Hybrid online software offerings to face market scrutiny in 2013: Xero

Accounting software provider expects market to gravitate to pure Cloud offerings instead of hybrid ones

The pace by which SMBs adopted the Cloud in 2012 was surprising, according to Xero Australia managing director, Chris Ridd, who said adoption was much quicker than originally anticipated.

“Looking at our customer numbers alone in Australia, we announced in March 2012 that we had 16,000 paying business customers and by October that number was 32,500,” he said.

“That sort of take-up really took us by surprise.”

Xero was expecting the add-ons market, consisting of Cloud developers that plug into Xero’s products, would start to take off towards the end of 2012, and it turned out that growth through 2012 had been exponential.

“It grew from about 40 partners in late 2011 to over 120 today,” he said.

Ridd said this grow was due to SMB customers seeing the value in plug-and-play capability in relation to Cloud offerings, and the growth in Cloud add-ons is a “clear indication of that trend”.

“We speak to about three to four new developers every week that want to integrate with Xero, so that ecosystem is really gaining momentum,” he said.

Having seen these trends in 2012, Ridd expects the next 12 months to bring about a “real shake-up” for some of competing accounting software providers such as MYOB and Reckon.

“[They] have been slow to respond to the Cloud opportunity and are trying to promote hybrid online offerings,” he said.

MYOB responded to the allegation by pointing out that its browser-based accounting solution, LiveAccounts, has been on the market since August 2010.

For those reasons and more, Ridd expects Cloud offerings that “perpetuate all the complexities of on-premise desktop software” are going to come under market scrutiny in 2013.

He attributes this to SMBs jumping on the Cloud in order to do away with the complexities of managing software, as well as all the headaches of dealing with patch updates, software compatibility issues, security, backups, and so on.

“In addition, customers want to be able to access their applications and data anywhere, any time and on device,” Ridd said.

“The explosion in new devices will continue to give weight to pure Cloud models that use a version-less modern web interface to access applications.”

Growing the ecosystem

The game plan for Xero in 2013 will be to focus on development of new features to its accounting and integrated payroll solutions, such as purchase orders, sales quotes, richer inventory management and more continuous improvements.

Ridd said add-ons will also remain a firm focus for the vendor, with the company continuing to develop its open API to support the continued growth of its ecosystem for Xero integrated solutions.

“We will continue to deliver tools to help accountants and bookkeepers move to the Cloud with the long-awaited release of Report Packs, which will help streamline the preparation of management and annual report templates across their clients,” he said.

Xero also has plans to introduce a new look UI for its Cloud Practice Management solution for partners, along with the full release of Work Papers, which Ridd said is currently in beta testing with over 30 of its Australian partners.

“Perhaps most exciting will be the first phases of release of our online tax lodgment platform that is currently under development, which we know many accountants out there are chomping at the bit to see,” he said.

Xero’s accounting and bookkeeping partners will be interested to know that the practice tools will be available for free when partners sign up 25 or more customers onto Xero.

“That's a very different approach to software in the accounting space, and one that should bring further disruption to the industry,” Ridd said.

Patrick Budmar covers consumer and enterprise technology breaking news for IDG Communications. Follow Patrick on Twitter at @patrick_budmar.

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