For the uninitiated, Xerocon refers neither to a brand of US politician nor a form of photocopier fraud, but rather to Xero bookkeeping software’s annual conference which took place in February.

We are reporting on this partly because technology is increasingly important to bookkeeping and other business systems, partly because almost all of our clients are now using Xero, but also because it is a fascinating insight into the way cloud technology is transforming business.

Our report is split into three parts – this general overview of the conference and the insights we gained on the future of business software; an overview of the new features and coming features in Xero; and finally a look at the add-on marketplace which was much in evidence at the conference.

Overview and Insights

‘Bookkeeping’, ‘software’ and ‘conference’ are three words that would traditionally be guaranteed to make the heart sink.  But of course Xero has set itself up in direct juxtaposition to anything traditional and the first impression on entering the conference is one of a buzz, excellent design, attention to detail and a down to earth welcome.

The accounting profession is not used to being cool, but walking around the conference you can’t help but feel that here is something cool.  It has all the elements – beautiful design, creativity, a sense of being slightly subversive and underground – albeit one that has been carefully planned.

Of course it is important to look beyond the window dressing.  There is no doubt that Xero is not the only cloud system on the market and no doubt others have great features too, but as the conference progresses this emphasis on the beauty of the design and the attention to detail is something that comes up a lot.  And if I am honest I buy it.  Of course I am biased, Crunchers South London has invested in Xero and we use other systems fairly little, but they make an important point – which is that achieving an interface that is attractive to navigate and allows for intuitive functionality is not an easy thing to achieve.  It requires a commitment to and massive investment in designers.

There is an obvious parallel with Apple who have also made the quality of their design paramount and if Xero are to be believed, customers are voting with their feet.

Ultimately the next 10 years will tell whether they have got it right.  The established giants Quickbooks and SAGE are just waking up to the threat of Xero and the possibilities of a cloud system.  Xero’s bet is that they will always struggle to catch up, that they can’t become something that they are fundamentally not.

The scale of the thing, is also striking.  I hope this picture gives some sense of the size:

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And this brings me onto another point to make in this new era of cloud computing.  In the end as with traditional software – size matters.  There will be market leaders who will have the most resources and attract the most integrations and therefore the greatest functionality.

For example take Microsoft’s mobile phone operating system Windows Phone.  It launched in October 2010 and despite the might of the desktop giant behind it, despite users liking the phone, it struggles because there are a tiny amount of apps being developed by third parties for it in comparison to iPhone and Android.  It becomes a vicious circle, without the user base, the app developers will not programme for it; without the apps, the customers are put off.

The point of this is that it turns out that the bookkeeping software sits at the heart of a spider’s web of integrated business functions.  These other cloud systems – tend to all need to link to the bookkeeping and eventually we will all want and expect joined up systems so that when we raise an invoice in our bookkeeping software we want our CRM (Client Relationship Management) system to know.

At present it is battle being played out between the big software companies and naturally Xero are keen to show they are winning – exponential numbers of users, exponential investment, a brand strategy that knocks others for six.  It is important not to get carried away by the hype but it feels like Xero is a fairly safe bet.  Perhaps most important of all is that whenever we go back to using another system it feels slow and unresponsive.  If enough people agree with that experience, it seems to me it has built a very solid foundation.

The eagle eyed will have spotted a paradox at the heart of Xero’s narrative.  They want to be the outsiders ousting the lazy and complacent software incumbents but in so doing they risk becoming the monoliths they seek to displace.  Today’s iconoclastic brand is tomorrow’s stodgy norm.

This paradox is not lost on Xero’s management who referred to it more than once and already understand the new challenges their success is bringing.

One of the most interesting aspects of the conference was the attempt made to peer into the future.  Xero’s main insight is that the next phase in the cloud’s development will be much more about sharing data.  Imagine if your bookkeeping software told you a client’s credit rating when you raised an invoice.  It is hard to know if this is scary or brilliant.  It is certainly unchartered territory.

Xero’s management pointed out that they are now guardians of a huge amount of data (and were  at pains to show they took this responsibility very seriously).  At a basic level this is about hacking and confidentiality but at another level this is about stewardship of data.

For example, they now have better data than the government on small business.  They have better data than the banks, because as they highlighted, the banks don’t realize how many businesses have more than one bank.  They advised being wary of very cheap or free cloud applications because as they said in a memorable phrase ‘if you’re not paying, it’s probably because you are the product’.  In other words your data is being sold on elsewhere.

On the other hand, there is clearly a big opportunity.  This data can help small businesses.  Imagine if your bookkeeping software could tell you that you pay significantly over the odds for a product or service compared to other purchasers, or could tell you that your staff were under-performing compared to the industry norm.  That information could save your business.

At times the implications of the wider picture were bewildering and it was a relief to return the main foyer, queue up at the very trendy Shoreditch Grind coffee company dispensing free lattes and browse the exhibitor stands.  Which reminds me of the other theme that I strongly took home, namely that this is a great time to be running a small business.

Technology is bringing a plethora of systems to our disposal to make life easier, but more than that it just feels cool to be small.  It feels like a place for exploration, creativity and a place where smart people want to be.