The Accounting Podcast

Aaron Harris: In traditional software, software recorded the results of business. In the digital era, software conducts the business. You're configuring your software to be actually the business itself.

Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver-

David Leary: And I'm David Leary.

[00:00:22] Meet Aaron Harris, Sage's CTO
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Blake Oliver: We are recording live at Sage Transform in Las Vegas at The Venetian, and we are joined today by Aaron Harris, CTO at Sage. Aaron, thanks so much for joining

Aaron Harris: Thanks for having me.

Blake Oliver: Yeah and we spoke to you a couple of years ago at this conference; it had a different name. I think it, might've been still the Sage Intacct.

Aaron Harris: It was Advantage, we called it at time, yep.

Blake Oliver: You had just taken on the role of CTO Sage Global.

Aaron Harris: Yep.

Blake Oliver: You've been in that role now for a couple complicated, I'm sure, by pandemic restrictions and whatnot-

Aaron Harris: That- It's been interesting.

[00:00:58] The Sage Evolution
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Blake Oliver: I would love to just kind of understand a bit more about how your role has changed. So, you know, you used to be CTO at Intacct, and now you're overseeing this quite large portfolio of products. What's it like?

Aaron Harris: It's, um, quite a different world. It's changedin a lot of ways. Uh, I think the last time we spoke, I would have told you that I was one of the first developers on the Intacct product. Uh, I was the CTO, you know, for the, kind of the full run of the business, and I went from kind of growing a startup into something sort of scaled, and successful, but, but still, sort of a manageable- we were like 600, or 700 employees, right? It was- it was big, but it was manageable, but it was one product; it was one market; it was really one named competitor.

Now, with Sage, we've got a couple hundred products. Uh, we've got 80 offices around the world. We're actively selling into 27 different countries. We've got a range of products that go back to- products like Peachtree, which still have like a huge following, believe it or not, that are- they're not as current from a technology perspective, but they're really healthy businesses. We also have a lot of money we're investing into newer products, new cloud products. So, that's part of the fun is managing that- it's not just a big portfolio; it's a diverse portfolio, from a technology perspective, with lots of markets.

So I'm having a blast. Uh, I have a lot more pieces to play with than I had at Intacct, and frankly, Sage is a really healthy company, from a financials perspective. So, I've gone from the world of startup, where, you know, you're running lean and fast to a world where there's- I have so many resources available to me to do strategic things. Uh, it's just- it's a lot of fun.

David Leary: And you said it's 90, almost 100 now?

Aaron Harris: Oh, no, there's well, over a hundred products. Um, I sort of lose track in part ... Well, yeah-

David Leary: Well, I mean, I think you guys have got like 10 new ones in the last 12 months, maybe.

Aaron Harris: Well, we've done a couple of acquisitions. I think, actually, as recently as two weeks ago, I discovered a new product in our portfolio. We are a company going through a transformation, and part of that- it's not just that we're going from selling on-premise client server desktop products to selling cloud products. That's a completely different business model, right? It's a different business altogether. This journey we're on requires reshaping the business. So, the portfolio is constantly changing because there are going to be products that don't really fit the future Sage that we're building, and so, we're selling off parts of the business while we're acquiring new parts into the business.

[00:03:41] Old Sage v. New Sage
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Blake Oliver: So, the old Sage model- I apologize if you don't like what I'm going to say, but, like, here's my perspective of the old Sage. It was, "Let's buy a product; let's slap the Sage logo on it-

Aaron Harris: yup

Blake Oliver: -and let's sell it around the globe."

Aaron Harris: Yep.

Blake Oliver: Okay, so, fair enough?

Aaron Harris: No, it's a really, really fair perception. I think what I would say to that is, in my tenure now, as the CTO, we have not made a single acquisition that was in order to drive more profit, or revenue. In fact, every acquisition we've made, we've increased the investment. So, we're acquiring now to build the future company. We're not acquiring now to fit stuff into this scalable business model; we're acquiring for the new business model that's coming.

[00:04:30] What's Your Five-Year Plan, Sage?
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Blake Oliver: So, tell us more about that vision, your three- to five-year vision for Sage. It's got to be quite a massive task - taking that business model, and essentially flipping it around. Instead of acquiring companies and then just selling it under the Sage brand, now integrating them. We saw a little bit of that today in the keynote for Sage Intacct, where it looked like you're bringing in stuff from AutoEntry that was acquired a few years ago, um, in terms of bills and Uh, yeah, what is the- what is the grand strategy?

Aaron Harris: So, allow me to get kind of academic here.

Blake Oliver: Please.

Aaron Harris: When we started Intacct - it's nearly 22 years ago now - one of the big breakthroughs was this notion of multitenant architecture. It was this idea that if you're going to serve up your solution from the cloud through a browser, the only way to really do that economically is to create an architecture where all customers share the same computing resources. That drove completely different economics. Uh, the multitenant architecture made the economics work because you're really taking on more costs as a provider, and this led to subscription- a subscription-based business model.

What we believe is happening now is we're entering into a new generation of software that we're calling the digital era, right? So, we're moving from Software as a Service to digital, and our big bet is that just as multitenancy, this idea that everybody shares in computing resources, was the big breakthrough for Software as a Service, networks - we call them digital networks - are going to be the breakthrough architecture for this era sort of defined by digital transformation. And there's three kind of simple ways to think about it.

In traditional software, software recorded the results of business. In the digital era, software conducts the business. You're configuring your software to be actually the business itself, whether it's taking orders online; whether it's digitally interacting with suppliers to do your purchasing, to do your payments; digitally, you're interacting with banks to get credit. The business essentially moves into the software. So, that's the first big change.

The second big change is you now have to design the software in terms of the experience, and the way people interact; not just for the business anymore, but for the entire business ecosystem, right? The big breakthrough of Software as a Service - because of any time/anywhere access - was, now, employees - because they don't need to install any software - can just, you know, use a web browser to file an expense report, which is kind of breakthrough. With this digital era, we've got to design the software for a job applicant. We've got to design the software for a customer, who's accessing an invoice for a vendor that's providing payment information, right? So, now we're designing for the entire ecosystem.

And the last bit, which kind of gets back to that core concept of multitenancy, where everybody is sharing computing resources, with the digital network, we're extending that. They're actually sharing data now, and they're actually sharing activity, right? They are interacting together on the same platform. This is going to drive all of the innovation for the next couple of decades. That network becomes the pipes over which data flows. That data is what's going to power great AI breakthroughs. It creates new modes of trust. We can create blockchain ledgers on network, so that if two parties are interacting, we can write to a shared ledger. It just kind of goes on, and on, what this means in terms of breakthrough innovation.

[00:08:10] Let's Talk Multitenancy
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Blake Oliver: The breakthrough 20 years ago, which you built Intacct on was multitenancy. Let's use the same computing resources for multiple but those businesses still had walls between their data. And now, you want to take that down; let them share data. Obviously, there's challenges for how to do that securely.

Aaron Harris: It's very sophisticated.

Blake Oliver: Yes, but with blockchain, right? That's one way you could do it, and then everybody wins, I guess, is the idea with-

Aaron Harris: think one thing to be really clear on is multitenant products replaced on-prem products. The digital network is not going to replace multitenancy; it extends it. It enables lots of products with different architectures to connect to a network for digital exchange. So, this will enable even some of our products that are a little bit older to now participate in digital workflows. So, these- we've got this big business of Peachtree customers; it's called Sage 50 now. They want to be digital, too. They just love Peachtree too much to get off it and move on to something else. And so, we can plug them into the network so they can now, you know, pay, and get paid digitally. They can send digital documents and receive digital documents or can digitally interact with their banks. It extends and connects the experience for everybody.

David Leary: Something I think I tweeted out last week, or whatever is small businesses are just everything businesses now. You know, you're B2C, you're direct to consumer, you're B2B, and you're also a service business, and you're also an e-commerce multichannel business.. It sounds like accounting systems are now systems of everything, now. It's not just the accounting system. Like you're- you're the business. Like, you can't even conduct business, really, in the future, unless you're on an accounting platform. And so, what's the advantage that Sage has, in general, over other platforms out there for that network of that data exchange happening, or is it more of a world where all the accounting systems kind of open up to each other?

[00:10:06] It's Not "One for All ..."
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Aaron Harris: We believe the future is a very open, connected world where, you know, there's not going to be one network that wins, right?

David Leary: Mark Zuckerberg might disagree, but ...

Blake Oliver: Yes, I think

David Leary: The Sage Metaverse - breaking news-

Blake Oliver: Will Sage be in the metaverse?

Aaron Harris: I actually ... We could have a long conversation about that. I think there's real opportunities to think about commerce, and the implications of accounting, and compliance in the metaverse in really different ways.

Blake Oliver: I mean, I'm excited to talk about that. I don't-

Yeah, exactly. Well, let's save that. Maybe we can get to that at the end.

Aaron Harris: I would like to answer this question about what's our advantage.

Blake Oliver: Yeah, let's hear it.

[00:10:48] The Sage Advantage
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Aaron Harris: So, the advantage, sort of across categories, is that accounting data is the most trusted data in the business. You've got a- you've got a team of people. It might be one bookkeeper. It might be, you know, the CFO's team, but their job is to ensure that data gets into the system of record reliably, accurately, and that truthfully reflects the performance of the business, right? So, this data, by nature is trusted. So, we're starting off from having this really, really valuable set of data that we can build capabilities from. And in the case of Sage Intacct, or Sage, globally, we've got this massive install base of millions of customers across all of Sage. Uh, you know, we've got huge amounts of data just within Sage Intacct.

The network gives us a way to get all of that connected, right? So, whether you're a Sage 50 customer, or a Sage Intacct customer, whether you're accessing through a budgeting product, or through an accounting product, through a payroll product, we're now creating common pipes for all of this data that is already uniquely valuable and trusted. If you were a startup now, and you believed that networks are the future for business, and a lot of startups are doing that, you're- you've got this massive cold-start problem; like, how do I actually get people onto the network? How do I get the data that I need to start building capabilities? We've got this massive headstart in the fact that we already have access to just incredibly valuable hoards of data.

And I think what's something that's really, really important, and we can never violate this, is we've got the trust of our customers. So, we've got this data principle that says- it's like the first sentence in our data strategy document: the biggest opportunity we have is data. Access to that datadepends on trusted customer relationships. It's their data, at the end of the day. If you're a startup, you don't have those relationships yet, right? So, who's going to help you through that journey of getting the data, partnering with customers to build this stuff? I can go on and on about this, but we have some really real- you can probably tell by the enthusiasm that this is what gets me jazzed about being the Sage CTO.

David Leary: I mean, it's exciting because you look at other industries, you could argue the, you know- Facebook dominated all the data about social, and people's personal lives possibly, and Amazon figured out everything we're going to buy, but, you're right, the accounting data is just troves of it, and nobody has figured it out yet. And it's exciting because like- you're right. It's the next phase in cloud accounting, if you wanna call it that.

[00:13:21] Life is a Highway ... of APIs
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Blake Oliver: And the thing that excites me is my whole career has been defined by APIs, and being able to move data from one system to another, from building my own firm, based on connecting different apps together, and automating stuff, to working at tech companies where, I mean, we wouldn't have existed, if it wasn't for an open API to Intacct, and NetSuite, and then QuickBooks, and Xero. So, that's really interesting that like- basically, it sounds like what you're doing is taking these hundreds of- hundred Sage products or so, and like figuring out how do we connect them all together?

Aaron Harris: Right.

Blake Oliver: When you do that, you'll have this highway for data that can go to any product, really.

Aaron Harris: Right. Exactly. So, all of this has to be exposed to partners via APIs. The big promise there is that you're not integrating to a specific product. You're integrating into the network, right? -adding more services to the network, and the network is designed in such a way that it's agnostic to how you might engage with the network. So, you don't need to know if a customer's on Sage 50, or on Sage Intacct, or X3, or BMS, or Timberline; it's called CRE now, right? You don't have to know that. What you have to know is what are the identities, the digital identities of the organizations and the individuals that you want to create capabilities for.

Blake Oliver: That is really, really, uh, exciting. Yeah, because- well, we just came from SuiteWorld, and the approach there is sort of almost the opposite in some ways, where it's create a system of all our data in one place- to have an all-in-one system. Evan Goldberg is very- that was his vision from the beginning.

[00:14:58] Sage's Payroll Game Plan
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David Leary: And it's not just the data, it's the relationship with the partners. One of the observations I made, being somebody that came up in this space and put on conferences with a bunch of sponsors, is things that they added to their product, those sponsors that were in that space weren't at the floor. Now, you guys just announced a new payroll partnership with ADP. If I go on your show floor, am I going to see other payroll products, or are they all kicked out now? That's kind of- it's beyond just the code and the data. It's just the relationship and the market.

Aaron Harris: Yup. Yeah, and I'll be honest, that's a bit of a challenge, right? We talked about new AP-automation capabilities within Sage Intacct today, and we've probably got 20 AP-automation partners on the show floor.

Blake Oliver: Were they sitting in the audience saying, "What's going to happen to us ..."?

Aaron Harris: Well, good news is that we like our partners, and I've been talking to them, right? So, we've got open channels of communication, but the answer to this is there's always going to be needs that aren't met by the core platform. Even if we extend to do things like automatically capture data from bills, and digitize the payment, there are going to be capabilities that we simply can't do. So, we have to be really, really smart about, you know, what's the footprint that we want to own, and, you know, where do we really want to leverage partners?

I mean, simple examples are, if you think about document management, when you really get into it, it's really different industry, by industry. Like, the way you interact with suppliers, if you're in construction, is so different from the way you interact with suppliers, if you're in technology. Starting to get into the nuances of requirements there is going to inevitably drive more products that have to integrate back into the platform.

So, I would wager that you can't find a NetSuite customer who has solved all of their accounting and finance needs within the NetSuite platform, right? As rich as it is, as broad as it is, you're always going to have to have access to more data than what's in there, and that- you just have- so the way to do that- this is where Evan and I disagree - you have to embrace a very open approach, right? You have to expect that customers are going to use products that might overlap. They might conflict, but they might be entirely adjacent, and you've got to embrace this ecosystem that allows customers to assemble the right portfolio of solutions that works for them.

[00:17:12] I've Got a Niche
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David Leary: All right, to make sure I was paying attention in the keynote today, obviously, you announced the partnership you're doing with ADP, and you're branding that as Sage Intacct Payroll, but did I hear also, correctly, you're- - cause you're jumping into niches, and deep-diving into niches, you actually have also partnered with another payroll app that specializes in construction payroll. Did I correctly?

Aaron Harris: kind makes the point-

David Leary: I just want to make sure it matches-

Aaron Harris: If you- a look at construction payroll, that is nasty business. I mean, that is really, really complex when you- the impact of some of the labor laws, in particular around construction, you know, health, and safety, the union laws, suddenly, the payroll product is entirely different.

Blake Oliver: So, the payments automation feature that was announced today was, essentially, you can pay your bills from inside of Intacct- and you can do it by check, ACH virtual card. Basically, that dream of pay the bill in the accounting system, and it actually gets paid in the real world, which we've been wanting for forever, right?

Aaron Harris: Yep

Blake Oliver: So, that's coming mid next year.

Aaron Harris: Payments is- I don't think they were quite clear enough about that. We are live with that payments capability.

Blake Oliver: Today, you can-

Aaron Harris: Yeah, today, you can go into Intacct- subscribe to the digital payments capability. I think we could have- we need to say a bit more about- One of the really cool things about this capability, and this gets to networks, is that we match your direct- your vendors in Intacct Accounts Payable to a directory, so that we can map them to the real world. Once we've done that, we know, in the real world, how does that vendor like to be- like, what are the forms of payment that they accept or prefer, and it gives us the opportunity to really optimize the relationship.

One of the things that we allow is- or we support is virtual card payment, which some vendors actually prefer. For the customer, that gives them far more control over spend allocation, but there's also a cash rebate. So, you actually get paid as a customer for using this capability because you're going to get meaningful cash rebates back every time a vendor accepts a payment with a V card

Blake Oliver: Because a virtual card is basically a credit card payment. Then they're telling you, "Please pay me with a credit card-"

Aaron Harris: It's basically a one- a single-use credit card with a specific amount that is used for that transaction, and it's settled the same way that credit-card payments are settled-

David Leary: And it makes a lot of sense at your space, from a volume perspective, because it's worth eating a 3% fee on your- you can automate those virtual cards, which you can't do with paper checks, and if you have enough volume coming in, it's worth the 3% fee across the board, up and down; it makes a lot of sense

Aaron Harris: From a vendor, you know-

David Leary: Now, did you guys, um, as we've seen- every accounting system actually is adding bill scanning, and they're naturally adding bill payment, and everybody's announcing they've either partnered with a bank, partnered with many banks, created their own bank. How did you guys- it wasn't really in your keynote today, how- what's the back end on that?

Aaron Harris: Payments is through a partner called CSI.

David Leary: Okay.

Aaron Harris: And don't ask me- I know what it stands for, but I'm going to use the rest of this conversation trying to remember. So, we've partnered with CSI to do the payments. We work with literally 11,000 banks on doing digital bank feeds, and automated reconciliation. And I think that the thing that got announced today that is coming, uh, first half of next year is that automated bill processing, right? So, having an email inbox where your suppliers can send their bills, which then kicks off an automated workflow that reads the data from the bill, automatically puts it into your accounting system, and then, leads you to a place where you can review the data to review it for accuracy, and then, initiate the rest of the workflow. So, that part's coming, uh, early next year. Well, I'll be very specific - first half of next year.

Blake Oliver: First half of next year.

Aaron Harris: I'm pushing the team to get it done faster.

[00:21:10] The Sage Definition of Data Mesh
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Blake Oliver: Well, you heard it here, team - first half of next year. There was one other term I wanted to ask about.

David Leary: Do you want to ask about the data mesh?

Blake Oliver: - So, I wasn't quite clear on data mesh. It sounds like a way to get your Intacct data, and other external data into one place to then do cool stuff with it. Is this related to what you were talking about before with the vision, the longer-term vision?

Aaron Harris: Well, let me explain the basic principle of a data mesh. The basic principle of a data mesh is that you are going to need access to data from all kinds of sources. It's impossible to plan, you know, a big project to say, "We need data from here, here, here, and here," and be done when you've done that. There's going to be an ever evolving list of places where you need to get data from.

The data mesh essentially says, rather than trying to pull all the data into one central data lake, or data warehouse, every supplier of data now thinks about data, being a product that can be consumed in sort of infinite ways. And so, all of these these- the payroll products we work with; Sage Intacct Planning- all of these products that are sort of in the ecosystem, they become providers of data to the mesh, right? So, the mesh, rather than pulling all the data into one place, it's got the ability to reach out and get the data where it needs to, based on the query, and you're- it's always evolving.

So, it's going to be Sage products, but it might also be data that you've got sitting somewhere outside of Sage. The thing that we will always be really, really clear on is that we're building it for the CFO, or substitute some other name for the head of finance. It's always going to be in support of what does the CFO, or finance leader need to get their job done? And if that means that, you know, in the process of creating, you know, the board reports, there's data that 's not in the accounting system. We want to make sure that the CFO, or CFO's team can get access to that data.

David Leary: So, as the CTO, when you're managing these 90, 100, 400 products - however many you're managing here - I know, uh, Jeff Bezos is very famous for telling everybody, "Hey, every piece of code you write needs to be consumable by others." -you have this mandate you've now put down, like, "Hey, the output of your products have to go into this data mesh. It has to be consumable by other people at Sage ..."?

Aaron Harris: We've set out basically six principles, for how Sage product development teams build products, in order to sort of fit with our vision. The very first principle is API first. In a digital world, you're going to have proportionally far less interaction with the software from humans than you will through some, you know, unforeseen set of digital sources, right? And so, if you really embrace API first, your job of making the data available as a product is already almost done. That's like first principle for building our products - API first. It's got to get plugged into the digital ecosystem.

Blake Oliver: Well, that's all the questions I have-

David Leary: I was dying for the next five, but we'll end on the one and maybe next time, we'll get the other five.

Blake Oliver: That's all the time we have. Maybe we'll try and catch up with you, uh, on the meta- the metaverse-

Aaron Harris: -metaverse!

David Leary: Should I go buy accountingmetaverse.com right now?

Blake Oliver: I think so. Go do it. You need another domain. We have been speaking with Aaron Harris, CTO at Sage. Aaron, thank you so much for your-

Aaron Harris: -for having me-