Xero’s moves get the accounting crowd excited
Kiwi software company’s founder Rod Drury says there are two key reasons for its growth, as it aims for $ 1b in revenue — money and talented people
What we want to do is turn this army of accountants and bookkeepers into growth consultants Rod Drury, founder and chief executive, Xero
It’s been 11 years since Wellington- based company Xero was founded, 10 years since it went public, and chief executive Rod Drury says it has the potential to become a tech powerhouse like Amazon, Facebook or Google.
At the company’s annual AsiaPacific region conference in Melbourne this week, Drury announced the release of a range of new products designed to make life easier for accountants, business owners and employees.
The new products and apps — Xero HQ, Xero Expenses, Xero Projects, Xero Discuss and education platform Xero Lifelong Learning Partners — aim to bring
the firm from back room to front of house, adding to its traditional accounting software.
Judging by the reaction at Xerocon, where more than 3000 accountants and bookkeepers from 19 countries whooped and hollered like a rock concert audience at news of the new products, the company is hitting its target market.
Xero is always writing software, but some of the products released have been in development for more than a year, Drury says.
“What people are really excited about is the Lifelong Learning Platform,” he says.
“We’ve had so much demand from people saying ‘ Why can’t I learn Xero at university or school?’ and it’s a hard problem to solve in the cloud and I think we’ve done it really well.”
Drury puts the firm’s success down to two things.
“Firstly, having the capital to do it properly, build a global business from New Zealand, and secondly, being able to hire great talent,” he
says.
“Talent isn’t in traditional businesses; talent goes to businesses where it can grow quickly and be part of growth stories.
“We keep attracting better and better people and our own people, with the experience they’re getting, are the best people in the world.”
The company, which has more than 1800 employees and 24 offices worldwide, posted revenue of $ 295.4 million in the year ended March 31, up from $ 207.1m a year earlier. It is targeting $ 1 billion — without disclosing when it hopes to reach that goal.
But the more immediate target is to break even. For the year to March 31, Xero recorded a net loss of $ 69m.
“We’re getting very close to break- even so that’s our next goal and then we’re driving towards a billion dollars in revenue,” says Drury.
“When you see the momentum of the products we’re having and how we’re winning industry, it feels pretty good.
“More importantly, though, what we want to do is turn this army of accountants and bookkeepers into growth consultants.”
Drury says it i s important for people to see the international opportunity, and to know that businesses can export from New Zealand using the firm’s platform.
“We’ve won the back office, we have a third of all New Zealand businesses and half a million Australian businesses on the platform, we’ve made our money by selling one thing to a million businesses so what we want to do is add more services to our existing clients: expenses, projects, which allows us to now provide services to the employees of small businesses,” Drury says.
“Our million businesses have several million employees so it’s a natural way we scale them.”
Xero has plenty of room for growth, he argues.
“Even though we’ve been going for 10 years, it still feels like the beginning.
“We’re building a globallyadmired brand with strong values and we are where the rubber meets the road in terms of creating job opportunities, and now doing the retraining and re- skilling part of that really makes all of us feel really good. We like that we can actually have a positive influence.”
It i s important that small businesses become global players, says Drury.
“Technology has made the world really flat and exporting now isn’t jumping on a plane and going and selling to a bunch of people, it’s connecting a global platform.
“The Asian market is accessible through Alibaba, the US market is accessible through Amazon, so we’ve got to make it through really making it easy to facilitate businesses in New Zealand and Australia, to connect into these global platforms.
“It can be quite daunting for businesses, and if we arm accountants as consultants to show them the pathway then we’ll grow.
“If we want to stay relevant, and [ have] better schools and hospitals, we’ve got to have our small businesses exporting.”
Innovation i s “everything” at Xero, says Drury.
“For us it’s about go- ing faster than anyone else.”
Artificial intelligence ( AI) is making life easier for small businesses worldwide, he says.
“We know that small businesses hate doing accounting, and they’re not trained in it, so we’re well on the journey now to small businesses not having to worry about the technical parts of accounting. If we can get their documents into the system then we can do their accounting for them.
“AI and machine learning will reinvent how the company works in the next few years.”
AI and machine learning i s Drury’s next focus.
“We’ve got an amazing product roadmap and we’ve done a pretty good job at developing our global leadership team, so I’m really focused on what I love, which is building great product and it’s really exciting. Having the resources and being able to change the world like this is pretty good fun.”
Laura Cardinal, Xero global general manager and vice- president of product management, says the growth opportunities with machine learning are endless.
“The core problems don’t really change, businesses still need to do business, but the technologies are changing,” Cardinal says.
She says Xero products are developed on the back of a problem.
“We always like to start with a problem. Even if someone goes ‘ Here, I’ve got this really cool idea’ we try and break it down and go ‘ Okay, is this really a problem?’ We can’t find out that without talking to customers and going out to see how they work, we have research teams, run workshops, or journey mapping,” she says.
“Sometimes we’ll say, ‘ Okay, this technology is coming, what problems could we solve with this?’ — machine learning is a perfect example.
“It depends on the technology and it depends on the idea as to how long it takes, and the urgency.”
A sense of responsibility and momentum keeps Drury motivated.
“Somebody must create the Facebook sort of important company, as Facebook i s for the consumer; there is no one really who is that small business platform, so we’re the leader internationally, so that gives us a massive opportunity and we’re focused on growing a great business that does a great thing for people.”
Xero shares have risen from $ 1 at their debut, hitting a high of almost $ 45 in 2014 before falling sharply. The share price has since recovered part of that fall, and is up by 60.8 per cent since the start of this year, with Xero shares closing yesterday at $ 28.14.