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New IDC report shows Xero is a global growth leader

Posted 5 years ago in Xero news by Beeny Atherton
Posted by Beeny Atherton

Xero is the fastest growing financial applications vendor in the world according to the International Data Corporation’s new report.

IDC, a world leader in technology research, recently released their annual report. They report on market sizing and share for finance and financial payroll software providers*.

Not only was Xero the fastest growing financial application, it also ranked as the fastest growing company in the payroll accounting space.

  • 74.7% YoY revenue growth in 2014 – fastest growing company in the payroll accounting space
  • 80.3% YoY revenue growth in 2014 – fastest growing financial applications vendor

In any business there are a few key markers that help you stay on course. My three are:

  • Product innovation is 5x ahead of the curve
  • Customer adoption is at scale
  • People and customers deeply love your product or service

The IDC report shows me that we’re on the right path for Xero. Three standout facts:

  1. Demand for accounting and payroll systems is on the rise – the market grew from $17.1 billion in 2013 to $18 billion in 2014
  2. Small business is a catalyst for much of the growth as enterprise-level tools are now available for them
  3. Xero is globally #1 for growth at 80 percent followed by Workday

At over 540,000 subscribers on the Xero platform we already have over 20,000,000 businesses interacting. And it feels like we’re on track towards our vision of millions of small business thriving on our platform.

There are 200 million small businesses and counting. Feels like the biggest opportunity on the web. I would love to hear your thoughts.

Chris Teeling is the Global Head of Strategy at Xero.

* IDC, Worldwide Payroll Accounting Market Shares, 2014: Xero and Workday Lead Payroll Growth into the Cloud, Doc #256819, June 2015. IDC, Worldwide Financial Applications Market Shares, 2014: Year of SMB and Public Cloud, Doc #257867, July 2015

6 comments

Massimo Boano
August 27, 2015 at 8.03 pm

Fully agree! A single modern operating platform is the real enabler that allows professionals to scale up in their activity with their SMB clients.
You are on the right track to overcome the requirement of localization in european countries, where, in tax & accounting, along the years, because of different regulations, innovation has found several roadblocks in terms of adoption.
My 2cents
Massimo

Chris Teeling
August 28, 2015 at 9.08 am

Thanks I agree. The opportunity to connect accountants, bookkeepers, advisors and small business across the whole world is what gets up up and running every day. With customers in over 180 countries (including Europe) we feel we are at the start breaking through many of the roadblocks.

Mike Porter
August 28, 2015 at 1.20 pm

I just love the market dynamic and beautiful investment model unfolding. The length of that market runway is unbelievable, two decades or more. Truly global opportunity that will continue to scale and hopefully Xero can create the complex software machinery of a multi-lingual and multi-regulatory fintech product. In my opinion particularly in the last 2 years you’ve improved that product development cadence and thus credibility to fulfill the global ambition. Whilst you’re at relatively low global penetration, that still took 8 years to achieve. Therefore any new player has a mile high barrier to entry (cost and time) and i’d think they’re too late to the party. You’re now adding more ‘new’ customers than any fin tech business globally. That’s some achievement. That leaves Xero and a few incumbents to participate in what you rightly frame as the biggest opportunity on the web. None of the incumbents are adding new customers at your rate, they’re basically converting their desktop one’s. None of the incumbents have total single country penetration. None of the incumbents have material customers in multiple markets. They can’t stop the Xero explosion even though they’ve been witnessing it for years. From an investment perspective i love the fact that i’m 25 years away from retirement and i don’t think i should sell my shares for $14 or $40, what I believe is that Xero is a low risk part of my portfolio providing i have 10+ years and a phenomenal return potential over the long term. Exciting, just a bit. (and i haven’t even mentioned what that market scale opportunity would bring once you’re out of the early bit). Is this valued in. Not by most. DCF models over 10 years are the wrong valuation metric while you’re in a perpetual state of hyper growth mode and geared accordingly.

Massimo Boano
August 28, 2015 at 10.18 pm

Mike:

I truly believe you got it right when you say ” … any new player has a mile high barrier to entry (cost and time) and … they’re too late to the party”.

However, I think that also existing vendors have high barriers. As a matter of facts, when you consider European countries (this is the market I can talk about), the customer base is still using local software, stacked with legacy technology and too high costs (and long time) to rejuvenate towards the cloud.
Xero and potential incumbents have a strong window of opportunity once they have integrated local regulations… it will be a game of winning share over the existing ground… churn rates will rise over the existing customers’ portfolios.
Just enjoying the interaction.

Bill Sutton
August 30, 2015 at 8.39 pm

I’d like to add something from a different perspective from either Mike or Massimo. I’m a small investor who bought 5000 shares in Xero for around NZ$7 and has watched them rise to more than NZ$44 then fall to currently around $NZ14. Unlike Mike I don’t expect to live another 25+ years. So I do want to see the share price grow. How can this happen in the short term, given the Xero team is quite properly focused on growing sales first and worrying about profits later? It appears to me the critical next step is the promised US share float, which properly handled by the team should go a long way to prove to millions of currently skeptical small investors that Xero is indeed a sensible place to invest some of your hard-earned money. The timing of the US float will of course be critical.

Massimo Boano
September 1, 2015 at 6.19 pm

US float is critical… nevertheless to be truly global there is a strong need of being multi-lingual and -regulatory… so people can really use it abroad.

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