and planning.

Finance 3.0 and AI

During the Analyst Day event, Sage Intacct emphasized that it believed we are entering a new era of Finance – what it is calling Finance 3.0. It framed Finance 1.0 as representing yesteryear’s focus on financial statements, compliance and the like, with Finance 2.0 helping CFOs move from GAAP accounting to a focus on real-time analytics. In its scenario, CFOs and their teams are increasingly freed up from repetitive tasks in Finance 3.0, to focus on strategic, future-focused issues, including evolving opportunities and threats.

Source: Sage Intacct, October 2018

As the chart highlights, at the heart of Finance 3.0 are three key aspirations: 1) eliminating the close; 2) continuous audit; and 3) predictive analytics. In this regard, Sage Intacct made a number of product announcements that begin to support its vision (e.g., Dynamic Allocations).

However, much of its investment going forward will focus on leveraging powerful (embedded / integrated) AI and Machine Learning (ML) capabilities to automate a number of routine financial tasks being performed today – where a huge chunk of staff time is devoted. In this regard, we wholeheartedly agree with Sage Intacct, as the Office of the CFO is especially ripe for the AI and Automation / bot revolution we are in the middle of.

Great examples of initiatives already underway include performing banking reconciliations, anomaly detection, continuous trend monitoring, and the like. While a number of other financial management players are likewise moving toward a “continuous accounting” or “continuous close” model (see Workday and Adaptive Insights: Summary Notes from Rising 18) – it is clear that Sage Intacct is right there with them for their SMB-targeted market segments.

Lastly, in regards to Predictive Analytics, Sage Intacct highlighted two key initiatives – a new interactive custom report writer and embedded financial analytics (coming in 2019). Importantly, Sage Intacct is now working more broadly with Sage corporate on a range of AI-based initiatives including cash flow forecasting, and real-time performance insights. Leveraging these core technology assets will be critically important to the business units success longer term.

Net / Net

I first started tracking Intacct more than 10 years ago. To see where they have journeyed is truly impressive. I walked away from the meeting firmly believing that the acquisition of Intacct by Sage is working – and will continue to work – so long as Sage continues to give the business unit some breathing room, and foster its people-centric “intrapreneural” culture.

The business unit has remained highly customer-focused – with Sage corporate investing for the future both in terms of enabling technologies (especially around AI), as well as innovative line-extensions such as its Budgeting and Planning solution. With no deflections thus far, Sage Intacct should be in for continued growth over the next 12-24 months. Stay tuned.


Adaptive Insights: Poised for Continued Growth

In mid-January 2018, I had the opportunity to catch up with Adaptive Insights’ VP of Product Marketing, who provided an informed update on the firm. Having followed Adaptive Insights for more than 10 years, I was gratified to learn that it had reached two important milestones by year-end 2017 – surpassing both the $100 million USD revenue threshold and $100 million USD in annual recurring subscriptions under contract. Both of these are visible markers that often signal an IPO on the horizon – which I would not be surprised to see by mid-to-late 2018, should the current window remain open. With more than 3,700 customers, 30 percent top-line growth, a rebuilt and strengthened senior management team (built to further scale the business), and an expanded set of beachhead solutions beyond the Office of the CFO (and the Financial Planning / Performance Management / Budgeting / Forecasting / Reporting market), Adaptive Insights is poised to enter its next phase of growth.

While hinted at in our call last month, Adaptive Insights yesterday announced the launch of its Business Planning Cloud, the latest repositioning of its core planning platform – as well as the first of what will likely be several new functional solutions, Adaptive Insights for Sales.  It was clear from the recent briefing (and a short follow-up call again yesterday morning) that Adaptive Insights has continued to invest in the platform – putting differentiated product “meat” behind its marketing mantra of “Easy, Powerful and Fast.”

While well known for its ease-of-use, highly collaborative approach to planning and strong data discovery / visualization capabilities (via dashboards) – especially for its primary mid-market target audience – Adaptive Insights has scaled-up its core planning platform to support larger enterprise requirements. In fact, I was not surprised to learn that 24 percent of its business is already with enterprise customers, although that figure is likely to grow substantially over the next few years as their sweet spot expands to firms with as many as 10,000 employees.

Built from the ground up as a multi-tenant and in-memory offering, its core multidimensional modeling, reporting and analytics platform can now scale to support the needs of large and complex models (and enterprises). This applies to the number of transactions records / users / accounts / what-if versions / scenarios or dimensions in their multi-dimensional cubes.

The Adaptive Insights for Sales solution appear to be the first of several new functionally-targeted solutions on the drawing board at it formalizes its vision of serving other functional domains beyond the Office of the CFO. Specifically targeting the sales operations function, the offering focuses on capacity and compensation planning, as well as quota and territory modeling and management. It is easy to see the significant opportunity in front of them – although they will no doubt face stiff competition, from specialists such as Ops Panda, as well as broader competitors such as Anaplan.

While having six live customers is a great start, this is a new and different buying center for the firm, and will no doubt take considerable time to create and capture significant demand. Helping to propel growth – of both large enterprise accounts and its expanded bag of functionally-targeted solutions – is a direct sales force launched mid-year 2017 (which now has 8 reps). While Adaptive Insights estimates that 50 percent of its recent deal activity has been touched by its 200+ partners, its growing direct sales force will no doubt lead the charge as it moves up market and creates larger and larger (multi-function) planning relationships.

Other planning-intensive areas that Adaptive Insights has already had some success include Workforce Planning, Project Planning and Operations Planning. Which one leads the way to become the next (functional) solution beachhead is not yet clear. However, what is clear is that Adaptive Insights will increasingly pursue a land-and-expand go-to-market model.

Key Takeaways

At this point, Adaptive Insights biggest challenges appear to be execution related, as the market opportunity for cloud-based planning tools is robust and growing. At the same time, the space is ripe with both traditional competitors (e.g., Oracle, Anaplan, Host Analytics, IBM, SAP), as well as a bevy of emerging players mostly targeting specific niche markets.  It will be interesting to follow how it plays out over time among Adaptive Insights’ large installed base of NetSuite customers, after its acquisition by Oracle a little more than a year ago.

We like Adaptive Insights move beyond Finance, and beyond the mid-market, as it sets itself up to grow into a sizable platform-based business planning player. Many of the core user benefits that today brings it to the table in Finance will likewise play elsewhere – but it will take time and substantial sales and marketing investment / muscle to establish the brand beyond its well-known core Financial Planning beachhead. Continuing to put the pedal-to-the-medal on its international expansion and vertical offerings will also be critical for success.

If you are not already subscribed to my blog, I encourage you to do so. After taking a couple of months off over the winter, I’m gearing up to more regularly publish again. This will include highlights from some new buyer demand research I have been conducting related to the digital journey, and the AI-driven future that is in front of us. Lots of interesting new insight on the horizon.

Bill McNee
February 13, 2018


Authored by on November 19, 2018 at http://mcneeassociates.com/tag/budgeting/


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