As you’d expect, we keep a pretty watchful eye on what our competitors are doing and saying in the market. We are bullish about the shift online based on trends we are seeing, the growth we are experiencing, and what we are hearing from our customers. Therefore, we were quite intrigued to read about the findings of MYOB’s latest SME survey in Australia. Their results pointed to a decline in the use of social media as well as the number of businesses paying bills or buying products online. Tim Reed, CEO of MYOB, was even quoted that he suspects many (businesses) are shying away from online activities as they focus on the health of their business.
No doubt there are ongoing concerns amongst Australian small businesses about a short term economic recovery, but I think it is dangerous to suggest to a small businesses owner that retreating from online is an acceptable response if indeed their business is experiencing health issues. Technology is a key business enabler and can actually help small businesses gain efficiencies, reach new customers, generate new revenue streams, etc, etc. Why turn your back on the one thing that can turn your business around?
As an example, many retailers are hanging tough and trying to compete with online entrants, but when research shows that cross-channel shoppers spend 3-4 times more than a single channel shopper, then you have to start looking at new ways of doing things. Online technology will deliver you those channels.
Cloud building momentum
Last week in Sydney about 300 of Australia’s most influential IT Executives and government policy makers gathered at the Four Seasons Hotel in The Rocks to discuss ways to drive uptake of the NBN and cloud computing. I was lucky enough to be asked to present and talk about what Xero is seeing in the small business market. I was joined by Steph Hinds at Growthwise who also provided a very upbeat view of the enormous economic and efficiency gains available to small business owners by embracing the cloud.
Kevin Bloch, CTO of Cisco kicked off proceedings outlining the incredible momentum we are seeing toward cloud and online. Based on Cisco’s own research, Kevin predicted that global IP traffic will increase 4-fold between now and 2016. In that time, mobile data growth will also grow 14-fold. Various other studies were referenced during the course of the day, including the recent IBM study on Australia’s Digital Future to 2050 which suggests that a 10% increase in broadband penetration would have a 1% positive impact on GDP. The study also contends that a doubling of high speed broadband would have a 0.3% positive impact. Clearly the researchers are pointing toward unstoppable momentum and new business models available to small businesses as they do more and more online. So the message should clearly be to embrace cloud, not resist it.
The growth we’re seeing
I’d also point to some of the trends that Xero is seeing from our customers. We announced 3 weeks ago that we now have over 100,000 paying business customers globally and that this number is over 26,000 in Australia, up 3-4 times where we were a year ago. On top of this more than half of our customers are using Xero Touch (iPhone App) to access their accounting data whilst on the road and are enjoying the new found freedom that was not available when they were office bound with an on-premise system. The cloud means that many small businesses can completely avoid the “walk into Harvey Norman and fork out hundreds of up-front dollars on on-premise software” experience and instead go straight to the simplicity and cost effectiveness of the cloud. This is evidenced in our numbers and the fact that 40% of new customers signing up to Xero directly are coming from having no accounting software. The cloud changes the economics of doing IT and makes automation of the business accessible and attractive to a whole new category of small business owners.
The appetite for new innovations is all driven by a market place of small business owners who want more. They live in a consumer world where cloud applications are simple to use and always available Facebook, eBay, Skype, LinkedIn, Twitter, etc. As business owners they want this same freedom and given all the projections from the experts around uptake of online and mobile computing, that demand is only going to increase exponentially.
So in summary, if you are a small business owner with concerns about the health of your business, then retreat to the security of on-premise software at your peril, because your competitor is going online and getting ahead.