Wednesday, 24 September 2014 17:46

Temperatures rise in the heat of battle between MYOB and Xero Featured

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Image courtesy of jesadaphorn at freedigitalphotos.net Image courtesy of jesadaphorn at freedigitalphotos.net

There’s an intriguing and relentless battle for the hearts and minds of customers and potential customers going on in the online accounting software market between Australia’s own homegrown vendor MYOB and the upstart New Zealand vendor Xero.

As an observer standing on the sidelines, from a media stand-point there’s a constant bombardment of stats and facts about client acquisition milestones, the take-up of conversion tools for clients to switch from one vendor to the other and the introduction of new or enhanced products and services.

Of course, MYOB and Xero have much more in common than their simple rivalry for the SME market in Australia and New Zealand.

Former MYOB co-founder and CEO Craig Winkler was an instigator and early investor in both companies and is now a prominent investor in Xero. And, just to add more spice to the market battle, high-profile New Zealand entrepreneur Rod Drury is the current CEO of Xero and features prominently in the media in both Australia and New Zealand spruiking the company’s offerings.

The battleground for MYOB and Xero, and all other major players in the market, is well and truly established, with the two vendors vying for market leadership in cloud services.

Clearly, Xero still has a mammoth task ahead of it if it wishes to make a serious dent in MYOB’s claimed market leadership in Australia. Just today, MYOB released its latest market figures, showing it has “surpassed a record client milestone” of 100,000 online subscribers, and “further cementing its leadership in cloud accounting”.

Xero, however, countered with its own announcement today that a recent survey of its new customers found that two-thirds had switched to Xero from a “rival product, such as MYOB” – and that it has now indefinitely extended its free MYOB–to–Xero conversion service. In fact, Xero says its Australian customer base is now sitting at 147,000 and growing quickly, with much of that growth occuring since the introduction of its conversion service in April this year.

And, while MYOB and Xero engage in their own cross-Tasman battle, the elephant in the market – some would say white elephant - is the big US player Intuit, the makers of QuickBooks.

Intuit is aggressively pursuing expansion of its QuickBooks market in Australia, but it’s up against stiff opposition in MYOB and Xero, and doesn’t appear to have made a great deal of headway in putting a serious dent in MYOB’s market leadership position.

Intuit had its own battle last year with another Australian vendor, Reckon, which had sold and marketed QuickBooks for several years in the ANZ market. That all changed with Intuit’s market entry in its own right, and Reckon now markets it own branded accounting software solutions.

The latest figures stats released today by MYOB and Xero highlight the battle for market supremacy – and ‘share of voice’- going on between the two vendors.

MYOB emphasises that the 100,000 online subscribers milestone has been achieved in under two years from launch of its flagship AccountRight cloud accounting solution, and that the percentage of new clients that are taking out an online subscription has passed 70% of total registrations, up from less than 20% two years ago.

MYOB CEO Tim Reed also gives a glimpse into the way the company is heading from a strategic standpoint.

“With the strong growth in our business it is an opportune time to take stock and prepare ourselves for the next stage of growth.

“With continued strong financial performance and favourable credit markets, it is an appropriate time to negotiate greater flexibility in debt arrangements, lowering the cost of our debt and building in the flexibility for a possible market listing in the future. To that end we are actively negotiating with a syndicate of banks to refinance our senior debt and are close to finalising the arrangement.”

Reed says the refinancing negotiation has been well supported by existing lenders with a commitment for $640 million, and is likely to result in “more favourable pricing and more flexible terms for MYOB”.

In its release of market figures today, Xero says its decision to indefinitely extend its free MYOB–to–Xero conversion service was taken after “thousands of small businesses and accounting partners opted into the service”.

Xero Australia CEO Chris Ridd says that while these latest stats show there are a number of customers upgrading from physical ledgers and Excel spreadsheets, “there are also a lot of customers switching from other accounting software as well”.

According to Ridd, the conversion shows demand for Xero as the preferred online accounting software option, with 96% customer growth in Australia over the past 12 months alone, and in the survey of new Xero customers who joined since September 2013, 67% of those who responded said they had switched from a rival product, including MYOB.

“We’ve been incredibly happy with the uptake of the conversion service offered by Jet Convert, but also with the rapid acceleration in customer growth this year. Xero is the smart, connected financial platform that business owners love.”

Ridd says the switch to Xero has enabled accounting firms and small businesses to take advantage of the online accounting software’s “unrivalled functionality and a growing ecosystem of more than 350 third-party add-ons”.

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Peter Dinham

Peter Dinham - retired and is a "volunteer" writer for iTWire. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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