Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions? Part Eight: More Challenges and User Recommendations

Perils of Partnering

In March, Best Software, Inc., one of the leading current providers of integrated accounting, business management, human resources (HR)/payroll and fixed asset solutions for small and mid-sized companies in North America, announced that its parent company, UK-based The Sage Group plc (LSE: SGE.L), had completed the acquisition of ACCPAC International, Inc. (www.accpac.com). The Sage Group plc (LSE:SGE.L)one of the leading providers of business management software for mid-sized companies worldwide, with annual sales of nearly $900 million (USD) and 3.6 million customers worldwide in fiscal 2003. ACCPAC International, Inc. (was, until recently, an independent subsidiary of the software powerhouse Computer Associates International, Inc. (NYSE: CA).

Incidentally, the fact that the dependence on partnering for products like reporting might show its ugly side in some instances could be exemplified by the recent copyright infringement lawsuit between Best and its former partner of ten years, Liveware Publishing Inc. of Claymont, Delaware.

Because of the litigation, which was recently settled down in arbitration for approximately $1.3 million (USD) in Liveware's favor, Best had to remove Liveware's R&R report writing tool from the Abra HR/Payroll system version 7.0 and later, and replace it with another report writer, Crystal Reports. The move has however forced at least some of the company's thousands of Abra Suite users to either recreate customized reports under the new system or buy a separate license for R&R from Liveware. Yet, because R&R and Crystal use different formats, and cannot "read" each other, Best's customers on Abra versions older than 7.0, cannot use their existing customized reports after making the switch to Abra version 7.0 or later. While the switch to Crystal might allow Best to take another step in merging its product lines, given many of its accounting systems already use Crystal Reports, there is always the risk of a disgruntled existing install base due to imposed painful changes.

Consequently, partner education about the still huge and expanding product portfolio cross-selling opportunities and new partner qualification remain daunting tasks too, despite Best's notable forays in that regard. Just the 6,600 VARs that Best has in North America will often inevitably lead to some partners competing for the same regional opportunity and underbidding each other. Furthermore, the situation may get aggravated by the fact that Best Software still has a cumbersome organization despite its recent restructuring.

One still has to deal with several primary offices stemming from former HQs of acquired companies, such as Pensacola, Florida (CPASoftware, now part of Specialized Business Solutions), Scottsdale, Arizona (formerly Interact Commerce, now CRM and Contact Management Solutions), Irvine, California (Corporate HQ and Mid-Market Accounting Solutions), Austin, Texas (Nonprofit Solutions), Norcross, Georgia (Small Business Accounting Solutions), and Herndon, Virginia (Specialized Business Solutions, original Best Software). It is likely that these local "centers of power" and mindsets will take some time to blend into a unified thinking and a message that is beneficial to VARs and customers. Not to mention the complication with ACCPAC and Softline's centers of power, and their resellers. For the first time, these acquisitions mark that Best Software has purchased vendors that compete head-on with its US VARs. Naturally, they are concerned about competition and whether Best can afford the research and development budget for its mushrooming products.

This is Part Eight of an eight-part note.

Parts One, Two, and Three presented the Event Summary.

Parts Four, Five, and Six discussed the Market Impact.

Part Seven began the presentation of Challenges.


ACCPAC's VAR channel particularly needs some bolstering. Furthermore, some regional Microsoft Business Solutions' (e.g., Great Plains, Navision, or Solomon) and Best Software's (e.g., MAS 90 or SalesLogix) resellers often generate more than $10 million (USD) in annual revenues. Conversely, not many of the almost 1,500 ACCPAC Advantage Series' VARs exceed $1 million (USD), which may likely cause consolidation, demise, or defection amongst VARs. One has to see how the above-mentioned ACCPAC's moves to nurture the relationship and the morale of its VARs and to make them more successful (profitable) will play with Best's enticing financing arrangements for its VARs and customers, particularly during these days of cash scarcity. Also, not only ACCPAC and Sage/Best may be plagued with the "accounting-only" perception, but their VARs have long been accustomed to deploying accounting point solutions (many of them are CPAs), and it will take much doing to retrain these to become full-fledged implementers of broad enterprise solutions including supply chain management (SCM) or CRM.

The fact of currently having only a several hundred CRM VARs (mostly accounting VAR converts) may confirm the fact that, although being numerous, current ACCPAC and Best VARs will not have many CRM experts and CRM implementation experience. The same would hold for warehouse management systems (WMS) and many other add-on applications the company has recently delivered. Thus, one of the biggest challenges for the company has been helping traditional accounting VARs get up to speed on the new offerings, and teaching them how to sell, market, and implement them. Only time will tell whether the beefed up support, adding a strategic sales group of reps with deeper knowledge of the products, vertical-market issues, and strategies VARs need to handle these larger projects, will suffice.

Hence, one should be aware of SAP's threat of wooing VARs into its fledgling but possibly attractive SAP Business One program, particularly given the fact that SAP emphasizes on the quality and not on a mere number of partners. Some disgruntled MBS and Best VARs that have been tired of internal cutthroat competition will have meanwhile seized SAP's first-mover value proposition, and will be sorely missed by their former partners. The forthcoming few years will be marked by wars for a limited number of VARs, and only the best-structured program for resellers will win.

Manufacturing ERP

Further on the down side, the combined company's native manufacturing ERP functionality across the board, besides being lopsided between lighter manufacturing functionality on one side and very solid financials and HR functionality on the other hand, has been a far cry from one of the strongest in the market, as the company does not exhibit much of a vertical focus either. The product is well suited for general light discrete manufacturing environments, with almost no support for complex and engineer-to-order (ETO) nor for lean and flow repetitive manufacturing, which is pale given the fact that some of its competitors offer a sharp vertical focus even to the precision of six-digit Standard Industrial Classification (SIC) codes within an industry (e.g., Navision and Epicor). A slew of manufacturing-centric competitors like Syspro, Epicor/Scala, or Intuitive Manufacturing Systems may boast many of these capabilities, in addition to solid financial modules and multinational coverage. Not to mention the capabilities of Tier 1 and Tier 2 ERP intruders.

Therefore, company should try to interest its resellers in industry specialization and provision of vertical extensions, and it should internally vertically incline its product offering and develop industry templates, wizards, and implementation methodologies to further decrease the time and expenses of implementation projects. Possibly, opting for a more focused third-party manufacturing product for ACCPAC Advantage would then fly in the face of being an end-to-end provider, which the company has been touting lately. Still, by typically offering the lower price point compared to the above solutions, ACCPAC may bet on the maneuvering space with its source code provision to customize a nearly-perfect fit and still offer a better deal for the customer.

The management team will further have to determine a narrow range of key go-to-markets for each product, clarify the positioning, and segment and target the sales channels. It will also have to vigorously deliver an assuring message to the current customers about the support, enhancement, and migration plans for their respective products. The task of keeping track of a growing matrix of upgrade compatibility relationships between multiple product lines and their own nuances (e.g., from Discovery to Enterprise) remains immense, in addition to some still outstanding integration and web-enablement effort for some products. With the large amalgam of products and a huge number of users using a plethora of different module gradations and releases, the likelihood of experiencing upgrade glitches may be high, even if the products may be genetically similar.

As for the rumors of Microsoft buying Sage, that would not be likely to happen, given it would not have much chance to pass the European Trade Commission's antitrust approval (Sage Group plc is a Newcastle, UK-based vendor), particularly with Microsoft's history with rival Intuit and others, and recent antitrust scrutiny and (unresolved) settlements in Europe and in two remaining US states. In that climate, it seems highly unlikely that the European Union will allow Microsoft to stake out a more dominant position in Europe given Sage's strong position in the UK and MBS Navision's strong position in continental Europe. However, it might not necessarily be the case with the rumors that SAP might be interested in buying Sage. Many are still puzzled with SAP recently taking Oracle's side regarding its attempt to buy PeopleSoft, as well as with the SAP management's indications of pursuing acquisitions. Given Sage would be by far the biggest acquisition in SAP's history, and due to SAP's discomfort with managing umpteen disparate product lines, it might not be very likely to happen, but it remains on people's minds.

Until something like that happens, Best Software/Sage will remain a pragmatic company that delivers products based on a savvy understanding of its customers' needs and the competitive forces in the market, and on constant adaptability. It is still standing on top of the hill in many SME markets, and it is typically a much more difficult task for anyone to capture the hill than to defend it. However, time is of the essence, and the vendor has to act fast with producing a sound and coherent product strategy that would shore up its customers and partners. Maybe the upcoming Best Insights 2004 conference in June would be the perfect time for the vendor to outline its blueprint?

Recent Announcements

Having been aware of the time factor, just weeks before the start of Best Software's worldwide Business Partner conference, Insights 2004, to be held June 1013 in Orlando, Florida, Best Software announced on May 18 that it has completed the integration of ACCPAC, which will operate as a business unit of Best Software. ACCPAC president and CEO, David M. Hood, will be leaving the company effective June 30, 2004, and Susan Sheridan has been promoted to the position of general manager for the ACCPAC business unit. The ACCPAC Simply Accounting product line will report to Best Software's small business division, and the ACCPAC mid-market business will report to Susan Sheridan, as part of the company's mid market division. In addition, ACCPAC's CRM business will report on an interim basis to Best's CEO Ron Verni and will be an integral component of an entire line of Customers and Contact Management and CRM products that also includes ACT! and SalesLogix.

Not surprisingly, on May 20, Best announced it has sold AccountMate, a mid-market source code accounting software developer acquired along with parent Softline, to an investment group, which includes select members of AccountMate's current management, for an undisclosed price. The announcement is in tune with Best Software's planned streamlining of corporate assets following the purchase of Softline, given that on April 28, it also sold Datafaction Inc., a developer of accounting software for CPAs, business managers, high net-worth planners, and production companies, to its former owner and CEO, Brian Kleinman, for an undisclosed price. The remaining asset from the Softline acquisition, BusinessVision, will be introduced to the Best Software Business Partner channel during Insights 2004, and will become part of Best Software's mid-market division, under the guidance of ACCPAC's new general manager, Susan Sheridan. BusinessVision's president and founder, Murray Aston, will remain in his current position, with responsibility for day-to-day management of the company, and will now report directly to Susan Sheridan.

Further on the streamlining front, on May 13, Best Software and CCH Tax and Accounting announced that they have entered into an agreement to provide complementary products and services to both companies' accountant customers. As a first step, the companies have announced a new integration between Best's CPAPractice Manager (formerly Visual Practice Management) and CCH's ProSystem fx Tax, potentially offering a seamless practice management and tax compliance solution for accountants.

As a result of this partnership, Best's CPASoftware division will no longer be developing its tax product, and will instead offer its customers tight integration with the market-leading tax solution from CCH Tax and Accounting - ProSystem fx Tax. To ensure an easy transition, existing CPASoftware tax customers will have access to free conversion services, web-based training, and other benefits, so that they can get up and running smoothly as soon as possible. With ProSystem fx Tax, CPASoftware customers will now have access to over 300 federal, state, city, and county modules to handle all processing requirements. They should also benefit from an extensive array of federal and state features, and many more forms, automatic calculations, and options.

User Recommendations

While current ACCPAC and Softline users should be encouraged by their vendors' ensured viability, current and prospective users should nevertheless monitor the consistency between the off-the-cuff announced strategy of not phasing-out any products, and the Sage/Best's actions in continuing to strategically support all of its acquired products. Interested companies and resellers should consider the added functionality and cross-selling opportunities from the acquisitions for an addition to their requirements list. Best's target market, single- and multisite and multinational light manufacturing companies and their satellite subsidiaries with up to $250 million-a-year (USD) in revenue, should consider the company's value proposition. Generally, these companies are rapidly growing and agile but have a limited IT budget and staff, a conformist IT strategy (a staunch Microsoft shop), and solid accounting, HR, manufacturing, distribution, CRM, and e-commerce collaboration requirements.

However, enterprises that have integration needs outside of the Microsoft environment, with multiple platform and strong scalability requirements, might want to look at more sophisticated offerings. To that end, with its global coverage, multinational product's capabilities, compact cross-module integration, and technological consistency, as well as with its cross-platform support, ACCPAC might be a viable option. ACCPAC's target market, single- and multisite and multinational accounting, light manufacturing, and distribution companies and their satellite subsidiaries with up to $250 million-a-year (USD) revenue range, should consider the company's value proposition, but avoid selecting it without looking at what the other vendors have to offer.

Global enterprises that have integration needs outside of the Microsoft environment, with multiple platform and with multiple dispersed locations, should earnestly evaluate ACCPAC and possibly its flexible—either on premise or hosted deployment—options. Looking at industry sectors, the company covers financial, distribution, manufacturing, and service sectors. Where it does target vertical sectors they would include manufacturing, distribution, retail, nonprofit, healthcare, and education via third-party add-ons and resellers' functional additions. Looking at industry sectors, Best Software covers financial, distribution, manufacturing, and service sectors. Preferred manufacturing styles are make-to-order (MTO), make-to-stock (MTS), and configured products or assemble to order (ATO) in discrete and semi-batch process manufacturing processes, while targeted vertical sectors also include third-party add-ons and resellers' functional additions.

Certainly, for SMEs that have long been using one of Sage's/Best's and ACCPAC's products for financials, fixed assets, and HR/Payroll, MAS 500, ACCPAC Advantage, or BatchMasterPFW should be seen as a logical, but not necessarily the only, ultimate solution. Existing customers should evaluate these specialty product add-ons or upward migration as a way to add value to their existing applications whether with an impending integration effort now or by waiting for the company to supply a generally available integrated solution. As a general rule of thumb, consider ACCPAC Pro Series product if you are rapidly changing small or medium light manufacturing enterprise with less than $100 million (USD) in revenues, but with growth aspirations and a need to customize the product as to accommodate a vertical solution.

ACCPAC Advantage Series suite only has basic manufacturing capabilities, but it has strengths in financials, payroll and inventory management, international features, and support for a broader range of implementation technologies (i.e., web access and more databases supported). Also, while it is easy to customize the user experience and while it provides many entry points for integration with specialty applications, Advantage is a more packaged application, while Pro Series is more suited to prospect with a need to modify the product for very specific needs at the source code level. Thus, Advantage Series should be evaluated in moderately agile and changing medium and large enterprises (up to $250 million (USD) in revenues) where international business management is needed and the traditional product features, functions and scalability still represent a very important part of the selection.

Enterprises looking for a much broader functionality beyond traditional ERP boundaries (e.g., more intricate CRM and supplier relationship management (SRM) functions such as content management, personalization and relationship optimization, product lifecycle management (PLM), direct materials procurement, plant maintenance, or complex project management/engineer-to-order (ETO) functionality) from a single vendor may benefit from evaluating other products at this stage.

While we believe that the vendor will not phase-out acquired products in a foreseeable future, some outstanding integration issues, intra-company organizational alignment, and discontinuation of redundant products are always to be expected. Consequently, users evaluating the above individual products should keep themselves informed and consider generally available (GA) functionality only. The major issue will be to obtain the firm delivery schedule of migration strategy for all Best flagship back-office applications.

Potential clients should conduct preliminary research on the industry expertise and reference accounts of regional offices or affiliate service providers of major products. Existing non-Sage/Best Software back-office users of certain popular products like Abra, ACT!, and SalesLogix should clarify their support status and the long-term product development and migration strategy with Best management. Existing users of the products that possibly face stabilization or discontinuation may benefit from querying the company's future product migration path, service and support, and scalability strategy. Existing customers with products based on a proprietary technology, custom systems, or products from other vendors should review the affiliate's development capabilities in order to gain data integration between their various systems. They should be asking the vendor whether, how, and when the above CRM, WMS, EDI, and B2B capabilities could be added to their investment. They should also inquire about any possible impact (or benefits) of migrating towards a more advanced offering.

Very detailed information about some Best Software's and ACCPAC's products is included in the Technology Evaluation Centers at www.erpevaluation.com, www.hrsoftwarecomparison.com, www.crmevaluation.com, or www.financialsoftwarecomparison.com.

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