Tony Ward, just one month into his new gig running Xero for the United States and Canada, drops by the mobile podcast recording studio for an interview at Xerocon in San Diego. We ask Tony about Xero's plans for San Francisco, how Xero plans to crack open the U.S. market, where Xero fits in to the new world of "Software Plus a Service," the significance of the new Xero and PwC partnership, the outlook for small firms, and more.
- 00:53 - Welcome to the Cloud Accounting Podcast!
- 01:49 - What made you want to join Xero?
- 02:38 - Tony's background in software
- 02:55 - How do you respond to the observation that another non-American is taking over for Xero Americas?
- 03:31 - You think you have a long commute? Try Sydney to Denver!
- 03:52 - Is Xero done with San Francisco?
- 04:32 - How are you planning to crack open the US market?
- 06:51 - "Platform companies win; product companies get bought or go away."
- 08:44 - Where does Xero fit in when it comes to the new world of software plus a service?
- 10:54 - What's the rationale behind the Xero PwC partnership?
- 13:08 - What's going to be the impact on small accountants and bookkeepers who can't write code?
- 14:32 - Any big plans for 2019, 2020?
- 15:58 - How to connect with Tony and learn more about Xero
Get in Touch
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Blake Oliver: Welcome to the Cloud Accounting Podcast. I'm Blake Oliver.
David Leary: I'm David Leary.
Tony Ward: I'm Tony Ward The President of the Americas for Xero. [00:01:00]
Blake Oliver: All right, thanks so much for joining us, Tony, here at Xerocon 2019 in San Diego. Thank you for having us as your guests here.
Tony Ward: I'm very happy that you're both here.
Blake Oliver: You are pretty new to Xero, right? How long have you been in charge?
Tony Ward: I've been one month in the role, literally. I think when we reported our annual earnings on the 16th of May, that was my literally my first day at Xero.
Blake Oliver: So, one month, and now you're here at the conference.
David Leary: 30 days later, and you're on the Cloud Accounting Podcast. Woo!
Tony Ward: Yeah, who knew?
David Leary: Your career has just peaked.
Tony Ward: That's right. I can drop the [00:01:30] mic now. Job done.
Blake Oliver: Have you been to a Xerocon before, or is this your first one?
Tony Ward: This is my third Xerocon. I went to one, working for SurveyMonkey, as an exhibitor, because it was an integration with Xero and same for Dropbox. I got to see what it was like as a sponsor, and now, I'm sort of behind the curtain, seeing what it's really like as an employee.
Blake Oliver: What made you want to join Xero? You've had this background in tech; you mentioned Dropbox, SurveyMonkey, Microsoft ... Am I missing one?
David Leary: LinkedIn.
Blake Oliver: LinkedIn, as well. Yeah, so, out of everything [00:02:00] you could have done, why go to Xero?
Tony Ward: I'll tell you, after 20 years working for US multinationals, I made a decision that I wanted to work for a company that was actually from Down Under - either Australia, or New Zealand - having spent the last 25 years down there. I've talked to Xero over the years, in one way shape or form, about different things. When I heard about this opportunity to come home ... I'm obviously- well, not obviously ... I'm originally from Canada, so to come here and to [00:02:30] run a business in the Americas, that is a massive opportunity. It was just almost too good to say no to.
David Leary: Do you have an accounting, or bookkeeping background, or you just came up through the software world?
Tony Ward: Yeah, I'm definitely a software person. I did a commerce degree, and there was some accounting in it, but I'm certainly- I'm definitely not an accountant by trade. I'm software and, most recently, SaaS software.
David Leary: Matt Paff made this observation ... I kinda made it, but Matt Paff made it very public on [00:03:00] Twitter. He made the observation that, "Oh, look, it's another non-American taking over Xero for the Americas." Can you respond to that?
Tony Ward: Yeah.
David Leary: What do you make of that?
Tony Ward: Well, it is 'The Americas,' and obviously Canada's part of that, and I am Canadian. My wife is a real Ancestry.com sort of person, so she's traced the lineage of my family back to the 1630s coming to America. Then it took them a couple hundred years to actually go up into Canada. I sort of feel, certainly genetically, the Americas is ultimately [00:03:30] home for me.
Blake Oliver: Currently, you're splitting your time between Sydney and the Denver Xero office [cross talk]
Tony Ward: That's right, yeah.
Blake Oliver: You're permanently relocating at some point, I imagine.
Tony Ward: Yes, that's the plan. People sort of complain about their commute sometimes, but Sydney Australia to Denver? Now, that's a pretty serious commute. I'm spending a couple of weeks here and week back in Australia, and my family's going to come up in January.
David Leary: Speaking of Denver, Xero just moved their US offices from some San Francisco. Are you guys 100-percent done with the Bay, and you're just gonna be all Denver now?
Tony Ward: Oh, [00:04:00] definitely not. San Francisco is a really important community for us, certainly for the go-to-market perspective. What we did is we re-deployed some of the technical roles into our hubs, whether they be Auckland, Wellington, Melbourne, Denver, or Toronto. We still have quite a few people in San Francisco, but they're going to be the go-to-market team - the people that are actually managing the partner relationships; the marketing people there. Super-important market for us. We'll have an office there. It's about [00:04:30] putting the right roles in the right place for scale.
Blake Oliver: I've been a Xero partner since- almost since Xero started in the United States, and I'm curious to know, how do you plan to crack open America - the United States, specifically - for Xero? I've been a bit jealous, watching the global growth in the UK; obviously in Australia just go crazy bonkers. Here in the US, we've got- it's a very [00:05:00] different situation, with Intuit, and QuickBooks, and that big giant ... How do you gain that awareness?
Tony Ward: What we did in the Americas ... We've been here for about six or seven years. I think what we did is we didn't necessarily follow the playbook that was successful in Australia and the UK. That playbook is you need to bring partners on board; you need to show them how they can grow their business and how it's easier for them; but you also need to focus on small businesses and what's in it for them. You have to do both at the same time. I think what we did in the Americas [00:05:30] in the past is we started with the partners, forgot small business, and then really flip-flopped to, "Hey, let's go direct to small business," and forgot about the partners. In the last two years, we've kind of gone back to the basics. We're two years into what we hope is a shorter journey than what it took in the UK to do it, but it does take time.
Blake Oliver: What I would say is, in the last year to two years, we recruited quite a few partners in the US that have about a million small businesses that they look after. So, now our [00:06:00] real challenge is how do we get those small businesses that they look after to move over to Xero?
Tony Ward: In terms of what we're doing, I just look at the Americas in general as a real greenfields opportunity, because only 10 percent of all the small businesses are on cloud-based accounting, and obviously, the competition wants them to move from desktop to cloud. They're gonna help us drive awareness that now is the time to move to cloud-based accounting, and whoever [00:06:30] does a better job with better product, better support is going to win.
Given that we're born in the cloud ... I think our culture is our really unique differentiator. I've heard from so many people that, "Hey, your people just show up, and they actually care." That is our special sauce is actually the people that we have that will be the difference. I think the open ecosystem, the platform, the partnerships - the things that small businesses need to get their job done ...
We have an amazing ecosystem, [00:07:00] whether it's Gusto, or Stripe. There's a lot of great companies that are building on top of our platform, and if you think about success in the software world, platform companies win, product companies get bought, or go away. So, I see us- we're really pushing hard that, if you think about it, the operating system for small business being Xero and what makes it sing and what makes it beautiful is the partners that build on top of that actually ... Small businesses [00:07:30] don't really care about software. Why should they? They care about ... My mom was a hairdresser. She cared about her hairdressing business. If you're a restaurant, or a law firm, you just want the thing to work in the back end and focus on what you love, which is what your small business is.
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David Leary: Where does Xero fit in? Obviously, our listeners, QuickBooks Live, they're very aware of that. Then you have H&R Block acquiring Wave last week, or the week before that. You have all this VM money pouring into these accounting firms with engineers - the Botkeepers, the ScaleFactors, Pilots. Basically, it's software with bookkeeping, kind of under a [00:09:00] combined model, if you want to think of it that way, and also, they're also adding in tax. Where does Xero fit in that new world?
Tony Ward: Yeah, it's an interesting ... There's a view that every business is going to become a software business, like software is eating the world. Talking to some of the large accounting firms here, some of them sound a lot more like software businesses than accounting businesses. I can imagine a time when accounting firms are almost managed-service providers, where they're looking after-
Blake Oliver: Oh, yeah.
Tony Ward: -a stack of software for a business, and they're charging a [00:09:30] monthly fee. They might- they should do advisory on top of that. That's kind of where I see the future. We want to be the platform that that's built on. We want to be, you know, "It's brought to you by the letter X." It happens to be Xero, but there's all this great stuff on top. So, I see lots more innovation. I can see acquisitions. I can see mergers. But, I can see software really ... The only way that it scales to do small business for large firms, or anybody, that's got to be software, and it's got to be one-click [00:10:00] to use. Simplicity, ease of use. It doesn't take away from me running my business, it's just the thing that runs in the background.
Blake Oliver: It's interesting you say that, because that was definitely my experience in a large accounting firm. I think 50 percent or more of our revenue was from consulting services, which included reselling software, IT work, that sort of stuff. The traditional accounting and tax had actually taken a backseat to that kind of growth.
Tony Ward: You hear some of the large accounting [00:10:30] firms actually talking about, "Hey, we're gonna be building software for small businesses, and it's gonna be $200 or $300 a month, all-in." For a large accounting firm to be talking about that kind of revenue? 10 years ago, five years ago, that would be like, "Are you crazy? How do we make money?" The only way you do it is it's software, and it sits in the background. Humans don't touch it.
Blake Oliver: So, speaking of big accounting firms, I saw the press release - PwC is partnering with Xero. I almost [00:11:00] missed it, because- I guess maybe I wasn't in the room when that was announced. What is that? What is going on with PwC?
Tony Ward: Yeah ,I think there are good examples. They are building their own- some of their own software to really go after that small business segment. Charlie, who's here from PwC, his charter is really to grow that business and grow in very small business, which, PwC in small business, that's an example of, five years ago, if somebody said that PwC was gonna go after really small business, you'd go, "How do [00:11:30] they make money?" I think it's the software.
Blake Oliver: They've tried it. It's been tried before, and there have been different announcements. I think there was one in the-
David Leary: KPMG killed theirs after two years-
Blake Oliver: Yeah, they had one in the UK; they killed it, because they couldn't make it work. Do you think that they're going to finally crack the code on doing this?
Tony Ward: You know, small business is that multi-multi-billion dollar, if not trillion-dollar opportunity, but it's got to be at scale, low-cost, low-touch software. Will PwC get it right? I hope so.
Blake Oliver: In the announcement, it mentioned [00:12:00] that they're going to leverage the Xero API. It sounds like they're going to build applications that plug in to Xero to leverage the GL-
Tony Ward: Correct.
Blake Oliver: Okay.
Tony Ward: Yeah. Again, think about Xero as that small business operating system that does the single ledger. Then you think about line-of-business applications, payroll, et cetera that sit on top of that as a solution for a small business, for a monthly fee, with potential advisory services on top of that. Play that out with a company that's the size [00:12:30] of PwC ... Think about all the data that they have, and they start using AI, and AML to get ahead of the curve, and how do you do that in a non-human way? You can start to think about what that could look like.
David Leary: It's the same play. I mean, if this is this software with-
Blake Oliver: A service.
David Leary: There's humans involved because ... PwC is an accounting firm with engineers. Now, they're gonna use Xero as the GL but it's that same model. We're seeing this pop up everywhere. It's amazing.
Tony Ward: Yeah, I think that's what you will see. You'll see it as software [00:13:00] plus humans. That's where the real value comes in is the advisory piece, but some of the basics are going to be done by software.
David Leary: Where do you see this impacting the industry on the whole? The average bookkeeper is not going to write code, create software, right?
Tony Ward: Yeah.
David Leary: I'd say the vast majority of accountants are not gonna write software, so as you said, and this quote's famous, this "Software's eating the world," right?
Tony Ward: Yeah.
David Leary: What do you think the impact's gonna be, overall, on these bookkeepers, and accountants that are gonna be able to do this in a super-highly-scaled way that fast in the same ... If PwC's successful, and [00:13:30] QuickBooks Live is successful, all of the sudden, there's thousands, and tens of thousands, and millions of businesses in this new model, or whatever it evolves to ... The average bookkeeper accountant that just has 40-50 clients, what are they gonna do in this model?
Tony Ward: If you saw some of the stats that Nick just talked about in the session, he was talking about profitability for advisory services. I think if you are a bookkeeper, or you're an accountant, you have to figure out a way to bring yourself out of the basics of accounting and [00:14:00] get yourself into actually being a business coach for ... None of these small businesses have coaches, right? They don't. They're the most underserved, under-coached business in the world, and there's literally millions, hundreds of millions of them. That's where I see the opportunity. The bookkeepers, and accountants that can figure out how to move quickly into advisory, and value-based advisory are the ones, I think, that will be successful. The ones that sort of stick to the current model, the cheese is moving, so [00:14:30] you have to figure out where the cheese is going to.
Blake Oliver: Coming out of Xerocon, it's your first month. Any big plans for the rest of the year, or 2020?
Tony Ward: Look, I think the playbook that the team have been executing, carrying the team locally. is the right playbook. Focusing on a few areas and really going hard ... You mentioned the US before. We can't cover, with the resources we have, the entire continental US. With some data, we've picked where we [00:15:00] believe we can be successful, and that's where we're gonna layer on our resources and where we're gonna focus on really doing a great job in those areas. Once we prove that we've nailed it, then you can scale that. What you don't do is scale a business, before you've really cracked the code. That's really the plan for the Americas.
Canada is a little bit different, because it's more similar to Australia, and New Zealand - five big banks; 80 percent of small businesses have an accountant, or a bookkeeper; quarterly reporting. That's more [00:15:30] like the standard playbook. Having said that, Ontario has 26 percent of all the small businesses in Canada, so focusing on Toronto, obviously, we could do really well there for a very long time and never leave Toronto, but we've put people on the ground in Calgary, and Vancouver, because if you add those markets together, that's probably 40 to 45 percent of the small businesses. Not trying to cover everything; not trying to be everywhere, but where we choose to be, actually really be there.
Blake Oliver: So, if [00:16:00] people want to connect with you online, where should they go, Tony?
Tony Ward: Being ex-LinkedIn, definitely go on LinkedIn. What I would say is when you ask to connect with me, write something - why we should connect; what value-
Blake Oliver: You mean I shouldn't send you an InMail that says, "We seem to have many mutual connections. Would you please connect with me?
Tony Ward: No, please don't do that, but if there's a real great reason to connect, I'm all over that; you know that. As a professional network, I really believe in it. So, yes, LinkedIn is probably the appropriate place.
Blake Oliver: Let's [00:16:30] say there's some ProAdvisors listening, and they want to find out more about Xero, what should they do?
Tony Ward: Go to the website would be my first starting point. There's tons of information on there. Then, if that doesn't work, or you want more, obviously, LinkedIn, you can find people that work at Xero. If that doesn't work, come to the office.
Blake Oliver: All right, sounds good. Good excuse to go to Denver-
David Leary: Or Sydney [cross talk]
Blake Oliver: -or New Zealand-
Tony Ward: Or Wellington.
Blake Oliver: Yeah.
David Leary: Vancouver sounds good, too. That'd be a nice trip.
Blake Oliver: Thank you, Tony, and I think that's a wrap.
David Leary: That's a wrap. Bye, everybody.
Tony Ward: Thanks, guys.
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