​Xero transitions into small business platform with new product suite

The cloud accounting firm cum small business platform has made four major product announcements at Xerocon, including a program to help individuals actively re-skill for a tech-savvy future.
Written by Asha Barbaschow, Contributor

Xero CEO Rod Drury at Xerocon in Melbourne

Image: Xero

Xero unveiled a slew of products on Wednesday, aimed at providing small business with an even larger platform to work on.

Speaking with ZDNet, CEO Rod Drury said the "biggest ever wave of new products" forms part of the company's evolution from an online accounting software firm into a global small business platform.

"Our purpose now is to help small businesses create jobs, get capital into them, and to give them pathways to trade with other businesses all over the world," he said of the shift.

"We're moving away from the software to actually being a business platform that accountants and bookkeepers can run their practices on to make small business customers more productive."

Xero won't be leaving its bread and butter behind, however, with Drury touting the cloud accounting aspect of the business as the key system of record.

"We said our strategy was to move from just being the back-office accounting tool to providing front office tools. We've made all of our money selling one thing to 1 million small businesses, so now we're selling to the employees of small business," he said.

"It's the new tools that can further automate and make themselves more efficient. There are so many opportunities to build smart tools for employees of small businesses."

In total, the New Zealand-based firm announced four major releases, with Drury touting the company's new Lifelong Learning Platform as the crown jewels. It is essentially an online learning tool aimed at students and the re-skilling of the workforce, which will be delivered by educational institutions.

The platform includes a bunch of courseware, delivered via the cloud, that allows educators to build curriculum and exams.

"It's not just about students, now people are re-training several times throughout their career so they have that platform so they can learn and that professional educators can build on," Drury told ZDNet. "Part of our moving to AWS allows us to spin-up servers for our education version."

Xero completed its migration to Amazon Web Services (AWS) in November, leaving its legacy environment and relationship with Rackspace behind.

Speaking with ZDNet this time last year, Drury said he was glad he made the decision to migrate to AWS.

"If you want to be on the lowest cost to serve and get the best margin, you have to be on one of these platforms," he said previously. "More importantly, we cleaned up that trillion dollars worth of transactions so we can now start applying machine learning and artificial intelligence to all of that data to do some cool things."

Drury said on Wednesday that automation and machine learning now sits behind everything Xero does.

"There's a massive iceberg under the machine," he said.

"Everything we're doing now is leveraging that investment ... there's so many commoditised technology we can use to transform the way accounting works.

"We have NZ$1.5 trillion of transactions last 12 months and what we're seeing is an 80 percent hit rate when we apply machine learning to the raw data that we have. Already this year we've been shipping more and more smart suggestions and doing a bit of coding inside our core product, but AI and machine learning is still very, very new."

With early indications showing Drury a "high hit-rate", he is confident there will be more innovation over the next few years in the industry than what has occurred over the last 10 years, when Xero was the fresh face in the scene.

"We've got some really transformational stuff we're working on," he added.

Other new products and features unveiled at Xercon in Melbourne on Wednesday include the Xero HQ open practice platform, which is an integrated multi-vendor platform for accountants and bookkeepers to run their entire back office.

Xero Expenses, a mobile-first expense management with open APIs; Xero Discuss, a communication tool on the Xero platform; and Xero Projects, which is a time and job costing tool for professional services, were also announced by Drury during his keynote.

For the 2017 financial year, Xero reported an after-tax loss of NZ$69.1 million, up from the NZ$82.5 million loss reported a year prior.

Operating cash flow turned positive for the first time during the second half, coming in at NZ$9 million. Full-year operating cash outflow was reduced to NZ$4.4 million, from NZ$34.8 million in FY16.

During the year, Xero surpassed the 1 million global subscriber milestone, which Drury said gave his company the title of the largest cloud accounting software provider outside of the United States.

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