What a year
2012 was our biggest year yet at Xero. When I went back through the blog and company announcements this year there were too many achievements to list. So instead I’d thought I’d finish the year with ‘where are we at’ and ‘what next’.
Firstly, thank you to our many customers and partners. We understand what a massive responsibility it is to look after your financial information and that many of you are betting your own businesses on us. It still blows us away that we really have made accounting fun and interesting for so many people. It’s amazing.
Thank you to our shareholders who provide us with the opportunity to grow our team and build this company. And thank you to our staff who are completely passionate about what we’re doing for small business around the world. It feels really good being part of a company that is innovating and doing something purposeful and good.
This year we’ve got through a solid program of work and delivered many of our most requested features, along with lots of innovations. For our small business customers you may not have seen the massive amount of work we’ve done on the accountant side of the fence to make the Xero family of products compelling for the accounting industry. We believe that small business accounting software on its own isn’t sufficient long term and we needed to build a compelling platform that connects professional advisers with businesses. We’re very pleased with how that’s playing out. With those workstreams well underway, and many key features already delivered, we will be focussing over the next year to complete the breadth of horizontal accounting features you’d expect in a mature product. A lot of this is well through development and you’ll see some big releases in 2013.
Internally we’ve been working hard to build our teams. We doubled to over 300 staff this year. Most are now up to speed, and so with that increased capacity expect our rate of innovation to accelerate. We’ll continue to grow our team significantly for the next couple of years as we are still a minnow compared to the incumbents but we are getting through the work.
Our volumes went through the roof this year as customers doubled, customers did a lot more on the platform, and many now have 3-5 years of transactions in Xero. We’ve been investing heavily on our production infrastructure and the operations team are best in class. Over the Christmas break we’re doing a full platform upgrade which gives us the ability to scale up to our 1,000,000 customers mid term goal. Xero is a big and complex set of applications running on hundreds of servers. It is a massive investment to stay ahead of growth. The days of just a couple of servers in the corner are well past.
A key moment for me was Xerocon in Melbourne, and our Gold Partner lunch where 60% of the conversation was about add-on partners. With well over 100 add-on partners now, 2012 was the year Xero became a platform. Small business can now select all sorts of innovative solutions that are already integrated with their accounting software. This is a fundamental change for small business software and a very exciting development.
Competitively we saw the inevitable struggle of the incumbents as they started to come to terms with how disruptive the cloud is and how hard it is to shift legacy business models. Some of the incumbents got their cloud products to market with the consequences of compromised technology decisions made several years ago becoming immediately obvious. It’s so much easier being able to start from scratch and get the foundations right.
One of my favorite sayings is ‘it’s not the big that eat the small but the fast that eat the slow’ and we’re seeing that play out across the industry. The internet is allowing nimble businesses to quickly emerge, disrupt and get to scale. Our model of developing both accountant and small business solutions on the same shared platform is a great example. Removing the double dipping of the separate desktop business model is a fundamental re-architecture of the accounting industry but completely logical as small business owners and their advisors work together. There’s little doubt now that a vendor transition is taking place. This will cause stress in the industry as career long relationships are being challenged. From a sleepy industry just a few years ago the accounting software space has become dynamic and interesting as the inherent size of the small business opportunity is unlocked by cloud computing.
In New Zealand we have moved to the next phase and winning business in the 1st and 2nd tier firms with many full practice conversions. Australia is smacking it out of the park as our fastest growing region and we’re excited about getting Report Packs out next year. The UK is also firing on all cylinders with some great new senior team members (it was such a treat to meet our UK partners at Xerocon UK this year). The USA team has executed their early entry plans and done a fantastic job getting Xero known by US accountants and we’re expecting an exciting 2013 there.
In our early markets where we have ‘got to scale’ we’re seeing an exciting increase of inbound enquiries from large companies that can see how we can help their customers by linking their systems to Xero. We believe online accounting creates a cost effective way for large businesses to interact with small business and we’ll see much more electronic connectivity delivered which will reduce costs for small business and speed up transactions. An early example of this is banking. We’ve had numerous workshops this year with banking teams and have been working on a number of new joint services that we hope we can roll out next year. This is a process that has taken several years but we’re seeing real progress now. Also we’ve been having great discussions on Government web services. We hope to see some of those appear in 2013 as well.
Heading into 2013 our team has a clear focus on a number of big items. The ones I can tell you about are:
- Completing the platform. Any small business should be able to run on Xero. We want to be able to tick all the boxes. That means simple stock and the ordering processes.
- Practice efficiency. Using the power of having large numbers of a practice’s clients in a single relational database platform, combined with integrated practice applications to provide a compelling practice platform for accountants.
- Further innovation that will reset what you’d expect your accounting software to do. With the traditional features almost there we have a number of innovations that will seem obvious and natural once you start using them. We still get a kick that no one asked for bank feeds but now they’ve become a mandatory feature for all accounting software. We like to think we have a few more of those up our sleeve.
- Make our service smarter and have it working for you while you’re sleeping. We have so much opportunity to add value here. Our teams are chomping at the bit to get into some of these projects.
We end the year with over $85m in the bank and a big team that is absolutely having a blast helping our customers and partners. We’re really proud of the massive progress made over the past year.
You simply ain’t seen nothing yet.
See you all again in 2013.
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