Xero's hockeystick

by admin on February 19, 2009

in Cloud Computing/SaaS,General,Innovation

This from Xero should put a sock in the on-demand naysayers’ mouths

Things are accelerating here at Xero, we’ve added 1000 customers in 50 days.

The company also claims to have 1,000+ paying customers in the UK. That is an excellent achievement but as I have said many time before, there is plenty of room in the market for the current players to grow massively while the likes of Sage drags its feet. Speaking of which, SageLive still seems to be dead. Presumably the issues they are reviewing are much more serious than first thought. That should please Duane ;)

Four points to think about:

  • One is the hockey stick effect we see in on-demand applications. This was something I mentioned in regard to Outright’s explosive growth in January. The difficulty for all vendors is in figuring out or predicting the inflection point. Given the speed of acceleration that Xero is seeing, I would like to see a graphical representation based on weekly numbers.
  • The big debate within saas/on-demand circles centers around the cost of demand generation. Xero has been burning cash like crazy but as we can now see, this is reaping huge dividends. It does create cash flow pressure and, as Philip Woodgate observed elsewhere, implies a level of risk that naturally concerns professionals. Hopefully we will be able to draw a line under that debate once Xero’s results are in.
  • Today’s on-demand competitors need to be smart when allocating their marketing spend. While there is no substitute for face time, Ben Kepes notes that Xero attributes part of its success to ‘word of mouth’ in New Zealand. That is near zero cost but is absolutely dependent upon having a super successful and happy group of passionate customers. On-demand players are able to leverage this in many ways that on-premise providers simply cannot achieve.
  • Any questions about the value that innovative on-demand offers should now be close to dead and buried. I’ve long argued that incumbent products, based on a 600 year accounting model cannot be right for the 21st century. Xero is proving (as are others) that putting customer needs at the centre of the design process is a vital element for success. Those who replicate the ‘music paper ledger view’ will not make it.

[Disclosure: Xero is a sponsor of this site]

Image from Xero but probably a Tintin lift (lol)

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Alister Cameron // B February 19, 2009 at 6:43 am

Hey credit where credit is due… that's the rocket from Tintin.

i grew up on Tintin and would recognise it anywhere :)

Thanks for the story, by the way. Been watching Xero since the start.



Miki Szikszai February 19, 2009 at 7:54 am

Xero rocks but word of mouth is not free!

It's a result of investing in great design, listening to your customers, making changes and treating your customers like your number 1 asset.

That all costs money – but its much more sustainable money than TV commercials…

Dennis Howlett February 19, 2009 at 8:03 am

I could perhaps have articulated it better but I thought I sort of had it covered with the dependency on happy customers etc…?

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