On 08/08/13 2:35 AM, Peter Stannard wrote:
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Hey Mike.
What do you think of Xero’s prospects in the US over the next 5-10 years?
Personally I feel they’ll squash Intuit as they have MYOB and others in NZ/AU and will eventually do with Sage here in the UK. I get the feeling you think the same way reading your blog?
Peter
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I told Peter I very much agreed and my answer would be my next blog post. Here is that delayed post:
Xero is getting new users about 50% faster than QB Online. It is the fastest, easiest, most beautiful (QuickBooks is now very unattractive) and least expensive way to do accounting, for most users. This is especially true if you use some of its many inexpensive add-ons. The number of Xero add-ons is growing very fast, while QB add-on ranks drop quickly. This relates to the free Xero industry-standard RESTful interface, compared to the expensive, proprietary, limited and repeatedly changed QB add-on interfaces.
You also should consider how fast Xero is adding employees (133% – 178% this year). Finally, we have a long history of fighting monopolies personally, besides fighting them with our laws. Despite this, we have had about 40 years of a virtual Intuit accounting software monopoly (QuickBooks and Quicken recently had 90 – 95% of the small business and home checking desktop software market). As a one-time QuickBooks insider, I know many cases where the lack of competition made QuickBooks delay or not implement many important changes. Therefore, we all have a very personal interest in seeing that QuickBooks and Quicken get much more competition.
You then must consider how long it takes accountants to test Xero, use it with a few accounts and learn it as completely as we know QuickBooks. This is partly due to the time it takes us to create many Xero account classification rules for each client. It is only after this that we will quickly switch many clients to Xero.Fortunately, my new 0CPAs program will soon virtually end the need to create new rules.
All this makes me feel we are now reaching a tipping point. Many marketing and scholarly articles say that, once 5% to 10% of a group make a change, it has roots (which you cannot kill). They also say that a 20% to 25% penetration makes a change unstoppable. The adoption of change rate actually resembles a bell curve, which starts slowly and then increases rapidly. After 50% adopt a change it gradually slows, as you begen to run out of people not adopting the change.
Online accounting software already has far more than 25% of the accounting software market. Therefore, the unstoppable online revolution is now killing QuickBooks desktop quickly. It will soon get far worse. Xero now has about 40% of the Xero – QuickBooks Online area and is growing about 50% faster than Quickbooks Online. Most other online accounting competitors are not really competing with these two programs, either because they are much less powerful or much more expensive. Most QBO users also are former QuickBooks desktop users. The number of such potential converts is quickly shrinking. Even if QBO keep getting 40% of those abandoning QuickBooks desktop, it would top out at about 2 million users.
When you compare this to Xero, you realize some amazing things are very likely. As Xero gets better known, it is likely to get many more users from those abandon QuickBooks desktop. This alone should soon give Xero a million more users.
Xero also already has the best foreign currency capability, while QBO lacks this entirely. Xero is already dominating online, where it matters most. It should soon have a massive increase in the number of users.
By the way, the stock market seems to know this. Two investment firms paid me to compare QuickBooks and Xero. I also see that Xero stock went up more than 200% this year, 600% in two years and 2,100% in 6 years, as U.S. investors now own 32% of the company.
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