New Zealand-based and ASX-listed cloud accounting firm Xero Limited had recently opened an office in Singapore in partnership with local bank UOB. Xero, which is also listed on the New Zealand Exchange, started off in 2006, and after Australia operations, launched in the UK and US, and have now grown their customer base to approximately 717,000 businesses in more than 180 countries.
Alex Campbell, managing director of Xero Asia, said the company’s largest Asian customer bases are in Singapore, Hong Kong, Malaysia and the Philippines. Xero reported revenue of US$187.5 million last year, an increase of 62 per cent over the previous year.
Are there any plans for M&A activity and for deeper involvement in the startup ecosystem of Singapore and Southeast Asia?
We want to make sure that we’re supporting the startup community in Singapore and to grow awareness of Xero. We have lessons to offer in terms of scaling a business, given how we’ve grown to over 700,000 corporate clients globally. So there are lessons we can offer. Talenox, HR Easily, Shopify and TradeGecko are some of the local partners with great integration.
TradeGecko has built a fantastic inventory management software that integrates very well with our platform. The UOB partnership is really interesting and what we’ve heard is that our customers switch banks in order to secure the benefits of Xero’s direct bank feeds. We’ve been very focused on building the team, so the next wave of growth will be focused on building relationships with the ecosystem of VCs and accelerators in Singapore.
What are the advantages of using Xero relative to competitors like Quickbooks, FreeAgent and SlickPie? What sets it apart from other cloud accounting services?
I’d say that we’re intuitive and targeted at small business owners, in terms of how we simplify accounting and bookkeeping. We’re a cloud-oriented platform business and have a lot of open APIs for this; we’ve got about 500 approved add ons & ecosystem partners that enable Xero and its partners to expand our offerings.
Another differentiator is our partnerships with banks, which sees us facilitate their reach and enhance their offerings to SME clients by linking up their Internet banking services to our own platform. From there, bank clients can download statements and plug in the numbers.
In the future Xero customers can apply for loans from NAB within Xero against their Xero financial data. It’s much easier for banks to make a positive lending decision based on their clients updated Xero financial data, rather than older printed bank statements provided to a bank manager.
Moving from WPP to Xero, what are the challenges that comes with shifting sectors from communication services to online accounting services?
I was working for Australian branch of WPP, which until recently operated as an independent company. They were looking at expanding into Asia; they specifically wanted to expand by looking at small businesses they could acquire. That got me talking to digital agencies, PR firms, advertising agencies. And the common thing I found was they were all struggling with financial management.
Many were using Excel and spreadsheets to manage their finances, and these are really successful business with great products and client relationships. So when I was with WPP, what happened is that we acquired a series of small businesses and we moved them over to Xero, which changed their financial management.
What are the insights you can offer regarding Southeast Asian customers? In fragmented markets like Southeast Asia, subscription service-based business often note the price sensitivity of consumers. How do you overcome this?
We’re really focusing on English-speaking markets like Hong Kong, Singapore, Malaysia and the Philippines. Predominantly, business is done in English across the region (i.e. Southeast Asia) and in the metropolitan cities of Malaysia and Philippines. These markets are not as fragmented as you would think. We offer incredible value for small business, which allows people to focus on managing businesses.
What’s your view on corporate development and corporate acquisition of startups?
Obviously it depends on the nature of the industry. Coming across from that world into Xero is that the strengths of taking a great product and growing organically creates a stronger business and single corporate culture, i.e. the way a team operates. M&A-driven companies naturally find it harder to create those things.
So it’s hard to have one cohesive culture, especially when you’ve gone on an acquisition spree and consolidated a whole bunch of small companies. If you’re clear about what you’re trying to change and what customers you’re benefiting and making a tangible impact on, then that’s a powerful factor.
What ’s your take on the Yahoo acquisition of Flicker and how it evolved?
Some tech companies have proven incredibly effective in integrating acquisitions and making sure it’s aligned with their mission and keeping the key people and retaining their talent. Some business haven’t been as successful.
Google has been really effective in building on these early stage acquisitions – Google Maps and Android – small business that were lined up with the Google missions and contributed to the platform. When tech companies do acquisitions less clearly related to strategy, it does not work out as well and it becomes a financial transaction rather than a strategic transaction.