Xero Fires Up US Competition
Tuesday, April 12, 2016 at 11:31AM
Bill Barclay

For those who have followed the fortunes of Rod Drury's Xero over the last few years, it will comes as no surprise that its success has awakened its major opposition - Intuit, who have sold its 1983 product - Quicken, in order to concentrate on a new cloud based product designed to forestall the inroads of upstart Drury and Xero.

Here is part of an article extracted from today's NYT:

"Intuit is a classic case of a onetime disrupter being challenged by an upstart with a new approach and a simpler product. In this case, the newcomer is Xero, a New Zealand company that has wooed small businesses and accountants worldwide with a flexible, online accounting system that can be used from a smartphone and can cost as little as $9 a month.

“I find that for people who’ve never used any kind of accounting software, the ones I’ve put on Xero are so happy with it,” said Stacey L. Byrne, a certified public accountant in San Diego who works with both companies’ products. “They sing its praises because it’s so easy to use.”

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"In Intuit’s early days, that’s what people said about Quicken and QuickBooks, which made concepts like cash flow, income and expenses, and balance sheets accessible to nonaccountants. But over time, the desktop PC versions of the software became more complicated, and Intuit treated the online versions as an afterthought.

Xero, which started 10 years ago, saw an opening. Intuit essentially owned the market for small-business accounting software in the United States and Canada, but it had ignored the rest of the world. At the same time, the migration of data to the cloud and the rapid rise of smartphones were changing how small business owners, many of whom do not operate from offices, wanted to use technology.

“This was a once-in-a-lifetime land grab to get this data off PCs and into the cloud,” Rod Drury, Xero’s chief executive and one of its founders, said via Skype from the company’s headquarters in Wellington, New Zealand.

Rather than build everything itself, Xero opened up its platform so that banks and financial app makers could plug their services into it, offering users the ability to customize Xero and offering partner companies the ability to strengthen ties with their customers. After establishing a strong foothold in New Zealand and Australia, Xero publicly sold shares in Australia in 2012, and it took its software to Britain and the United States.

Intuit — and the accountants who relied on its software for so many years — took notice.

“For so long it was QuickBooks, and that was pretty much it,” Ms. Byrne said. “Rod Drury poked the bear. He woke up this sleeping giant.”

This is so often the case when a company like Xero attempts to enter the US market with limited resources. The bear, once awakened is generally able to move fast and catch the outside competition with appeals to nationalistic pride, and Trump-like walls eventually get raised.

Rod Drury clearly got right under the hammer of the dated, but established poroduct on this occasion, and may still pull off a victory, but it will become harder by the day - he still only has 600,000 customers world-wide against Quicken's 1.2m in the US alone. The NYT is coy about the progress of the TurboTax cloud product, but claims that it increased its revenue by 23% over the past year - meaningless in those terms. 

Rod Drury remains the 'disrupter' - he deserves a huge accolade for what he has done. The NYT article gives him a massive thumbs up - a pretty unusual occurance for a NZ company in those circles.




Article originally appeared on BillBarcBlog (http://billbarclay.co.nz/).
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