What Next for Xero?
SME Tech Commentator
Digital First
Sholto Macpherson is a business technology journalist and expert on cloud software and services for SMEs. Since June 2011 he has published http://DigitalFirst.com, which explores how SMEs can use the latest cloud technologies and the impact of digital disruption on the accounting industry.Sholto has 14 years’ experience contributing to magazines and websites, radio and TV segments, webinars and conferences on enterprise and SMB technology and the cloud-led productivity revolution. His stories have appeared in national and regional Australian newspapers and industry websites such as CRN.com.au and iTnews.com.au.Sholto won a national IT Journalism award for Best Columnist in 2012 for his Cloud Channel column in CRN Australia magazine on the transition from server software to cloud software…...
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From the beginning, software company Xero has signalled that its vision is broader than online accounting software.
As far back as Xerocon 2013 CEO Rod Drury was already talking about “the end of the beginning†– the point at which Xero would close the gap with desktop accounting software in terms of features. At last year’s Xerocon the message was even clearer – the next step is about business intelligence and mining the value of accounting data at scale. Drury told Digital First at Xerocon 2014:
There’s this assumption that all accounting software is the same. Up until this point we’ve had to all build the same features – reconciliation, general ledger, reporting, debtors, creditors, expense management. [...] Now we’re just turning on business intelligence and doing that for all our customers and their data. [...] So the difference of what we’ve done compared to everyone else is starting to show.
Less than three months later, Xero hired fellow Kiwi Angus Norton. Norton was previously based in the US as vice president and general manager for Microsoft’s sacred cash cow, the Office desktop software line. He is now chief product officer (and vice president) at Xero and largely responsible for answering the big question – what is next for Xero?
Digital First: Rod Drury recently declared that the first stage – the accounting features – of Xero had been accomplished. What will the next stage look like?
Angus Norton: We are building a suite of intuitive business tools that will connect customers to customers and will do your accounting as well. It’s about connectivity, conciseness, collaboration and compliance. And that’s what really excited me about coming here.
Digital First: So the compliance is clearly the accounting platform aspect. How will Xero interpret the other three aspects?
Norton: We call them the four “Cs†of growth. Collaboration is about allowing businesses to work in real time with their accountants but also with each other. Right now it’s email, notifications or phone. We will move into federation with the big players like Gmail, Google, Microsoft. An email from Gmail will be treated like any other document in Xero. You will be able to use it in the documents environment just like any other document. You will be able to initiate an instant message or (Google) Hangout from within Xero. The same with Lync and Skype. We will be connecting them so it’s a truly collaborative platform.
Digital First: Ok, so deep integration with productivity suites. That makes sense. What about concise? That seems the least obvious aspect.
Norton: Concise is about continuing to be beautiful. Not sacrificing the experience just for features. We don’t want to enter an arms race. For some of our competitors it’s all about features. We want it to be focused on experiences. It’s all about the customer.
Digital First: Right, the whole design-led approach. Ok. Xero has already demonstrated connectivity pretty well, but where do you see it going?
Norton: We connect to all the data sources that you expect to connect to. And the data you need is connected wherever you are. We also have a vision that Xero is on every piece of glass that you need it to be on. Who knows what that might be 10 years from now. More and more pieces of glass are connected to the web.
Digital First: Pieces of glass?
Norton: In my home in Seattle my TV is connected, my aircon is connected to the Internet, I can watch TV on my phone from my DVR. I can lock and unlock my doors. It’s all on an LCD panel on my wall. The problem is a lot of these devices connect through disparate tech layers. You should be able to push this to devices all over the world.
Digital First: So how does this relate to an accounting program – or business platform?
Norton: Notifications today is very much in the nascent stage from a tech point of view. If certain KPIs for my business change I want to know straight away. My watch, TV – whatever that programmable piece of glass, Xero should be able to be where I want to be. I can’t talk too much about that area but you can expect to see something very soon about the wearables platform. We don’t think it’s about putting xero on watch – you don’t want to squeeze an app onto a device just because it’s there. Some tech companies have come out in the last year and said, “We’re mobile firstâ€. It’s such an old term. When we think about a data platform that provides a heartbeat for your business.
Digital First: Rod Drury has talked about the potential of data in accounting systems. Where is this headed?
Norton: There’s so much rich data in the platform. We’re very, very focused on compliance and privacy. We are also thinking about how that data can work harder for small business and how we can connect small business to insightful data to run their business. This could be trends in their industry, connected to finance, banks, those types of resources in a way that they wouldn’t ordinarily do on their own. And in a way that allows them to opt into the broader data ecosystem. Xero really could be the mobile heartbeat for everything you care about in your business.
Digital First: The theory sounds good but how would it work in practice?
Norton: The business platform has to be something that allows you to collaborate with your customers. When you’re doing a quote or an invoice their details should auto-populate in Xero. It should tell you latitude and longitude on the map and which industry they’re in. If you’re using a platform like Google Apps or Google Chat then it should be easy to connect to whatever platform you use. To us that’s a no-brainer and very exciting. You will see this over the next six months, next year at the latest.
Digital First: Will you be testing this stuff out in Australia and New Zealand markets? They seem to be a test bed for most of these new ideas.
Norton: In Australia and New Zealand we are seeing network effects take hold. They are connecting in a way that only big businesses could do in the past. Warehouse Stationery (an office supplies chain) is now injecting orders and invoices straight into Xero. And Veda (credit scoring service) can show the quality of the business they are working with. Australia and New Zealand are much more sophisticated with payments. You can pay a bill overnight with direct debit. That’s part of the culture. In the US it’s three to five days before you’re paid. We’re looking to close the payment gap in the US and make sure we’re connected to some of the payment trends.
Digital First: What are these trends?
Norton: PayPal is becoming the old way of paying. New ways are like Apple Pay and HashCash. HashCash is Square’s “cash tag†service. I can send money from this app to friends, family, whoever has this app. The payment structure is really evolving and there’s a race on to see who’s going to win. PayPal is the incumbent, Square was pioneering and now Apple Pay is trying to get a flywheel going thru their iOS share. We want to make sure Xero is connected to all these payment services. I recently hired a team to make sure we are focused on the payments scene in the US. Their number one job is to close that gap (for payment) to under three days.
Digital First: Now that you have quotes, basic inventory, and dashboards are on the way, it does feel like Xero is rounding out. But that’s just in Australia and New Zealand. Where are you in the US and UK?
Norton: Full accounting requires inventory, accounting and payments. Now we’ve done payroll everywhere except in the US (only eight states). The next piece is to make sure we have mature payments support in all geographies. When you receive an invoice today in Australia, New Zealand and the UK, it’s a PDF or webform. At the bottom of that webform are payment details. You just go and pay. That’s kind of a static experience. You should click on a link and it takes you to a payment provider. We can do that in AU/NZ but in the US, it’s very fragmented. The US is so different and customers are trained to pay for everything by credit card. It introduces a new step and a new fee. The US is also very specific. While we have online invoicing in the US and Australia, in the US there’s a battle for the hearts and minds of consumers. We want to make sure we’re right there and flexible around payments in the US. We’re working with all of them to make sure that Xero is well positioned to take advantage of that. We will get the other 42 states done in this calendar year. We’ve completed payroll in California now. It would be the fourth largest market in the world.
This story first appeared on DigitalFirst.com.
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