I was sure that at Xerocon I would meet lots of people who were excited about cloud technology, so I was surprised by what I learned talking to hundreds of people who are running accounting and bookkeeping businesses based on Xero, the cloud solution that is growing at huge rates.
The people from Xero are talking up the cloud as a place to do business. The Xero partners are all about the cloud and creating applications and cloud integrations in powerful ways, but the kicker for me was that the bookkeepers were not too sure about cloud and other cloud solutions – they really did not seem too fussed about the technology.
What matters to the people signing up the clients is that the tools just work and that it makes their life easy. They kind of get that it looks after the backup for them, but they don’t do much to backup other systems as the perception is that by being in small business they have so much risk that a bit more risk with data is normal. The sense that they could spend a bit of money to reduce risk was actually unpleasant for them.
So Xero is not having massive success because it is in the cloud and that is what people want; it is having massive success because it has software that makes life easy for people, because it is easy and pleasant to use.
It is also because there is no barrier to entry for a new bookkeeping business or accounting practice to get on board and get subscribers signing up. Part of the brilliance of the offering is that the software and support for the bookkeepers and accountants is free. So a start-up bookkeeper who has done a six-week course to get certified can start adding clients to their portfolio and sign the new clients up to Xero for a low monthly subscription fee without investing in anything more than a cheap PC with a web browser.
The fact that is stunning is that 40% of Xero’s 75,000 clients did not previously use accounting software. So it is not that Xero is stealing market share from larger established markets, it is creating its own new markets from the newest and smallest businesses in the western world by reducing the barrier to entry for its product. The potential for this to grow exponentially on a global stage is tremendous.
There are so many business opportunities in this model that are sensational, bookkeepers can take themselves from employee to business owner in one step at almost no cost, the integrators who offer practice management solutions for the accountants are able to do well helping these growing bookkeepers to structure their growing businesses, the HR software people can team up to sell their solutions through this channel and so many other service providers and software providers can jump on board.
The interesting point is that the channel and the end clients are not necessarily tech savvy. They are simply consumers of technology who have grabbed a great tool because it works and have then been introduced to a world of integrated solutions. Selling to this audience is not about technology it is purely about the function the solution provides and how it makes people feel. Giving them a feeling of control, safety and capability is all important. Removing the barrier of cost which brings negative sentiments of pain, fear and inadequacy are key to the success of this business model.
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 a country like Australia where there are now over two million businesses where the majority of them turnover 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 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. We need to stop scaring people into protecting their data and simply help them to use safer systems.
How will these sentiments scale up into the SME and mid-market segment?
David Markus is the founder of Combo – the IT services company that ensures IT is never an impediment to growth.