Xero’s secret sauce / a View From Ireland

Denis Breen is managing director of ProfitPal, an accounting firm headquartered in Ireland writes: A few years ago if someone told you there was an imminent threat to the dominate SME accounting software providers in the market you might have thought – no chance! How could someone undermine the market domination of SAGE, MYOB and Intuit, these companies have owned this space for the past 20 years. Every company that looked even remotely close to threatening them was bought and either painted a nice shade of their respective colours or binned to eliminate the treat.

The difficulty with dislodging the incumbent is the same in any industry; they have the high ground, the existing market users, the re-sellers, the resources. Its nigh on impossible to dislodge incumbents, until and unless a shift in technology changes the game entirely and either makes them instantly or slowly irrelevant. This is the treat facing Sage in the UK, MYOB in Australia and Intuit in the States. These three giants of the accounting software industry are being stared down by a little upstart from New Zealand called Xero.

Sage may be the dominant player in these waters, but time is running out. Compared to Xero, Sage and Intuit are flat-lining.

Xero has made massive inroads in all three markets as a result of the massive shift in technology brought about by Cloud Computing. Its enabled them to offer a product with a whole load of secret sauce included.

So what’s the secret sauce?

1. Real-time Bank feeds via Yodlee
2. Electronic bank reconciliation something akin to playing snap with your kids
3. Incredibly well thought out simplicity applied to every aspect of the system
4. Online – so anywhere for anyone
5. Monthly reporting that encourages the user to look and keep looking
6. An open API that allows hundreds of specialised partners to plug their systems into Xero
7. Accountants layer encourages practices to on-board their existing clients
8. Real-time accounts change the conversation between owners and accountants from last year to now and the future. This brings a sales and marketing edge to adopting practices

We’re a Xero oriented practice now but that wasn’t always the case, and it’s because of the points above that we changed entirely. We’ve seen the significant benefits Xero has brought to our clients and to us.

The incumbents have responded in typical fashion, slowly! Most have launched some form of substandard online or hosted solution but these are simply defensive measures to tell their customers, we’re in this space also –  don’t leave – please. Most likely the incumbents internal conflicts will prevent them from reacting with a credible competitive offering to Xero.

My guess is that if there is any company who will give Xero stiff competition it will be Intuit (QuickBooks) – .

It’s going to be an interesting play-out.   Visit ProfitPal Here.