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Read the headline on Hamish Fletcher‘s High-flyer Xero crashes to worst spot and you might think the accounting software as a service company is in trouble.

Technically speaking Fletcher is right. Xero shares lost 50 percent of their value during 2014. They fell 65 percent from their highest point. In that sense it does make the company the worst performer in the NZX.

But investors overpriced Xero shares at their peak and, presumably, at the start of 2014.

The Herald might have added that anyone buying Xero shares at the start of 2013 would have made more than 100 percent on their investment when 2015 began. Or getting on for 600 percent from the start of 2012.

Traditional rules

If Xero was a traditional industrial stock, say a company from the steampunk era or the more dieselpunk Air New Zealand, it would be bad news indeed.

Xero is a technology company. It’s still young. It is a growth stock. Xero’s price moves around a lot. Some speculators took a wild punt on the company and came off badly. That’s what the numbers tell us.

The Herald tries hard to make its stock market reporting relevant to non-specialist readers. I applaud the idea. The practice is something else.

Creating tables, which look like sporting leagues, makes financial news accessible. But January 1, 2014 and January 1, 2015 are arbitrary dates. Pick two other dates one year apart and you would get a quite different picture.

And that’s the inherent problem in popular reporting of financial markets. The simple-to-understand snapshots thrown out by this kind of table, or for that matter the quick daily run through gainers and decliners on electronic news bulletins don’t convey useful information for anyone.

Professional investors don’t sit at their trading desks waiting for the whiz through prices on Radio NZ’s Midday Report. The rest of us don’t hear the report tell us Air New Zealand is down 10 cents then decide it’s time to call the broker.


Fletcher puts the Xero facts in context. He notes: “chief executive Rod Drury’s focus on customer growth means this is unlikely to faze him.”

This isn’t hidden. These words are in the third paragraph, above the fold as we used to say in the old time newspaper world.

Yet I’m willing to bet if the headline on the story ever gets dragged out and used in public, say by Xero’s rivals in the US, that extra, clarifying third par information won’t be part of the picture.

There are stories about Xero’s share price movements that need writing. Thanks to collapsing advertising revenue, the Herald no longer has the resources to allow a journalist like Hamish Fletcher spend a couple of days getting to the bottom of the stock’s rise and fall. That’s not just a problem for the Herald, it’s a problem for Xero, for investors and for the New Zealand public. My plan for 2015 is to do something about that. Watch this space.

9Spokes cloud dashboard9Spokes says its cloud dashboard gives small businesses the oversight corporations pay millions to get from ERP systems.

The New Zealand-based start-up is a cloud app integrator. When customers first arrive they find a one-stop marketplace. 9Spokes walks customers through the stages as they build tailored software suites. It has recommended suites for several vertical markets.

Each app in the marketplace is hand-picked, often there are choices of competing app. Brendan Roberts, 9Spoke’s chief marketing officer says there are 22 apps in the store at the moment.

9Spokes New Year launch

Right now the service is available as a beta version. Roberts says when it launches early in the New Year there will be around 35 apps. He says 9Spokes will add more later. The process takes time and does not include every available app because 9Spokes imposes its own quality control.

At the time of writing 9Spokes has MYOB and Reckon cloud accounting apps in the marketplace. Roberts says the company is in discussion with Xero.

He says customers can move their existing cloud apps to the dashboard.

Single sign-on

9Spokes cloud dashboard and integration separate it from simple app marketplaces. Customers get a single sign-on to all their purchased apps. They need just one password to access everything. They also get a single bill covering all subscriptions.

While many apps have pre-built integration with other apps, others don’t. Roberts says 9Spokes provides its own inter-app integration whether links are already in place or not.

The dashboard uses key information pulled from each app to give business owners a clear view of performance. Roberts says it makes it easy to find problem areas and to plan strategies.

Business owners can track their own performance over time.


There’s also peer tracking. Roberts says this allows owners to benchmark their performance against similar businesses. The benchmarks pull anonymous data from other companies. Roberts says there is data protection in place so customers can’t identify rival companies’ data.

This means, say, a café can see how it did over a long weekend compared to other cafes. Again this information helps with planning.

9Spokes has a call centre. Customers can get help with support problems for all the apps in the marketplace. There is also handholding for integrating the apps and adviced on selecting the best apps for specific needs.

At first 9Spokes plans to focus on selling in New Zealand and Australia. Although the company is New Zealand-based, it is already operating in Australia where Deloitte Private Connect uses a rebranded version.

New Zealand-based cloud software specialist Xero gets a sideways glance from some industry commentators because the company burns cash.

They are right to worry; a high cash burn is often a warning sign.

But not in this case.

Unlike the social media companies and dot-com boom and bust merchants, Xero is sometimes unfairly compared with, the company generates a steady and healthy flow of revenue.

Today Xero passed an important milestone hitting monthly revenue figures, which over a year would add up to $100 million.

That should silence some of the criticism.

Sure, the business is not profitable yet. However, that day is now in sight.

Xero expanding

Xero is using its capital to expand the business as quickly as possible. It has momentum, but that needs to keep going until the software-as-a-service operation achieves global scale. In particular, it needs to make inroads into the US market where it faces strong incumbent competitors.

This costs money. Lots of it. One day the spending will stop. At that point, hundreds of thousands of customers will continue paying their $50 or so every month — for years to come.

PC software developer has always been a high-risk business. Software as a service reduces some the risk.

In the past developers would build applications, then, if they had the right product, would earn a one-off sale, and, perhaps, extra for an upgrade every year or so. Although not every customer would buy the upgrades and selling to them could be expensive.

The beauty of software-as-a-service is that revenue comes in regular as clockwork. It predictable and manageable. There’s nothing to update, that happens automatically.

Not so long ago the idea of accounting software as a service was revolutionary. Now it is mainstream.

Xero has already changed the face of the market. Now it is building a sustainable business for the long-term.

Xero has launched Practice Manager software for accountants, bookkeepers and financial advisors.

The company says the software will help organisations turn jobs around faster, which, among other things, will improve productivity.

Xero Practice Manager makes it easier for accounts professionals to share data and collaborate with clients who use Xero software. This gives them live access to a company’s books, which makes it easier to deal with questions and give advice.

It’s a smart move by Xero. Accountants and bookkeepers are the key battleground for accounting software firms as professional advisors have a great deal of influence over the accounts software their clients use.

Xero’s regional rival MYOB also offers back-end products and services to accountants.

Many small business operators listen to their financial advisors about accounting software some even buy their software from accounting firms.

Xero Practice Manager is free to certain members of the Xero Partner Program.

wellington cloud

Xero is the biggest thing that’s happened to small business accounting since PCs made their way from geek bedrooms and into the office.

Putting accounting in the cloud was a stroke of genius. Cloud accounting is here to stay.

For a long time MYOB dominated small business accounting in New Zealand and Australia. Today it is playing catch-up with Xero.

Xero, MYOB pick your cloud accounting partner

Strictly speaking  MYOB isn’t far behind Xero. Perhaps the New Zealand cloud service has a six month lead on its rival. Given the way the internet warps time, that’s a huge gap.

There are four main accounting software players in the New Zealand market. Xero, MYOB, Reckon and Intuit. Australia has all these and its own Saasu.

Xero is a long way in front in terms of sheer performance. It also beats competitors with mature apps for mobile phones and tablets. Business people on the move can do everything on Xero, perhaps saving more complicated reporting for when they are in front of a PC.

MYOB has a wider range of products. Xero is one-size-fits-all or more accurately three-sizes-fit-all. MYOB has products for different tiers of business and with differing levels of cloud integration.

If you want something a little more specialist, say inventory control, you’d need to buy a third-party add-on product to use with Xero. MYOB covers inventory in its own range.

Intuit, Reckon behind

The last time I looked Intuit and Reckon were about as far behind MYOB as MYOB is behind Xero. You may see things otherwise if either company’s products have features that you particularly need.

If you’re not interested in accounting, it may be best to leave the decision about which software to use to your accountant. Many accountants commit to one or other of the big software brands, Xero and MYOB are just as far ahead of their rivals with professional bean counters as they are with end users.

While accountants can earn commission by signing you up to one service or another, it’s worth letting them make a few bucks on the deal just to keep your life simple. There are huge efficiencies when your accountant can get cloud access to your books, any financial benefits they earn from commission are far less than the value of the time you’ll save.