Editor in Chief (interim) AccountingWEB
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CEOs head for exit at top accounts software houses

5th Sep 2018
Editor in Chief (interim) AccountingWEB
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Sage CEO Stephen Kelly
Stephen Kelly_Sage CEO_AccountingWEB

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.

Replies (17)

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Mark Telford Chartered Accountant
By Mark Telford
05th Sep 2018 12:33

All trailing (and imploding/falling apart) in Xero's wake...

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By ireallyshouldknowthisbut
05th Sep 2018 14:06

Interesting after several business roles he spent 2 years in government in an influential role in the transformation of government processes before moving to a private sector company JUST at the point when MTD was being developed which under its original design all but mandated use of that private sector's (or a competitor's) product.

"Fancy that!" as private eye might say.

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By Glenn Martin
05th Sep 2018 13:43

"Quickbooks is currently No 2 in the UK but will be No 1 very soon".

I will look at this thread in 12 months time and see if that has happened.

A big boast I think he will struggle to deliver on, even if they are giving subscriptions away.

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Replying to Glennzy:
Mark Telford Chartered Accountant
By Mark Telford
05th Sep 2018 22:43

I saw that and did think he may come to regret that comment.

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Replying to Glennzy:
By ShayaG
06th Sep 2018 13:57

In case any QBO people are listening: QBO is slow to use, too frequently has JavaScript errors (which don't corrupt your stored data but mean you have to enter a transaction again), has too high a click count for routine tasks like recording a payment, has far too many useless reports, and has a system for matching payments to invoices / bills that I'm still struggling to understand.

On the plus side, though, it's cheap :-)

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Replying to ShayaG:
By davidbrokerage
06th Sep 2018 16:54

I have the same issue with many of my clients. In fairness all the platforms have an issue at some point but I do find Xero being the least buggy.

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Replying to Glennzy:
By davidbrokerage
06th Sep 2018 16:53

Big difference between selling it cheap and stacking it high to actually using the QBO license they are dumping in the market.

I’d take the QBO numbers with a massive pinch of salt, what I see from Xero is people actually using the software.

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By Tornado
05th Sep 2018 17:20

Welcome to the seedy world of accounting software.

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By johnt27
06th Sep 2018 10:21

Sage is almost done as a serious competitor in the S of the SME space and their recent acquisitions over the past 18 months or so add credence to a seeming focus on large-scale accounting solutions where (perhaps) the competition is less fierce or, at least, it is easier to acquire your way out of trouble.

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By Mr J Andrews
06th Sep 2018 10:51

I hear there's an imminent vacancy back in the Government - Brexit Department.

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By North East Accountant
06th Sep 2018 11:18

Sacked, pushed or left of own accord?

Pushed I reckon.

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By Glenn Martin
06th Sep 2018 11:26

Peter Jones maybe should cash his cheque quickly for his advertising campaign which for me they got totally wrong, as its aimed at small business, (which he isn't) doesn't show the product (which is rule 1 of TV advertising surely), and the thought of running his empire on Sageone is not believable or relatable to a man who drives a white van for a living, which are you people that will be most effected by MTD, the target market of the campaign.

So in answer to the above got to be pushed.

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Dermot Hamblin
By LangdonHamblin
07th Sep 2018 08:54

An unusually acerbic piece from you @John Stokdyk.

You fail to mention that Exact shut up their UK shop.

Of course Stephen Kelly had charm and PR savvy in abundance - he's been extremely successful in his career and he's the CEO of a FTSE 100 business.
I think he's made a lot of changes in his time, but the business still has a huge way to go.
A revolving door of senior exec's does not help their image, although for a "failing" business, Sage exec's always end up landing decent jobs elsewhere. The Sales Director has jumped ship to Fluidly - a 2 year old start up!
The Accountants Division (AD) is too slow to innovate and currently has always had a muddled product set.
No exec stays long enough in the AD to sort out the mess - Nick Longden, Claire Carter, Paul Tooth, have all come and gone. Who is the current MD?
AD is a tiny part of Sage, and with the rest of the business selling through resellers, it's hard for AD, because a reseller model does not work with accountants.
Huge number of seminars and shows this winter/spring, at last, but you must have product to deliver afterwards.

No need to focus on the AD, when other divisions, deliver greater returns per sale.
Sage still don't get accountants.

You may recall the 90 day speech that we attended in Newcastle for Stephen Kelly, John. I was the bear and you were the bull. What's changed?

Everything's changed, but nothing has changed.

The next CEO needs a decent pay rise, to take this business on.

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By Cantona1
06th Sep 2018 20:25

Sage has not invented anything. It has grown by destroying promising and innovative companies. It is now pay back time. I will hold my celebration until it is delisted.

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By Silver Birch Accts
07th Sep 2018 12:35

Just a thought, look into the future and everybody is using Cloud based accounting software (which appears to be the the dominant offering now) and your provider goes bust.
It is going to happen there are too many suppliers (many are very similar and full of bloatware) They have spent a lot of money on development, adverting and promotion. If they don't recover this then they are going to feel the strain and some will go to the wall leaving you unable to log into your software. What guarantees have the Government obtained to protect tax payers as they are forced into choosing from so many products but knowing how financially stable they are. Within say five years the market will shrink and many of the software companies chasing your clients money will have gone. I see a major problem with no solution unless surviving software companies take on the crashed ones. This is survival of the fittest and only the big players will survive.
Think of this when advising clients on which Cloud based product to go with, now they may not be around to even see full MTD being rolled out.

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By mike120636
08th Sep 2018 13:06

I sold Sage in the 90's. I didn't think they ever grasped the nettle of Windows. I switched to Exchequer. Great software for core accounting but weak in peripheral areas like stock management. All through Sage has pursued commercial interests and neglected production of world beating accounting software. Unfortunately accountants have been badly served in the rush for growth and share values. A previous writer makes a good point about Quick Books. It is not a great program but, like Sage, it is being well marketed. When will we get accounting software that does the job we want it to do rather than being a vehicle for quick profits?

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By AndrewV12
12th Sep 2018 11:58

I have found Sage accounting not that great, and judging from the rubbish reports I have received from clients, I dont think I am alone in this.

Stephen Kelly is just like most accountancy software..... promises the world and delivers...... a mess for the accountant to sort out.
But to be fair it has a great reputation.

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