Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions? Part Five: Market Impact of Joint Effort

Market Impact of Joint Effort

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).

"Freedom of choice" and "openness" mantras have been professed independently by both Best and ACCPAC, which bodes well for the joint effort going forward, but ACCPAC also brings many other missing parts to the Sage/Best collection. Like its former competitors and now partner and sibling companies, ACCPAC has long made a conscious decision to go for product distribution solely through partners or value added resellers (VARs). This has often proven to be advantageous to small and medium enterprise's (SME) for keeping costs down, and, as selling through partners requires a higher quality of product support, and accompanying documentation. Moreover, direct and indirect channels that have already been built in targeted countries has helped the company with product translation and localization issues, which has resulted in the solid multinational capabilities of the product.

The company has become an undisputed leader in Canadian, South African, and ASEAN (South East Asia) accounting markets, with high positions in many other established and emerging markets.Regarding the Advantage Series product, the VAR channel is truly global, since international companies can easily find ACCPAC VARs capable of supporting their needs across multiple countries, contrary to most competitors (including Sage, Best, and Softline) whose channels have expertise that typically focus on specific products by local region and offer limited cross product support. Best Software, in particular, has never had a product that satisfied core accounting in Canada and internationally, let alone for specific regional requirements for places like in India. Excise for manufacturing, sales tax, payroll, or fixed assets with two depreciating rates applied for each asset—in terms if Indian Companies Act and Income Tax Act, are regional requirements which ACCPAC will manage with ease.

ACCPAC targets SMEs with up to $250 million (USD) in annual revenues and with up to 1,000 employees that are in need of enterprise application solutions that are intuitive and, consequently, easy to use and implement. The company has often met this market's requirements of competitive and scalable priced, functional products, ease of modification, relatively short implementations, and dependable service and support. The modules can be implemented in a gradual fashion to tackle the most burning issues first. While at the enterprise products level, functionally, there has been an ever-diminishing difference from one general ledger (GL) or accounts payable (AP) product to another, ACCPAC might have still be leading the pack in delivering multicurrency and multinational and inter- and intra-company consolidation capabilities and in built-in financial report writers that provides flexible query and report creation without programming.

This is Part Five of an eight-part note.

Parts One, Two, and Three presented the event summary.

Part Four to Part Six will discuss the market impact.

Part Seven will cover challenges and Part Eight will make user recommendations.

Positioning for SMEs

As mentioned earlier, in addition to its SOHO (small office home office) offering called Simply Accounting, ACCPAC offers two flagship core accounting product suites, both being a foundation to its more complete set of the above-mentioned newly released enterprise applications beyond core ERP scope. Its chief original product would be the ACCPAC Advantage Series, formerly ACCPAC for Windows, whereas the ACCPAC Pro Series is the product suite formerly provided by Software Business Technologies (SBT), which ACCPAC acquired in 2000. Given the product had been branded as Pro Series even while with SBT, ACCPAC has retained that brand name, and has thereby likely gained an additional visibility in a market catering to light manufacturing and warehousing companies. This should be further boosted by the new ACCPAC WMS radio frequency-based (RF) warehouse management product that also integrates a wireless bar code reader and web-based, remote management to streamline the picking, packing, and shipping process. As mentioned earlier, the vendor has also added to its offering the suite of manufacturing products originally developed by Lahey Software to integrate with Pro Series.

Both Advantage Series and Pro Series are positioned for the small to mid-size enterprises. One of the key differences in the products' positioning lies in source code access. The Pro Series has always provided full source code availability for code modification throughout the suite. To that end, complete Microsoft Visual FoxPro source code allows professional programmers to make unlimited extensions and enhancements to address unique business-specific needs or interfaces. The above provision of source code might be attractive particularly against the background of ever increasing market awareness of the following facts:

1. that almost every business changes, and software must change with the business,
   
   
2. that even small businesses are really unique—one size can never fit all, and
   
   
3. that custom software is a requirement for many enterprises, even for the smaller ones.

Although the Advantage Series does not provide source code per se, it offers many entry points for other applications to integrate, even to the degree that core business logic is accessible and can be leveraged by the third party product. Furthermore, Advantage Series is web-based, simple object access protocol (SOAP) compliant, fully accessible without intermediate web-enabling technology such as Citrix MetaFrame or Microsoft Terminal Server (MTS), while the Pro Series is not yet web-based. Transaction data and other processes can now be performed using an Internet browser via the company intranet or the Internet. Several extended-ERP applications, including ACCPAC CRM and eTransact Web store module bring additional wireless and web-based functionality to the module suite. Advantage Series also has much stronger international features in terms of languages, taxation support, and currency handling than its Pro Series counterpart. Still, both product suites can be built upon to form a full suite of integrated web-based business applications. To that end, accounting, HR, CRM, POS, and WMS are tightly integrated with Advantage Series, while the manufacturing functionality is tightly integrated and available through selected third party products (such as MISys, COSS Systems, and EMR Innovations' ProcessPro 2K3 product). With Pro Series, however, accounting, CRM, manufacturing, and WMS are tightly integrated, while the HR integration is still in progress.

Additionally, ACCPAC applications are geared for growth since virtually all the major product lines are tiered into graded editions that share the same design and technology despite differing levels of functionality. They are aimed at enabling customers to select a product with features at a price point, that best suits their current needs. As the company grows, it should then move up to more advanced functionality without re-learning software or rebuilding databases. Although its competitors (and current parents as well) also offer scalability and migration options to more advanced functionality at the later stage, most of them still offer it through more disparate products leveraging disparate technologies, which often have to be relearned from scratch. Consequently, often the migration is not much easier than an implementation anew. Conversely, ACCPAC editions within a product suite (i.e. Advantage Series or eCRM) share similar functionality and screens, but differ in terms of the maximum number of supported users and related pricing.

Best Target Companies

Best Software also offers multiple flavors of SME systems to accommodate varying needs across the range of company sizes and industries with an attempt of clearer delineation and less internal competition between the products. These start with low-cost "desktop" solutions like Peachtree and ACT!, and are both sold primarily through retailers as well, like Microsoft Office. While nobody will dispute Microsoft's brand equity, Best could find its consumer product equivalent in ACT!, which has long been loved by the salespeople who use it. Furthermore, Best, ACCPAC and Intuit, owing to their respective Peachtree, Simply Accounting, and QuickBooks entry-level accounting products, benefit from huge migration feeder bases, and are thus able to "cut the air supply" for the likes of MBS, Exact, or SAP. However, of these three, Best has achieved the largest success at the upper level of the market, where Intuit, although with over 80 percent market share in retail SOHO accounting products has only been making nascent strides in the enterprise space and in the equivalent channel ramp-up.

Best's MAS 90 is targeted at mid-sized companies with 10 to 500 employees, and features more than 25 accounting, light manufacturing, distribution, e-commerce, BI, payroll, CRM, SFA, and financial reporting modules. Very readily recommended by CPAs, in addition to basic business management, MAS 90 offers industry-specific functionality for manufacturers and distributors, such as inventory management, bill of materials and job costing. The product might be ideal for small businesses who have outgrown an off-the-shelf application such as Peachtree Accounting, and there is a clear migration path available for customers who are ready to make that transition. MAS 200, the client/server version of MAS 90, handles higher transaction volumes, and supports multiple databases, including Microsoft SQL Server. Smaller companies with up to fifty employees are covered by BusinessWorks Gold, which, with eleven integrated modules and strong reporting tools, was devised to bridge the gap between entry-level products and MAS 90.

As the top of the range, MAS 500 (formerly marketed as Best Enterprise Suite and before that Acuity Financials) from Best's Mid-Market Division, is an integrated, SME-focused from ground up, international ERP package with multicurrency capabilities, targeted at companies above $25 million to $250 million (USD) in annual revenue and with over 200 to 2,500 employees. It is web-enabled, with browser access to the entire functionality, via Microsoft Terminal Services, business alerts, and workflow management. The package combines accounting, budgeting, distribution, manufacturing, project accounting, HR/payroll, enterprise reporting, and electronic commerce functions, and integrates with SalesLogix CRM. It features strong financials and project accounting functionality, and light discrete manufacturing (including a product configurator, engineering change management [ECM], materials requirement planning [MRP], and advanced planning and scheduling [APS]). Particularly strong is distribution functionality with robust inventory replenishment and supply chain visibility capabilities.

More Migration Tools

The upcoming product releases promise even more migration tools that facilitate moving data from the legacy system in place, and in particular tools to move data from MAS 90 and MAS 200. Moreover, the product blends its financial and accounting modules with Abra HR/Payroll, FAS Fixed Asset Management and analytics offerings from Best's Specialized Business Solutions unit. Also, project accounting, a number of pre-built integration hooks to popular third-party applications, extensive "drill down" and "drill around" navigational capabilities, and authentic customization tools (particularly the intuitive screen customization tool, used by "ordinary", less IT-oriented users, and with the ability to track or preserve changes for seamless future product upgrades), represent another set of attractive features.

Supported platforms are Windows NT/2000/XP and Microsoft SQL Server databases. The product is fairly new though, with slightly over 1,000 installations, but it has been developed from the ground up for Microsoft SQL Server, and is also developed in Visual Basic, making the transition to Microsoft .NET straightforward. The program might be a likely migration path for ACCPAC Advantage users, albeit only those that are on Microsoft platforms.

This concludes Part Five of an eight-part note.

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

Part Four began and Part Six will continue the discussion of the Market Impact.

Part Seven will cover Challenges and Part Eight will make User Recommendations.