Sage CEO Steve Hare: AI with a human touch

Sage chief talks about staying agile, automation and the importance of remembering your roots

Steve Hare has been CEO of Newcastle-headquartered, SME-focused software company Sage Group for the last four of its 40 years, arriving at a time of significant change. The firm had just acquired analytics platform Compass, cloud-based HR company Fairsail and financial management services provider Inacct and was looking to consolidate these assets. At the same time, it was making a concerted move toward SaaS and hybrid cloud.

Hare was previously CFO and COO at Sage, and stepped into the top spot in November 2018 with the goal of ensuring that Sage's customers stayed with the firm through its transformations. This culminated last month in a rebrand, with a fresh logo and new propositions for customers, including Accounting and Compliance as a Service (ACaaS) and automatic access to the benefits of Sage Membership for all customers.

Sage is the UK's second-largest IT company. To survive and thrive as long as it has, Sage has needed to remain faithful to its niche, adapting to the changing needs of small businesses as the ground shifts beneath them. Many SMEs have come through the pandemic with changed business models, and an added appreciation for the need to be agile. Hare said they need their supplies to be aligned with their new priorities.

"Right back 40 years when we were founded in a pub in Newcastle, as well as providing software we've always provided service. Being able to speak to a human being and get advice is an integral part of what we've always done," said Hare.

"We are supplying small and mid-sized businesses, not big enterprises. We're supplying to people who often it's their money, it's their business. They do value that relationship, that human connection."

All about automation

Like many software companies, Sage has moved to a subscription model, and as others have found this cannot be introduced overnight, with an extended period of having to support both models. But having grasped the nettle, Sage is starting to see results, with 70% of revenues now coming from subscriptions and cloud-enabled services.

"There are customers who do 100% of their activity in the cloud and in the network, and there are customers who still do part of their activity on their desktop, or they will have the core accounting software sat on their server, but they are connecting into the cloud, to consume services, whether they be banking services or payroll services," said Hare.

The latter model is similar to Microsoft 365, he explained, where work can be carried out offline and then synchronised at some stage - as opposed to something like Teams which is 100% online. However, newer customers are generally much more comfortable with cloud-only.

"It's often driven by accountants. They don't want their customers handing them paper receipts or the infamous shoebox, they want everything to be done digitally, they want to share information digitally."

Another transformation that Sage is pursuing is the application of AI to its products. In its cloud accounting software, for example, automation can reduce the manual effort in processes such as accounts payable and receivable. A secondary benefit, but one that will no doubt grow in importance, is AI's ability to provide insights from the data it crunches to help with business forecasting and to update data in real-time.

"Small and midsized businesses spend most of their time worrying about what's happened in the past and compliance. That's important, but the more that gets automated the more you also want your business software helped by AI to give you insights into the future so that you can run your business more effectively," Hare said.

Sage operates a cross-functional, multinational AI team that includes product managers as well as data scientists and machine learning engineers. This mix is to ensure that its innovations are genuinely useful and not harebrained pet projects. This is important for trust, Hare said. There are two parts to trusting digital systems, he went on. One is trusting the identity of the person or organisation you are interacting with, making digital identities a vital component, and the second is trusting your data will be used responsibly and for your benefit.

"The customer is opting in their data to get an outcome which is of benefit to them, as opposed to early uses of AI and machine learning, where often in the consumer world people's data is being used to sell them more, or to learn more about them in order to get them to consume more in a way that's not entirely transparent. I think the way you build trust is to be transparent: this is for the benefit of the customer, and the customer is asked to opt in. They don't opt into something they don't understand."

Sage is successful when it can reduce back-office friction for its small business customers, via demand-led AI innovations or through collaborations. Hare mentioned the company's partnership with Experian in which the credit scoring company provides wage verifications that allow people to fast track their applications for loans so that they don't have to provide payslips. The service is managed through the Sage digital network.

Think global, stay local

Historically, smaller businesses have been an afterthought for many large tech companies. More fool them, said Hare.

"Small and midsized businesses power most western economies; two thirds of the jobs created by small midsized businesses, which is sometimes overlooked. If we're going to drive economic growth in this country, at least two thirds of that will come from small midsized businesses. So these people matter, and we're very proud to support them and get behind them."

Sage Group has offices all over the world, but Hare said its North East origins are very important to its sense of identity as a company. Along with the rebranding announcement came news that Sage will launch a new arena (Sage Arena) in the region, plus an exhibition and conference centre (Sage ICC) to be opened in 2024 at a cost of some £300 million. The company says 2,000 jobs will be created.

"We are very proud of our roots," said Hare. "We've just moved to a new flagship campus in the North East with 2,000 people and that's where it'll stay. We will always have our engineers and our core go-to-market people based in the North East. We are a global company, but our global head office is in the North East and always will be."

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