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Cloud potential in Asia 'massive': Xero

NZ NewswireNZ Newswire 17/07/2016 Jane Shanahan

Xero sees "massive potential" for sales growth among the millions of small and medium-sized businesses in English-speaking southeast Asia, provided the cloud-based accounting firm can wean them off Excel and hand-written ledgers.

In Singapore alone, where Asia sales director Shaun Burke has been stationed for the past three months at Xero's first base in the region, some 30,000 new SMEs are registered each year.

But Xero's penetration in Asia, where it is targeting Singapore, Hong Kong, Malaysia and the Philippines, among others, is tiny.

"We've got a huge opportunity here in the tens of millions of SMEs across what we would consider English-speaking southeast Asia," Mr Burke said.

While mobile penetration is huge, with many people having two or three phones, cloud and integrated solutions at the business level was still a little bit new.

In the Philippines, said Mr Burke, "there's places there where they're crunching the books, they're hand-writing in the ledgers".

Unlike Xero's core markets, which have cultural similarities, Asia's cultures are diverse.

Challenges include highly fragmented markets, diverse regulations, users with a preference for controlling their own IT assets, and differences in available technology such as broadband.

Neither China nor India are near-term targets for Xero, but they are both "far too big to ignore", Mr Burke said.

Xero faces some old rivals in southeast Asia including Intuit, the California-based owner of the QuickBooks Online (QBO) accounting software, and ASX-listed MYOB is a competitor too.

Mr Burke said QBO had been moving its existing customers to the cloud.

"In a funny, roundabout way they're probably doing a lot of marketing for the cloud proposition and then we come in as the better solution. It's kind of a double-edged sword for them."

Xero's shares have fallen 9 per cent on the NZX this year and last traded at $17.99. First NZ Capital is forecasting the company will reach positive operating earnings in 2018.

* Jane Shanahan travelled to Singapore courtesy of Singapore Airlines.

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