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SaaS Productivity Raises National GDP By @CPrimault | @CloudExpo [#Cloud]

Empowering Small Business Influences GDP

SaaS Productivity Raises National GDP, One Small Business at a Time

Xero small business accounting software believes SaaS (software as a service) and especially mobile accounting software can empower small business in a way that can influence whole countries' gross domestic products (GDP). Xero's U.S. President Jamie Sutherland explains how this is true.

The kiwi company was founded in 2006. In 2012, Sutherland - a former Sage employee was tasked with starting the U.S operation, which now has 150 employees in San Francisco, New York, Los Angeles and Denver.

Sutherland decided to make the switch from the world's third largest ERP (enterprise resource planning software) U.K.-based Sage to Xero because he felt the company's direction made sense with how he saw the future of business software.

"I absolutely thought the concept of Xero was the way the market was going," he said, and specifically "how we work with accounting professionals to help SMBs [small and medium-sized businesses.]"

He particularly appreciated that Xero was multi-tenanted, built in the cloud from the ground up and always kept mobile in mind.

"From day one, we had what we call an API-centric architecture, meaning we allow and actually encourage other vendors to connect their apps to ours. There are a lot of great cloud companies out there solving problems we're not going to be able to take on," Sutherland said.

This concept has evolved into the recently launched Xero add-on partner marketplace that we'll talk about later in this piece.

The accounting software veteran particularly appreciated how the folks at Xero really seemed to understand how small businesses need to get accounting done. Since it is often the least favorite part of many entrepreneurs' months, there is an obvious demand to streamline the small business accounting processes.

"One of the ways to be successful in business is to understand what's going on with your finances in real time. But you don't get that visibility in desktop apps," Sutherland said.

With Xero, you receive real-time insight into your cash flow. And because it's cloud-based, you can give your accountant access, allowing them to play a bigger role in your financial decision making from their own office.

"Our CEO had worked with his accountant in his previous business and just struggled to get information," Sutherland said, "It made sense for this information to be accessible from any device, at any time. It increases small businesses' [ability] to make the right decisions at the right times," he continued. "That's exactly what Xero set out to solve."

While they are just focusing on the English-speaking market right now, Sutherland says the view of Xero is global and that "We expect to be the general ledger for small businesses over time," including paying taxes and managing bank loans, all on the go. He believes if they aren't using it already, every small business is going to need accounting software.

How to stand out against strong market leaders

Sutherland is entering his fourth year leading the U.S. expansion but it's still an uphill battle for Xero to gain market share against accounting dominator Intuit Quickbooks.

"The biggest challenge with Xero is just market awareness," said Sutherland. "When we launched in the U.S., we'd already built solid software over the course of the previous five-and-a-half years. The feedback we get is the software is great and people love it. The sentiment is positive...we just need to get the word out there."

Sutherland doesn't think Intuit's accounting and tax dominance in the U.S. is odd. "It's not unlike our other markets. It's typically dominated by one [SaaS] vendor," he said referring to MYOB in Australia and New Zealand and Sage in the U.K. Xero certainly feels capable of disrupting Intuit as they've already become a formidable name in accounting in its three other markets.

Sutherland believes Intuit is in a tough position because, "Like any good incumbent, it's hard to find a new way to wow."

When Xero entered it's first three markets, there was only one dominant accounting software vendor to take on. However, there are now a number of new SaaS start-ups entering the space. Sutherland is confident no other up-and-coming accounting software company has Xero's mix of quality and funding. Xero has received $244.2 million in investments over the course of five funding rounds.

Sutherland also realizes patience is the key, particularly in the accounting arena. "With accounting software, cloud adoption is a bit more gradual," he said. Small businesses need to transfer and convert their financial data from desktop apps like QuickBooks and SAP to the cloud.

Xero Builds Ecosystem for Small Businesses
In 2012, The U.S. Small Business Association's Office of Advocacy said in its annual report that "Small businesses continue to be incubators for innovation and employment growth during the current [economic] recovery. Small businesses continue to play a vital role in the economy of the United States."

The same office also found that small businesses accounted for 63 percent of the new jobs created between 1993 and 2013, which equates to employment for about 14.3 million people.

It's no wonder Xero feels like it can help indirectly increase GDP by helping boost small business productivity.

"We feel like we can improve the GDP of nations by making SMBs more efficient and giving their accountant the ability to access their finances online," Sutherland said. "Small businesses make up 95 percent of the GDP of any nation and we think helping them is really purposeful."

And Sutherland is more than confident that the Internet and especially the SaaS world will give small businesses the ability to have a global presence. "The Internet has democratized how information is distributed and the beneficiary is definitely small businesses."

What's been Xero's biggest step toward this lofty goal? This past August's release the Xero Add-on Marketplace.

"We believe that small businesses are better off when they have access to an open ecosystem of software companies working together to better their business and their life," he said. "Data can flow freely back and forth between systems, making it much easier for them to manage their business," Sutherland said.

The goal of the add-on marketplace is to let small business owners build a total business solution with Xero at the head of it. The marketplace has more than 350 apps already and Xero is continuing to forge relationships with other vendors.

Sutherland believes the future of SaaS is accelerating."The accounting world is typically a laggard in adopting new software but it's picking up the pace," he stated

The next five years of SaaS will tell how accounting software can reinvigorate small business and entire economies.

More Stories By Christophe Primault

Christophe Primault is the co-founder of GetApp, the #1 Cloud based Apps Marketplace. His aim is to provide tips and advice on how businesses, especially small and medium enterprises, can benefit from cloud-based apps and improve their bottom line. In my spare time he enjoys mountaineering, water sports and long distance triathlons. He's a proud IronMan finisher. You can follow him on Twitter @GetApp