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Xero is a platform, not a product…

To compare Xero to stagnant desktop software, or even to half-baked cloud solution with no significant app support is madness. It’s comparing apples and pears.

An opinion piece by Sam Wood.

For the past three years, I’ve spent a lot of time speaking to clients, industry insiders and accountants about the evolution of cloud accounting and the technology which is underpins its rapid growth. Throughout this time, what has become more and more apparent to me is that in 2017, it’s not good enough to be an amazing product, you need to be an amazing platform.

The mobile platform wars. History repeating itself?

Before talking accountancy it’s worth looking back to the change that mobile has seen in the past decade. The rapid growth in smartphone use from 2007 onwards is astonishing. Smartphones are now prevalent to the point where it’s difficult to imagine a time when we weren’t all connected 24/7. But looking around, there is far less diversity in devices being used than in 2007/8. It must have been hard being Blackberry/Nokia over the past 10 years. And it must have been terrible to be the business/corporation that backed the wrong horse in the mobile platform battle that bore out circa 2007-2012.

In the mid to late noughties, Nokia Symbian and Blackberry OS looked untouchable. Both boasted huge customer install bases and dedicated fans across the world. Between the two companies, they had both business (BlackBerry) and personal (Nokia) mobile computing markets won. It wasn’t even a contest. But then in 2007, Steve Jobs hauled himself onstage and gave his now legendary iPhone/iOS introduction Keynote (“… a widescreen iPod with touch controls, a revolutionary mobile phone, a breakthrough Internet communications device…”). A short while later, Google followed suit and entered the mobile space with Android OS. During this time, Nokia and Blackberry watched on seemingly unalarmed.

The CEO of Microsoft, Steve Balmer, whose Windows mobile platform was a small-time player in 2007, seemingly echoed the wider industry sentiment shortly after the iPhone’s introduction, declaring:

“There’s no chance that the iPhone is going to get any significant market share.” — Steve Ballmer, Microsoft CEO, 2007.

Now this is where I want to make my point. You are probably expecting me to dive straight into how the iPhone instantly upended the smartphone industry in the months after launch, but to be honest, that’s not true.

In 2007, what Apple launched was a product. They launched the iPhone. Running on the first gen iPhone was “Full OSX” Steve Jobs had proudly declared at the launch event and though the two OS’s shared the same base code and kernel (or so I am told! I’ll try not to get too technical and stray out of my lane here!) it was clear the system was significantly different to that of its Mac bound big brother.

After launch, sales of the first gen iPhone were… good, not incredible by today standards, but not too shabby for a first entrant into an established multibillion dollar market. The OS was tied closely to the hardware to form an impressive product which mainly drew the attention of Apple fan boys and industry commentators, while others sat comfortably under their Symbian/Blackberry umbrella content not to worry about the events unfolding at Cupertino.

But here’s the thing that people forget. The first gen iPhone shipped with no app store, no significant third party app support and very little concept of what an ‘app’ would become. It was steady and it was static and it did just fine. It was a product and not a platform.

Then in 2008, Apple launched the iPhone 3G running “iPhone OS2” and with the launch Apple unleashed the ‘App Store’. This was the game changer. Suddenly Apple had a revolutionary, always connected, mobile platform and opened it to developers across the world. It was the launch of the app store which changed IOS into the platform we know today and with it came the growth explosion of mobile computing.

Simultaneously, Android was creeping out of the shadows as a secondary platform of which to take note, with Google quickly following Apple in launching an ‘App store’ of their own.

Momentum quickly built around both platforms and in 2010, Apple saw the light and put the operating system front and centre. Apple dropped the clunky naming convention and opted in favour of the cleaner ‘IOS’ moniker. It was time to devote serious dev and press time to “the world’s most advanced mobile operating system”. The developers came in their thousands, and an explosion of mobile experiences erupted.

At the same time, Nokia and Blackberry began to wake up to this threat but even then, it was too late. As they scampered to sign up app experiences and developers, the pace of Android and iOS adoption continued to accelerate, buoyed by the engaging experiences the app stores continued to deliver.

In 2017, the smartphone platform wars are over, Apple and Google won. They won because of the platforms they built and the app partners which brought in experiences from thousands of developers across the world.

Apple and Google’s platforms enabled products to spring up overnight in categories and experiences we couldn’t have imagined previously. Uber, Spotify, Sonos, Twitter all have the mobile platform underneath them to largely thank for their success. Today they are so pervasive we take them for granted.

I find it interesting that Steven Elop, the former CEO of Nokia famously said “We didn’t do anything wrong, but somehow, we lost”, but that isn’t true.

In my opinion, what Nokia and Blackberry both did wrong was to think of their products as insular experiences tightly controlled by their dev and marketing teams. If they had embraced their products as platforms, then the above chart may have looked decidedly different.

Stagnation and insulation kills businesses in the cloud driven era of integration and collaboration.

The cloud accounting landscape in 2017:

I may have laboured the above point but understanding the fall of Nokia, Blackberry others in the wake of Apple and Google is key understanding the rise of cloud accounting and the precarious position desktop and non-platform building cloud accountancy companies now face.

I often get asked why I get passionately excited about the work that Xero does as a cloud accounting package and until recently I’ve struggled to say why. Surely other cloud packages do the same? Surely desktop software is more powerful and better understood?

It was only during my recent trip to Xerocon that it all fell into place for me. At Xerocon 2017, watching the Keynote addresses, I felt like I was at an Apple product launch. When walking around the expo area, I felt like I was at CES/IFA or some other high profile tech conference. I didn’t feel like I was there to learn about Xero product features in isolation. I was there to collaborate and to make the most of an eco-system build on Xero’ s platform.

As I looked around the show floor, I noted the volume of amazing partners that were showcasing and noted how without cloud accounting platforms most of them wouldn’t have even gotten off the ground. Where I saw Receipt Bank I thought of Uber and where I saw FUTRLI I was reminded of Spotify. The industry that has grown up around Xero is one fully enabled by Xero as a collaborator determined to use tech to bring better experiences to SME’s.

The keynotes focussed huge time on the Xero HQ platform and the integrations possible with partners; I wondered whether we would be at the conference watching at all if it weren’t for the app partners…

More and more the Xero experience is reaching further away from its bookkeeping origins and pushing deeper into every aspect of business operations. Integrations with sister systems in CRM and HR mean that the accounting platform is now often the central core to many business operations, no longer constrained to just finance. At such levels of integration, picking the correct system is critical.

One such partner showcasing at Xerocon was Curve, the UK Fintech start-up looking to revolutionise personal finance. The integration was the first that Curve had announced and I found it telling for two reasons. Firstly, because I was impressed that such a cool, industry leading fintech start-up wanted to spend time at an accounting convention and secondly because they chose to integrate with Xero before any other partner, including other cloud accounting products! Is this indicative of the wider view of Xero? A view of industry leading software and an ecosystem open to collaboration, proud to support other tech start-ups? It sounds about right to me. It’s this perception and reputation that Xero has nurtured over the first phase of its life that I see as being crucial to the way its next phase will play out. I simply can’t imagine Curve being so excited to partner elsewhere.

The volume of amazing experiences and business solutions Xero’ s platform and ecosystem can now deliver is truly staggering. When we started our cloud journey at Blu Sky Chartered Accountants, we naively sold the benefits of Xero alone without ever having an adequate answer as to why, other than we intrinsically knew we were onto a winner. But now, we don’t sell Xero, we push the experiences that the platform and app partners deliver to SME’s. This sells Xero to the clients for us.

We then use the platform to deliver business experiences far beyond that of the traditional bookkeeping or accounting provider. To compare Xero to stagnant desktop software, or even to half-baked cloud solution with no significant app support is madness. It’s comparing apples and pears.

Summary:

I said at the start that it must have been awful to have been the business that backed the wrong platform in the mobile wars. Even today we still see the after effects of the wrong choice with Delta Airways announcing it’s switch from Microsoft to iOS just this week. The capital, infrastructure and people costs must be immense.

As cloud accounting systems continue to build momentum as the core of the SME’s internal ops, can the SME business owner afford to get the choice wrong? Moreover, can the accountant, the “trusted advisor”, afford to give the wrong advice when the system they recommend will go on to underpin so much of the SME’s future business architecture?

That’s why I have now settled on a standard response to my most oft asked question of “Why should I bother moving to/choosing Xero over ‘XYZ product’? What does Xero do that it can’t?”

My response to the cloud doubter, the reluctant business owner, and the desktop software entrenched bookkeeper will always be the same.

“Stop looking at Xero as a product. Look around it to the 500+ app eco system that backs it up. You can’t compare it to product XYZ because Xero is not a product, Xero is a platform!”

Is Xero iOS, Android, Windows Phone, Symbian or BlackBerry? Only time will tell but as each day passes I’m more convinced that it’s Xero who have the strongest strategy while the others continue to watch on seemingly unalarmed. Xero has an allure and a cool factor that its competitors simply cannot match right now. If Xero can bottle that feeling and keep it going, it’s going to be hard to keep pace with.

But there is one thing that I’m convinced of. In 2017, it’s platforms that win, not products.

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