I’ve been doing a bit of “research” about this entire SaaS accounting thing and thought I’d share a few developments with y’all.
In June 2005, MYOB became the Australasian distributor for NetSuite. NetSuite, of course, is the SaaS accounting company primarily owned by none other then Larry Ellison of Oracle fame. A few things to note here – NetSuite is aimed at US sized SME’s which in effect means it’s pitched at medium players in our scale of things. The complexity and no doubt cost of their offering puts it our of reach of our average business. Arguably they could reverse engineer but that doesn’t make sense and big software companies just aren’t geared up to be lean and nimble like that.
The second thing to note is that MYOB and Netsuite hooked up over two years ago. This is the 21st century and we’re talking about a software offering in a space with a rapidly shortening product development time and life cycle. Two years without gaining significant traction in the marketplace is criminal. Last year a rebranding occurred with MYOB (part owner of the company distributing NetSuite in Australasia) setting up NetReturn Limited as the front to schlep the NetSuite product.
Interestingly enough Jim Donovan comments about the terrible service that NetReturn provided Fronde (well I assume Fronde anyway);
I couldn’t use Xero in my business, but I could use Netsuite – that is, I might have if their Australasian sales partner had not taken over a month to respond to my enquiry.
this again is criminal – B2B in this space has to be fast, attentive, flexible and responsive.
There is also no obvious sign of a pricing structure for NetSuite on the NetReturn website – not so much of a big deal if they’re pitching at larger businesses but bad if they’re serious about small entities. The only thing I could find was this;
What is the cost for NetSuite and NetSuite CRM products?
NetSuite product pricing can vary depending on the number of users, training and implementation services, and ongoing support plans that you choose – you simply pay for what you use. In general, the overall total cost of ownership when compared to other solutions can be up to 90 percent less over the first few years.
Which doesn’t actually say squat.
How does this relate to Xero and my previous comments about the competition? Well it certainly explains why Rod is strongly targeting the Xero offering to smaller SME’s – they’ve obviously identified that the hole exists in that space and they don’t want to go head to head with the providers of solutions for medium sized operations. It also nicely explains their intention to target Australia and the UK as opposed to the US. Partly because the threats in the US are bigger but also because the opportunities (read potential number of businesses of the right size to suit their product) is bigger. It’s SWOT analysis 101 and undoubtedly something Rod understands backwards, in his sleep and in Cantonese.
So…. (again) two very valid questions for Xero investors or industry watchers…
1) If this is the MYOB SaaS experience that they’ve sunk time and money into only to have it flop, will they be interested in turning on the heel and creating a new product, a reverse engineered NetSuite or a SaaS MYOB to compete with Xero?
2) What has Xero got up their sleeve?
Obviously they’ve got some serious hooks in terms of having the banks and accountants in their camp. There’s some nice trickery getting bank accounts into the package and reconciled – but that’s nice and all but isn’t a killer ap.
The aura of smug emanating from the team at Xero (and I mean that in the nicest possible way) would indicate that they do in fact beleieve that they’ve developed the killer ap – that they have something to roll out that is so ground breaking that it will build the business and overcome the threats. I have no idea what it is – I’ve kind of thought in the past about some accounting software features that would aid in business development – automated industry averaging, benchmarking, comparative analysis and that sort of thing but I don’t think thats what Xero is hanging it’s hat on.
I guess it’s a case of watch this space for developments.