Xero: accountants are the new channel

A segment of software channel is booming – with few traditional partners in sight.

Xero has nearly 2,000 channel partners in Australia for its cloud-based accounting software, most of them accountants and bookkeepers.

They are servicing 75,000 Australian Xero users, an increase from 51,000 on 31 March 2013. Xero now has 200,000 paying customers around the world.

Xero Australia managing director Chris Ridd told CRN: "The big vendors such as Microsoft struggle to service small business in the channel. There is not much money and the cost of sales is high, so we see accountants leading the charge."

The company hosted its Xerocon event last week, with 900 partners in attendance.

"I used to work for Microsoft, which is the benchmark for channel-driven companies. Microsoft had 800 partners at APC; we had 900 at our conference in just two years [since our first Xerocon]."

Ridd said accountants and bookkeepers are driving its growth.

"Seventy percent of our new customers come via the accountant or bookkeepers. The average small business owner may be frustrated with technology but they don't wake up and change their accounting software. The trigger for change is usually when the accountant suggests it."

But the accountants and bookkeepers don’t stop there. "They get a taste for [technology] and ask, 'What else can I provide?'.

"They are becoming more tech-savvy. They are becoming more of a full-service provider, moving into HR and health & safety, and the cloud platform is enabling that," added Ridd.

However, there are still opportunities here for system integrators.

Xero works with the likes of Paradyn, Combo and HubOne, who work hand-in-hand with accountants to provide their higher-level technical skills on projects and implement Xero add-ons.

These "cloud integrators" can find solid business if they can reduce the upfront costs to implement the software and establish annuity fees. "It becomes a volume play," said Ridd.