CEOs head for exit at top accounts software houses
A difficult financial year got tougher for Sage last week when the FTSE-listed accounting software giant announced the departure of CEO Stephen Kelly after four years.
Kelly joined Sage from his previous role as the government’s chief operating officer in November 2014 vowing to transform the company into an integrated cloud dynamo rather than the directionless, desktop-dependant basket case he took over.
After disappointing half year results in April, Sage culled 30 executives including UK and Ireland managing director Alan Laing in a bid to sharpen the company’s focus on “execution”. But feedback from AccountingWEB’s Accounting Excellence Awards shows Sage has been losing ground in the UK, with the renamed Sage Business Cloud Accounting (formerly Sage One) failing to counteract growth from QuickBooks Online and Xero.
Kelly arrived in a burst of plublicity and grand public statements around supporting entrepreneurialism and bringing order to Sage’s fragmented product portfolio. But by his final financial year, the company had reverted to old habits by purchasing the online ERP system Intaact, which now sits alongside Sage Live, Sage 200 and Sage X3 as options for enterprise software shoppers.
Kelly’s first year was marked by initiatives to bring together entry-level cloud offerings for practitioners into a single “Sage Impact” suite, but progress slowed on this front. It took until this year for the rebadged Sage Accountants Cloud to finally appear. During that time, Taxfiler, Capium and specialist practice management applications such AccountancyManager, Senta and Xero HQ successfully infiltrated Sage’s practice market.
The final blow may have come last week from Deutsche Bank analysts, who downgraded Sage shares due to its lack of competitive innovation in the mid-market, where it was losing ground to Microsoft Dynamics and other smaller rivals such as AccountsIQ. The surprise announcement was released on 31 August.
After the early buzz, the nearest analogy for Kelly’s rein might be Tony Blair and his New Labour project – another example where a charismatic, PR-savvy executive took office in a blaze of optimism. Looking back, the reality doesn’t live up to the leader’s original vision for either organisation.
Nevertheless, Kelly negotiated a 12-month severance period during which he will collect his £800,000 salary, along with all his outstanding performance-related bonuses from previous years. Kelly will remain “available” to Sage during nine months of gardening leave while chief financial officer Steve Hare takes over his role and the search for a successor gets under way.
Investors did not react well to the surprise announcement, with Sage’s London Stock Exchange price dropping 7.8% to under 600 for the first time since April.
QuickBooks CEO moves upstairs
Coincidentally, Intuit also announced last week that CEO Brad Smith would be moving on from his role to become executive chairman of the US software giant from 1 January next year. In contrast to Kelly, Smith is being widely credited with achieving a successful cloud transition while maintaining revenues, which grew 15% to $6bn for the year to 31 July 2018. The QuickBooks developer is currently valued at more than $50bn in contrast to Sage’s £6.5bn ($8.4bn).
Sasan Goodarzi, currently executive vice president and general manager of Intuit’s small business and self-employed group will take over as CEO from Smith. Intuit’s year-end announcement credited his group with 18% growth in the financial year just path and adding another 1m QuickBooks Online users during that period.
Speaking to AccountingWEB at the QuickBooks Connect event in London in February, Goodarzi struck a suitably bullish note. “We are number two cloud accounting supplier in this country at the moment and we will be the number one very shortly,” he said.
The CEO changes for Sage and Intuit complete the set the globe’s leading cloud accounting players, all of which have changed leaders in the past 12 months. In March Xero CEO Rod Drury stepped back from the frontline to become non-executive chairman at the company he co-founded.
And former IRIS CEO Phill Robinson took over last September at Dutch software house Exact, which claims to be the world’s third biggest cloud software supplier. Amost immediately afterwards, however, the company closed down its UK office.
UK cloud developer Clear Books, while not quite in the same global league, parted company with its CEO Phil Sayers in April. His role was taken on by legal and HR head Ruth Fouracre, whose husband Tim set up Clear Books before moving on to found the challenger bank Countingup.
And while there haven't been any executive changes yet, FreeAgent is now part of the NatWest/RBS banking group.
Phase two of the cloud accounting era is definitely under way.
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