MYOB and Xero locked in a bitter cloud war / Both in the red, investing heavily to knock the other out.

William Maher for CRN writes:  MYOB has doubled the number of paying cloud users as it continues to battle Xero in a fight for the accounting market. The race currently sees MYOB reporting much higher revenue and a larger overall user base while Xero holds a big lead in terms of cloud users. While MYOB has a smaller cloud user base, cloud adoption is growing significantly, as is revenue.

The company reported a record result in its half-yearly financial report, with revenue for the six months to 30 June growing by $23.7 million, or 21 percent, to reach $140 million.
Earnings before interest, tax, depreciation and amortisation increased by more than $15 million to $69.7 million, a 29 percent boost. MYOB made a net loss after tax of $5.6 million, compared with a loss of $6.3 million the same half the previous year.

More MYOB customers are choosing cloud services than before - there were 86,000 paying customers using cloud files at June 30 this year, which was double the number recorded a year earlier.

Of new MYOB SME product registrations in June, 63 percent were for cloud products, compared with 36 percent a year ago. Recurring revenue now accounts for 93 percent of total revenue at MYOB.

MYOB lays claim to an overall customer base of 1.2 million businesses. The company also boasts a partner network of more than 40,000 accountants.

The company has been investing heavily in staff and R&D. It reported an 11 percent increase in operating expenses to $59.7 million to fund strategic growth initiatives. More than 100 staff were added in the last 12 months and MYOB plans to spend more than $40 million on R&D this financial year.

In early 2015, MYOB plans to launch MYOB Advanced, a cloud-based "business management system" for larger enterprises. This will complement its MYOB EXO and MYOB PayGlobal products for medium and larger businesses.

Meanwhile Xero may not have the same size revenue but is well ahead in the number of cloud users. Compared with MYOB's 86,000 paying customers using cloud files at June 30, Xero reported 284,000 customers at the end of March 2014 - these would all be cloud users, as Xero is delivered as a SaaS product. This number is growing significantly - up from 157,000 paying customers in 2013.
MYOB's financial reporting follows the calendar year and the company has not released full-year results that can be directly compared over the same time period with those of Xero. However, in Xero's full year results announced in May, the company reported revenues of NZ$70.1 million (AU$62.3 million), up by 83 percent from NZ$38.4 million the year before.

Xero reported a net loss after tax of NZ$35.5 million (AU$31.6 million) for the financial year ended 31 March 2014, compared to NZ$14.4 million the year before.

Like MYOB, the company is investing heavily for future growth, spending NZ$55.1 million on sales and marketing costs and adding 376 employees in the 2014 financial year.