​MYOB CEO shrugs off pressure from competitors

MYOB CEO Tim Reed explains that the company is well positioned to compete with the growing competition in cloud accounting software marketing, including its biggest rival, Xero.

Despite the fact that accounting software provider MYOB continues to be targeted by New Zealand-based arch-rival Xero, the company seems unfazed by the competition.

MYOB CEO Tim Reed told ZDNet that competitors such as Xero promote healthy competition.

"Frankly, I think it's great because ultimately, that leads to better solutions. We're all forced to innovate more, and we're all forced to work harder and really make sure our clients are loyal and happy with the service they're receiving," he said.

Reed believes that given the company's product range covers a large breadth of the market, from sole traders to enterprises, it is well placed to take on the growing number of competitors. He added that while Xero does compete head on with MYOB Essentials, MYOB still has an advantage as it also serves the mid market with its newly launched MYOB Advanced product, and the small to medium-sized business sector with AccountRight.

"They have a much narrower range. Xero competes fairly head on with MYOB Essentials, but if you compare MYOB AccountRight to Xero, then it's like comparing chalk and cheese," he said.

MYOB CEO Tim Reed (Image: Supplied)

Late last year, Xero ramped up its effort to convert MYOB customers by indefinitely extending its free MYOB-to-Xero conversion service, Jet Covert, to allow MYOB customers to easily shift their accounting ledgers onto Xero's platform.

However, MYOB also has a similar conversion tool for Xero customers looking to transfer to MYOB. While he was unwilling to specify exactly how many extra customers MYOB has gained as a result of offering this service, Reed said there are businesses "using it all the time".

In addition, MYOB announced that it had pumped AU$40 million into research and development last financial year in a bid to grow its cloud-based service portfolio -- a sector, Reed said, where the company will continue to grow.

Reed said investment in R&D has nearly doubled from six years ago, when the company was spending less than AU$20 million annually. This has since allowed the company to release updates two to three times a week, instead of twice a year.

"I think the basis of competition has changed, and it has moved from a category where the channel was important to innovation is most important. In general, technology is also moving more quickly," he said.

But the company's momentum wasn't always this positive. Reed said at one point, the company was investing a lot of money in the overseas market, but the return on investment was never there.

"We had an international growth strategy, but it failed. We weren't getting growth from international markets like we planned. The growth we were getting was coming from Australia and New Zealand, yet I believe the franchise in those core markets was under threat because we weren't investing enough in product innovation -- innovation at that point in time was very minimal," he said.

"Interestingly, our customers wanted it that way; they told us don't change anything. But it's a really dangerous position for a technology company to be in where innovation stops happening. With innovation, if you're not out there innovating ... then you can find yourself in a dangerous situation, and I believe at that time, we lost the ability to innovate."

But once the company decided to refocus its strategy to only its core markets of Australia and New Zealand, and began investing in online solutions, the company's efforts began to pay off.

"We believed back then, online solutions was going to revolutionise our category, and decided we needed to start investing. I look back now, and I'm enormously glad we did. If we had waited, we could have found ourselves in a difficult decision," he said.

The company has since made strategic acquisitions, including its most recent one of New Zealand-based Ace Payroll as part of a NZ$14 million deal. Reed said acquisitions will be one way the company plans to grow.

Another area that Reed said the company will be looking out for is the number of paying subscribers. At the start of this year, MYOB announced that of the 1.2 million businesses actively using its solutions, more than half a million are regular paying customers. This resulted in a return to profitability for the company, posting AU$1.6 million in full-year profit for 2014.

"Paying customer numbers is not just about revenue, but sustainability of revenue over the long term," Reed said.

But the biggest news in recent times for MYOB was relisting on the Australian Securities Exchange in May, after the company's owner, Bain Capital, decided to bring in new investors to participate in the growth of the company. However, Bain continues to hold a 58 percent majority share in the business.

"They're not going to maintain it forever. Bain are a private equity firm, and private equity firms work with management to improve the business, and then they eventually sell. So they will sell, but their shares are locked down for at least another 12 months," Reed said.