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        Robert Kugel's Analyst Perspectives

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        Sage Positioned to Gain from Seismic Shift in ERP Market

        I recently attended Sage Software’s Partner Summit. Implementation partners account for most of the sales and implementation of finance and accounting applications designed for small and midsize businesses, so they are important to the success of the software vendor. These events are designed to inform partners of product enhancements and the product and technology roadmap as well as provide a perspective on market conditions and trends.

        My key takeaway is that Sage is well positioned to take full advantage of the most profound change in business computing since the last seismic event, the introduction of “client-server” computing in the 1990s. That term is in quotes because the system architecture was arguably far less important to that business computing revolution compared to the graphical user interface, event-driven programming and the SQL database that fundamentally changed how businesses operate. Then, as today, it was a synergistic combination of innovations that made the difference.

        With the eruption of interest in generative AI, it’s now almost trite to state that artificial intelligence will have a profound impact on how finance and accounting departments are managed. But in this regard, it’s important to distinguish between “boring AI” and generative AI using large language models. Both will enable finance and accounting department executives to deal with the challenge of finding and retaining the best people to do the work. But boring AI is already here, and capabilities will multiply rapidly over the next few years as software vendors introduce, expand and refine functionalities. Recognizing its strategic importance, Sage formed its AI team four years ago and, for example, has already introduced intelligent invoice upload and processing.

        AI may be the bright shiny object, but its practicality stems from a decades-long list of existing technologies including in-memory computing, novel database structures, multiple forms of data stores, hyperscalers, increased Ventana_Research_2023_Assertion_ERP_AI_in_ERP_43_S-2sophistication of open application programming interfaces and the ubiquity of cloud computing. Like client-server computing before it, AI, along with natural language processing and generation, will transform how work is performed. The frequently repeated prediction that robots will take over the department is misplaced. Technology will substantially reduce the robotic work done by accountants, enabling them to be more productive. Rather than putting them out of work, AI will address the current shortage of accountants and make the profession more attractive to those entering the workforce. In the 2020s, technology will go a long way to achieving the long-sought objective of having computing systems think and act like an individual in a specific role, rather than forcing users to work deliberately and adapt to a system’s requirements. The technology is so valuable that Ventana Research asserts that, by 2026, almost all vendors of enterprise resource planning software will incorporate AI to reduce workloads, speed processes and reduce errors.

        Sage’s product roadmap recognizes that technology is essential for enabling accounting departments to address the needs of a 21st century organization. A key characteristic of back-office functions is that the distance between strategic and in-the-weeds is vanishingly small because accurate and timely management of trivial details is what matters most. Streamlining processes and eliminating manual steps through automation and error reduction are strategically important because these address hidden killers of productivity and improve the performance of the finance and accounting department and by extension, the entire organization. The SMBs that Sage serves stand to gain substantial benefits from AI and technology by cutting administrative burdens, providing better information and insights about the performance and health of the organization, and in so doing, enable organizations to improve operational and financial performance. In this context, the Partner Summit showcased several initiatives worth noting.

        Sage is rolling out Inbox, a user interface that organizes tasks, collaboration and communication around a familiar email motif. Some of the capabilities covered at the event are already available, while others mentioned will be rolled out over the next year. Inbox illustrates how the seemingly trivial can have a significantly positive impact on performance. The software mimics how many back-office processes work, such as accounts payable and receivable. Both can be made more efficient using workflows and AI, which make it possible to automatically ingest and process email messages and attached forms (including electronic documents). This cuts down on tedious tasks and can substantially reduce errors caused by data entry. Ultimately, Inbox will “read” incoming emails, identify those that it can respond to (such as a request for a duplicate invoice to be sent to another location) and then automatically initiate the response. A staff member will only have to review it and approve or amend it as necessary.

        Inbox operates with user-centric workflows that keep things organized, alerting individuals to tasks that need doing, escalating issues when necessary and ensuring approvals and other process requirements are met. Ventana_Research_Benchmark_Research_Office_of_Finance_19_06_Midsize_Technology_Gap_220927 (1)Organizing end-to-end processes in a single, logical interface centralizes information storage and simplifies search when needed. It also makes it possible to support customer and vendor self-service, enabling (with proper credentials) access to statements and transactions history, facilitating payments and cash application and ensuring contact and other account data is current.

        The Sage Network isn’t entirely new, but there is significant potential for it to provide differentiation by expanding sources of value to Sage customers beyond accounting and reporting. Online applications for e-invoicing, AP automation and expanded payment processor options will soon be available. The network facilitates transactions between suppliers and buyers by enabling the 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. It provides tax compliance services, streamlining computation and filing, which is increasingly important in countries with a value added tax regime because of now-common mandates to pay VAT at the time of the transaction rather than at a period end. The network provides an immediate and secure connection to a range of related services such as accountants and financial institutions.

        The Sage Network is currently available to users of Sage Intacct, Sage 50 UKI and QuickBooks, with availability in the coming fiscal year to other Sage accounting applications as well as Xero and Acumatica. 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 SMBs to close the technology gap between midsize and larger establishments. The network also reduces the reliance of midsize organizations on spreadsheets, which are excellent tools for personal productivity but aren’t well suited to support an organization’s business processes. Our Office of Finance Benchmark Research found a pervasive reliance on spreadsheets by midsize organizations for a broad range of accounting, analysis and reporting tasks.

        A broader initiative is generative AI, which, as my colleague has articulated, refers to a type of artificial intelligence capable of creating original content in the form of text, images or sound. It employs deep learning techniques such as neural networks to learn patterns and structures from existing data and then generate new content based on that learning. The essence of generative AI’s utility is its heightened ability to understand natural human language to a far greater degree than current search engines offer, even when language is less than precise. Its ability to infer meaning from natural language input facilitates its performance in retrieving information, summarizing or classifying text as well as generating content, translating text into another language and writing computer code.

        Generative AI has gained frenzied attention in the months since ChatGPT was unveiled. A key challenge for generative AI in business is achieving a high level of quality and relevance with limited risk of errors or running afoul of legal or regulatory issues. To hope to do this, systems must be carefully prepared and constantly evaluated to ensure the generated content meets necessary standards. As with its other AI initiatives, Sage’s focus is on safely harnessing the power of generative AI to reimagine how finance and accounting departments work.

        SMBs generally and accounting departments specifically have benefited greatly from technological advances over the past two decades. Midsize organizations have most of the requirements of larger businesses but fewer resources – chiefly people and money – to address them. By boosting productivity, the new generation of ERP and financial management software will enable these organizations to be more competitive and scalable than ever. Sage’s systems are designed for a broad array of business sizes and vertical industries. Its roadmap and development priorities will enable its customers to make practical use of new capabilities as they become available. I recommend that financial executives considering a new ERP system include Sage’s software in that evaluation.


        Robert Kugel


        Robert Kugel
        Executive Director, Business Research

        Robert Kugel leads business software research for Ventana Research, now part of ISG. His team covers technology and applications spanning front- and back-office enterprise functions, and he personally runs the Office of Finance area of expertise. Rob is a CFA charter holder and a published author and thought leader on integrated business planning (IBP).


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