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Earning your trust

Mike Deam at Goldmine Bookkeeping posted earlier today on Why I now Xero and explains why he’s moving on from MYOB.

So my entire practice is based around one product which is going to be re-sold at some point and its long term direction is not clear.

Because MYOB has been the defacto accounting software standard in New Zealand and Australia, what MYOB does has a serious impact to our important small business sector. MYOB software was a great step forward for small businesses many years ago. But as the technology world has moved on we believe their lack of innovation is holding back productivity. That is a key reason we started Xero.

About a year ago I wrote a post entitled MYOB: End of an era. I wrote that post when MYOB was brought by a private equity firm and subsequently delisted from the Australian Stock Exchange. Of course there is self interest here, but regardless this was a significant event for small business computing.

Over the last year we’ve watched the predictable path as the private equity player substantially reduced MYOB headcount, exited non profitable businesses and increased fees. That makes their internal profit numbers better, so that the private equity player can onsell the business and make their profit. That is how private equity works – no surprises there.

There are hints that the business is getting ready for sale again. For example adding the new AccountRight brand name into its products. Possibly they’ll split the end customer products out from the accountants product. These are already two different business units and product ranges, so they’ll sell the business units individually and any potential integration may cease. Already small businesses and accountants have to pay for both sides. This separation is the opposite of our model where the client and accountant works on the same system and the accountant doesn’t need to pay us to work with their customers.Personally I’d speculate that Sage would be the only candidate to buy the dated client products. CCH is the obvious choice for the accountants side.

We’re now starting to see Accountants waking up to the fact that their major vendor is about to enter a massive transition phase again. For the last 10 years MYOB has been the gold standard. Accountants, Bookkeepers, Trainers, Consultants and small business owners have built businesses over their tools. This rapid transition is scary for them. Who can they trust?

What is playing out here is one of the reasons we wanted to list Xero as a public company. It provides the transparency we think customers and partners need to build their businesses alongside us. As the Xero ecosystem develops we feel a big responsibility to do the right thing by those that rely on us. We are far from perfect but we are working hard to earn that trust.

And while we all like money, we also feel a big responsibility to improve small business productivity – substantially. We believe connecting small businesses to advisors gives them a better chance to improve cashflow, get a loan for new plant, hire a new employee or begin exporting. That is good for the economy and better for schools and hospitals.

That is why what we’re doing is important.

So rather that quietly stand by and watch as the MYOB technology is onsold again you can be sure we’ll be making it clear to small businesses and advisors who they can trust, and how seriously we take that responsibility.

 

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2 comments

Mark Mitchell
16 February 2010 #

I am an ex MYOB employee as a result of the private equity firm take over. I had been through a redundancy before when another publicly listed software company I worked for in 2000/2001 was taken over by another company (not a private equity firm in that case). I don’t agree that Xero needs to be publicly listed. The transparency / trust explanation is a reasonable marketing strategy to accelerate market share but going public stifles responsiveness and changes the business focus. Publicly listed company’s management have a overriding pressure put on all decisions – that decisions affect on share price. Privately held companies can be transparent and can communicate with all of their stakeholders if they choose to. In my view moving through the IPO process is the first step in the larger process that may lead to private equity company take over. Run the company well – communicate the what, why and how with everyone who wants to listen – but don’t go public.

Rod Drury
16 February 2010 #

@Mark, thanks for your comment. I hope we can prove to be a new type of public company that while being transparent, can also innovate and deliver a fantastic customer experience. We believe that will drive the most value to shareholders.

We deliberately avoided the Venture Capital intermediate step of funding so we can run the business for the long term, not drive to an early acquisition.

We believe this was an important (if not essential) part of our strategy to become a globally significant provider over time.

Cheers

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