Rewiring the economy: How businesses, big and small, are finally connecting

Rod Drury
Rod Drury
Feb 22, 2016 · 4 min read

Small business is proving to be big business for enterprise-level companies, and many are starting to pay closer attention to the market. With over 600,000 customers across more than 180 countries, Xero’s small business platform is already pulling together what was once a highly fragmented market, that was expensive to service and reach at scale, into one place.

Small business SaaS is incredibly interesting to the large enterprise market because it’s providing this aggregation point to talk to hundreds of thousands of customers.

Small business, for big business

As traditional telcos, banks and insurers automate their supply chain, we’re seeing them shift focus towards building more intimacy with customers by integrating directly with the platforms their small business customers use to run their operations.

Put simply, Xero becomes the aggregation point connecting small and large businesses. Previously, large enterprises built separate portals, expecting their customers to interact directly with them. The problem is, for a small business owner, having to log into various self-service portals run by their telco, insurer or electricity provider, is a cumbersome process. It’s too hard and they don’t show up.

Instead, platforms like Xero have invested in piecing all that data together, in one place, so small business owners don’t have to go somewhere else to get their information. By smoothing out that workflow, small business SaaS companies are becoming more appealing to large enterprise companies.

Today, we announced that Xero is teaming up with Google to make it even easier for businesses to stay on top of their customer relationships by integrating with Google’s Gmail platform and Google Apps for Work.

It means small business owners are now able to view email exchanges with customers and suppliers without leaving Xero, export content to Google Docs and Google Sheets, use Hangouts to collaborate with advisors and build Smart Lists for sales and marketing campaigns, just to name a few functions. Finally, accounting and Customer Relationship Management (CRM) are coming together.

We are starting to see some big differences between enterprise and small business SaaS companies. In the Enterprise realm, these systems of record might be provided by different vendors as different departments are responsible for each area. However, in the world of small business, everyone does everything. As a result, small business SaaS is more naturally a platform than an application.

In the small business SaaS world, we are seeing many integrations but also much more data connectivity with information flowing in and out of the systems of record.

This is especially starting to play out in the banking space. Xero now works with more than 75 financial institutions around the world to help open up the small business market, where the deals were previously too small or too risky, and help improve access to capital.

We’re using the technology to reduce the cost of evaluating individual loans. By having real-time, two-way connectivity between the lender, accountant and the business owner, banks have a true understanding of their customers’ daily cashflow, further reducing the likelihood of a default on the loan. We’re making it much easier to approve loans, reducing the risk of those loans, and therefore increasing the margin of banks doing lending at scale with small business.

A new category

For nearly 10 years, we’ve focussed on building the functionality of desktop accounting software into the cloud and have hit the end of the beginning, where small businesses now get better accounting experiences through their browser with anytime, anywhere access and seamless collaboration.

With accounting now better in the cloud, we see accounting software broadening to provide the four core, interrelated functions that make up the small business back office: accounting, people, payments, and connections.

Small business SaaS is doing much more than just changing from the old world licensing model to an up-front monthly framework. We are using software to rewire the economy. By connecting small businesses to other global platforms like Google as well as banks, government and large companies.

Of the millions of small businesses around the world, less than 1 percent have online accounting. The market opportunity is massive and we’re just getting started.

Small Business SaaS will likely generate greater long-term revenue growth as network effects kick in, with a lower cost to acquire and serve customers.

Enterprise SaaS was the warm up that showed the power of the cloud. Small business SaaS uses software to connect networks together. The functionality of the applications will become less important than the nodes on the network, especially as small business SaaS fundamentally rewires how all businesses work together in our new connected cloud world.

Rod Drury

Written by

Rod Drury

CEO of Xero - Beautiful Accounting Software

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