Why Xero migrated to AWS - and what it cost

Cloud accounting software firm Xero has opened up about its gigantic migration from Rackspace to Amazon Web Services.

The company began migrating more than 700,000 customers to AWS in August, with the transition expected to be completed over the coming months.

During its results announcement for six months ending 30 September 2016, Xero expanded further on the reasons for the migration. The company said it would be able to capitalise on machine learning through the AWS platform.

"By using the on-demand computing power of AWS, Xero can release new software more rapidly, scale to meet times of high user demand – even during the busiest times of the day – and grow to millions of subscribers globally," the company said in a statement.

The migration wasn't without its costs though. Xero said its financial performance was impacted due to running duplicated platforms on Rackspace and AWS at the same time during the transition.

Xero's cost of revenue increased by $10.2 million to reach $33.8 million for the six-month period, attributed primarily to hosting costs for both platforms, along with the cost of hiring new staff. The company said that it expects operating margins and further efficiencies on AWS.

Xero finished the first half of the financial year with 862,000 paying subscribers, an increase of 45 percent from the same time last year. Revenue was up by 48 percent to reach NZ$137.4 million (A$130 million).

However, the company continued to rack up losses, posting a NZ$43.9 million (A$41.7 million) net loss, a slight improvement from the NZ$44.3 million (A$42.1 million) net loss last year.

Earlier this week, Xero revealed ambitions to reach $1 billion in operating revenue. As part of the announcements, Xero flattened its management structure, meaning country managers will report directly to chief executive Rodd Drury. The chief marketing and revenue officer role was replaced, and as a result, Andy Lark left the company to "pursue new ventures" after two years with Xero.

Xero's US president Russ Fujioka is also leaving the company, and will be replaced by Keri Gohman in December.