Xero Sees Opportunity in “Under-penetrated” North American Market

New Zealand-based cloud accounting giant Xero sees ample opportunity to bring more U.S. and Canadian SMBs into the cloud, according to an article published this week on the financial news site Benzinga.

Xero’s premise, expressed by Xero CEO Steve Vamos to Benzinga at the recent Xerocon event in San Diego, is that SMB cloud accounting in North America is way under-penetrated compared with Australia and New Zealand. So despite intense competition from Intuit, Freshbooks, and a host of lesser players, there is more than enough business to go around.

Xero operates a bit differently than other cloud accounting players, working more through accounting firms than directly with small businesses.

“What we are focused on is: how do we partner with accountants and bookkeepers to help them transform their practice, and at the same time bring their clients on?” Vamos told Benzinga.

The article shared some interesting data, albeit with vague sourcing.

  • Citing the U.S. Small Business Administration, the article asserts that SMBs using cloud software grow net profitability 30% faster than businesses that do not.
  • Citing the same study, the Benzinga says accounting firms that advise their small business clients on adopting cloud apps grow their own profitability 60% faster than those that do no.
  • Citing no sources at all, the article asserts that less than 10% of North American small businesses are using cloud-based accounting tools, compared with more than 50% in Australia and New Zealand.

We have reason to question the last data point, at least as far as the U.S. is concerned.

Our own Modern Commerce Monitor shows that 36% of U.S. small businesses have adopted cloud tools in the “finance and operations” category, which includes accounting as well as apps for payments, taxes, expenses, and other finance-related functions. This figure is from the latest wave of our SMB research, conducted in April. This is up from 14% in the first wave of the study, which was conducted in 2017.

In fact in our latest wave, “finance and operations” had the highest adoption among the services measured across all four waves, beating out payroll/HR; marketing and advertising; CRM; and supply-chain services.

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