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Xero barriers to entry

After spending two days staffing a booth at Xerocon, the conference for Xero channel partners and integrators, I walked away with a new mindset for my business. The mindset is setting Xero apart in the race for domination of cloud accounting systems.

Xero barriers to entry
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  • admin
  • November 27, 2013
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I learned it is not about the cloud; the people adopting the technology at the rate of hundreds each day do not really understand where their data is. What they are doing is selecting the easiest tool they can.

The software makes their life easier by doing what they need it to do.

Xero calls it ‘Beautiful accounting software’. And it does not end at making a product that does what the clients want. It goes much further. The key to Xero’s success and rapid rate of growth is the removal of all the barriers to entry.

A new bookkeeper who has just finished their Certificate 4 does not want to buy expensive software to start their business. So, Xero gives them the tools they need to start up. Barrier blasted!

The bookkeeper can then go out and find a few clients who get a free trial, and after the trial only have to find about one dollar a day to get going with Xero. Client barrier blasted!

No need to upgrade computers or fund expensive migrations: more barriers blasted! Just start loading the information into Xero via a web browser and off they go. This also applies to accountants who want to get their clients onto Xero.

Add a reward for the advisers for directing their clients to the tool and you have a script for rapid uptake that is playing out right now.

There are comments on the web about inappropriate advice given by advisers who encourage clients to adopt a product that is not a good fit for their business. However, there are other comments about how cloud solutions create more options for advisers to allow them to choose the best fit for the client without having to make any investment in their own systems to support the tool.

Xero has made good use of behavioural economics to develop a path to market that is enticing – so much so that their executive staff now claim 40 per cent of their new clients did not previously use any accounting system. They are developing loyal clients who previously had not committed to any product.

With this, Xero sees a target Australian market of 1.2 million SME prospects. This represents a possible market of more than $400 million in revenue per annum before up-selling or cross-selling any other solution. And that is just the Australian market; there is still the rest of the world, and Xero is rapidly building both the sales force and the channel strategy to dominate the space globally.

Other products may still have a better technology solution for the accounting world, but as Xero develops its tools and its ‘cloud integration partners’ develop bolt-on solutions, the gap between Xero and its competitors in functionality is rapidly closing.

At first, there was no payroll function in Xero; it was pretty hard to take the product seriously then. It also did not handle inventory. Of course, these solutions now exist – as do many others. The Xero API is available to independent software companies so the software community can integrate other solutions easily. This drives Xero capabilities faster than Xero could on its own. No wonder the model has thrived in tough business times over the past five years.

What can the rest of us learn from this success about making technology easy to access, empowering to use and, above all else, functional for the people who use it?

In Australia, there are now more than two million businesses, the majority turning over less than $200,000 per annum. Building these pain-free on-ramps to technology and services is essential to the health of our economy.

For my company and the rest of the IT industry, the job ahead is to make the technology go away, make the devices in our hands stable, powerful and connected to tools that are simple enablers for the way we want to live and work. Rather than scaring people into protecting their data, we need to help them use

safer systems.

How will these sentiments scale up into the SME and mid-market segment? For my IT services business, the lesson was clearly to build solutions that people like, remove the barriers to entry of complexity and cost, then increase the volume throughput.

What could you be doing in your business or organisation to blast through barriers and build a better future for your clients?

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