Sage under pressure from private equity

Sage’s position as the dominant purchaser of accounting software vendors
could be threatened following its defeat in the battle to purchase Norwegian
business Visma.

Private equity firm Hg Capital beat Sage to Visma by placing a bid of $675m
(£380m) for the business. The soon-to-be-completed move has been hailed as the
beginning of a plan by Hg Capital to compete with Sage on a regular basis, and
could see the private equity firm pool together its software investments,
including Sage rivals Iris and Exchequer in the UK, to build new products and
create a new software house.

‘Visma would be the largest accounting software product in its portfolio, and
could be used as a master vehicle,’ said Dave Bradshaw, principal analyst at
technology researchers Ovum.

But Nic Humphries, the head of Hg’s technology practice, said he could not
see its business going ‘head on’ with Sage, although on occasions the two would
compete for acquisitions. ‘It’s not part of Hg’s core strategy to compete, but
we might on certain deals,’ he said.

Humphries revealed that product gaps among the Hg Capital companies could be
plugged by their other ventures. ‘Iris has a benchmarking tool, for example, so
if Visma doesn’t do that so well we could leverage. We may do the same for
Iris,’ Humphries said.

This kind of product sharing may have arrived just in time for Iris payroll
software users, who have had a difficult time over the past two weeks. Many
accountants have struggled to implement a new software upgrade, which has left
them unable to run end-of-year payrolls.

Iris group chief executive Martin Leuw claimed many users had not upgraded
the payroll application, and that the problem was a one-off. He added that the
company had stepped up its support team and website to help users resolve their
issues. Users of the product have been unhappy with the roll-out of the upgrade.

Richard Ballard, a disgruntled Iris user, said that the upgraded program
produced ‘spurious week 53 dates for payrolls that did not have a week 53.

‘Iris is a good product, but making a major upgrade and change of

platform at the same time as the year-end was asking for trouble, which we
certainly got – in spades.’