I’ve been following cloud accounting vendor Intacct for almost a decade now. The mid-market vendor was always hampered in its goals by the higher relative profile that competitors FinancialForce and NetSuite had. The former was buoyed up by its Salesforce pedigree and hence had bigger brand recognition, while the latter, with its publicly listed status, was always one to garner more attention.

So to hear the news today that Sage, the UK-based (but globally focused) vendor of accounting products has acquired Intacct for an impressive $850 million price tag was big news. Big news because it means that FinancialForce is now the only independent mid-market cloud financial vendor left (since Oracle acquired NetSuite.) Big news because of the impressive price tag. And big news because Intacct was long rumored to be a near-term IPO candidate.

In its materials post the deal, Sage gave a clear indication of how Intacct fits within its portfolio but, have no doubt, as much as this deal is about targeting a new part of the market, it is more about increasing the cloud pedigree within the organization. It is important to note that Sage has fostered deep relationships with Salesforce, including building (and rebuilding) some of both its client-facing and practice management solutions on Force.com. Indeed I had suggested that there was the potential of a deeper strategic tie-up with Salesforce, time will tell what the Intacct deal does to that potential. Sage had also recently acquired Fairsail to build out its human capital offering.

sage intacct

Intacct was founded all the way back in 1999 and, despite being early to the market from a cloud perspective, never really found escape velocity. Well-respected industry analyst Brian Sommer reported that, as of a couple of months ago, the company’s metrics saw them with over 11,000 customers including one customer with over 3,000 users. Not enterprise ERP scale by any measure, but a good number of customers and with promising growth.

While some commentators have suggested that this is more an acquisition to help Sage fill in the white space between its SageLive and Sage X3 products, it strikes me that this is much more a case of Sage deepening its cloud credentials – Sage has been slower than its North American competitor, Intuit, to move to cloud models, and the DNA that it acquired (along with the code and customer base) should help it accelerate the much-needed changes if it is going to avoid market share degradation – Sage has some serious competition: at the smaller end of town both Intuit and Xero are voracious in their customer-acquisition ambitions, while in the middle market FinancialForce and Acumatica are growing fast. Sage must avoid any market share impacts from these vendors’ growth. A strong cloud-first story, leveraging Intacct’s long history, will help with this.

There is an interesting historical note here in that Intacct nearly folded in 2006, and that Emergence Capital, its first investor, wrote the check that kept the company going. That second investment made by Emergence was pivotal and Brian Jacobs, partner, Emergence Capital (and Intacct board member) had this to say:

In 2005, when Emergence Capital invested in Intacct, most companies were afraid to manage their books in the cloud.  Today, every company — both big and small — demands the reliability and security of the cloud for their most important financial applications. As a result, the largest application market in the world, financials, is now a race for cloud leadership.   Intacct’s market position as the independent US cloud leader was a strategic acquisition for Sage as it seeks global cloud leadership.

Indeed. As always, the proof of the pudding comes with the eating and time will tell whether Stephen Kelly, Sage’s CEO, does the right things with his new business unit and lets the cloud DNA change the way Sage approaches its other businesses.

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Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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