Why Sage Will Acquire Kimble PSA?

December 12, 2017
This article posted in: HR Technology News  Tags: Industry News, Cloud, ERP

Kimble acquisition will create solution uniqueness and broaden Sage’s cloud portfolio


Life is filled with uncertainty and making predictions is hard. After listening to Sage announce faster growth and a 10 percent rise in profits, it looks like Sage is turning the corner from an on-premise to a cloud company. During their most recent earnings call, Stephen Kelly, CEO of Sage Group commented “I am pleased to confirm that the transformation we outlined in and out in FY15 is now complete.” I’m confident that Mr. Kelly didn’t mean Sage’s business transformation was entirely complete, but that the first three steps in a long journey had been addressed and wheels fully in motion. The first item outlined in the transformation was ‘to attract new customers with best-in-class cloud solutions’. With two significant cloud-based solution acquisitions completed in 2017, accounting and HCM, this shift in strategy is definitely accelerating. I anticipate the next phase of the transition to the cloud will focus on extending Sage’s ability to address the growing services economy, which is estimated at $22 billion in the U.S. (professional and business services represented 12.4% of the $18.5 trillion U.S. GDP in 2016), and provide additional solutions to attract new customers. This is why I think Sage will acquire Kimble PSA.

Let me start with answering the basic question ‘What is PSA?’ Professional Services Automation (PSA) is a type of software designed to assist service firms with project, resource, time and expense management for billable staff (e.g. lawyers, auditors, engineers, developers, and consultants). PSA software aims to help organizations optimize people utilization and keep track of project related time, billable and non-billable, making it easier to manage increasingly distributed and mobile workforces, particularly with professional services businesses.

The world is changing and businesses are adding or converting their traditional offerings to a service subscription or recurring revenue model. Just look at companies like Amazon, NetFlix, Cinemax, Blue Apron, Microsoft Office 365 and LinkedIn Recruiter, who have all made the switch to subscription business models. Consumers have a new expectation and the adoption to subscription based offerings is now the norm. To keep pace with this movement and Sage’s cloud-first strategy, Sage needs a solution to address the growing services market that will complement its newly acquired cloud offerings. A strong PSA solution that will not only harmonize well with Sage Intacct and Sage People, but will also allow Sage to more effectively compete against vendors (NetSuite, Workday, FinancialForce, Infor ERP, and Acumatica) offering a full suite of technology tools addressing the rising subscription trend.

Sage isn’t going to build a PSA solution, it would take way too long. An acquisition would allow them to start competing, almost immediately, for those companies evaluating PSA versus having to wait for the development, branding and time to launch an entirely new PSA solution from the ground up. Even though Sage had two major acquisitions in 2017, Fairsail and Intacct, the timing is right with profits up and momentum on the rise to acquire a PSA vendor that best fits into the Sage family of cloud solutions. It’s my opinion that the vendor to be acquired will be Kimble.

Back in July 2016, I wrote in a blog* on why Sage would acquire Fairsail, a global HCM solution built on the Salesforce platform, and made the comment “I also see Sage snuggling-up with Kimble, a PSA solution built natively on the Salesforce platform. This application will allow Sage to better compete in this growing cloud ERP market against its competitors.

*Read the full blog here.

Kimble, founded in 2010 and headquartered in London, is focused only on delivering a modern cloud-based PSA application in the U.S and U.K. markets.

Why Sage Will Acquire Kimble

 

9 Reasons Kimble is a Likely Candidate for a Sage Acquisition

  1. Kimble is natively built on Force.com, now the preferred platform for Sage’s cloud-first strategy.
  2. Kimble aligns well with Sage Intacct and Sage People customers (i.e. similar size, similar industries and common business challenges).
  3. Kimble, like Sage, has operations within the UK and the US, which will help congeal the philosophy and management teams together quickly.
  4. Kimble is already listed in Sage’s Marketplace and has a working relationship with Sage.
  5. Kimble achieved Sage “Rockstar” status in August 2017 which is the highest accolade presented to a Sage ISV (Independent Software Vendor).
  6. Sage Intacct and Kimble PSA receive similar high marks from G2Crowd as “Leaders” in their respective software categories (i.e. Accounting Software and PSA).
  7. Sage and Kimble have similar pricing models and implementation costs.
  8. Stephen Kelly is an active advisor to Kimble’s management team.
  9. In November 2017, Stephen Kelly was quoted by the Financial Times that the company will look for more acquisition deals.

Besides my reasons listed above, I suspect Sage will want to capitalize on the huge PSA market opportunity around the globe. An acquisition of Kimble will create solution uniqueness and broaden Sage’s cloud portfolio compared to competitors focused only on being category leaders. Is this enough to justify an acquisition? Only time will tell.

With the wind at their back and momentum accelerating, Sage will acquire Kimble and want to make this announcement public before they head back to their annual user’s conference in Atlanta the week of June 18-21st, 2018. These types of acquisitions are not only intended to “gin-up” their employees and partner’s moral by creating excitement and opportunity, but signal to the world and its competitors that the days of the past are over.

 


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About the Author:

Mike Maiorino

Mike Maiorino is the Founder and CEO of HRMS Solutions. His 30 years of dedication to the HR/ Payroll technology profession, with a proven track record of results and recognition, has earned him a reputation for being a subject matter expert regarding HCM Solutions. Mike has served in a number of sales and managerial positions for leading providers of HR and Payroll solutions, including ADP, Sage Software, Kronos and Infor (fka SSA Global / Infinium). He is a member of the BAHRA Chapter (Boulder Area Human Resource Association) and completed his certification as a PHR (Professional in Human Resources) in December, 2002. Mike was also recognized in Biltmore Who's Who in 2007 as one of Washington, DC's most distinguished members.

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