Acounting Software Acquisitions continue - Sage and Access. Where is the Industry going?

The press have been busy covering the latest round of acquisitions. I’d like to have a look at a couple of these

Sage

Firstly, Sage announced at the end of last month that they were acquiring UK Construction Software specialist Tekton for £21m. The Sage board continues to look for growth via acquisition and this news adds to a long string of purchases over recent years.

On interesting aspect of this purchase is that Tekton’s software – evision, is based on one of Microsoft’s own accounting products – Dynamics NAV.

Sage and Microsoft are often regarded as direct competitors in the Accounting Software market so the fact that Sage has purchased Tekton raises some interesting questions.

Will Sage re-write the product to work with their own software? If not how does Microsoft feel about this relationship?

Sage has made its money by acquiring dozens of different products and generating good profits from the user bases – so I guess if the finances stack up for this deal the explanation for the purchase could be very simple.

Access

Access Accounting announced last week their acquisition of Armstrong Consultants – for an undisclosed sum. Armstrong Consultants has a focus on the professional services and service management markets and is a reseller of Access Accounts. Other Access resellers may not be too pleased with this purchase. Software vendors owning resellers as well as supporting third party partners creates a conflict of interest, for example when allocating sales leads and supporting new business pitches.

More interesting perhaps Access has announced plans to grow their business to £100m t/o by 2017. Formed in 1991 their turnover has so far risen to c. £14m in 18 years so they have some way to achieve this growth. However the expansion plans look like they are off the back of acquisitions of new products, so it will be interesting to see how they fare – and whether they will come up against Sage with future deals

One thing that saddens me across the SME Accounting Software space is how established software vendors have not yet managed to deliver a ‘killer product’ that gains really significant global market share, Intuit being the possible exception. Satisfaction levels among the users of accounting software products still leaves a lot to be desired. This is in part down to serious functional weaknesses in many of the products on sale. Accountants using these systems want reliable, reasonably priced and functional products that are well supported. They also want software authors to invest enough in R&D to keep the application up to date with leading technologies.

In the case of Sage their revenue/profit growth has come primarily from acquisition – not organic growth of their existing products. In the case of Access Accounts their revenue comes mainly from the UK. For whatever reasons their product has not gained a dominant position in the market and they have not furthered their growth significantly in overseas countries.

So will we ever get to the point that the market consolidates into a handful of global products? One really starts to wonders whether the only chance of this happening is with a new player in the market. Google? Salesforce? Who knows?