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Thread: Xro - xero

  1. #4791
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by KW View Post
    Actually it is not new at all. It is simply an old idea given a new name. SaaS companies used to be called ASPs - Application Service Providers. They have been around since the late 90's and the concept was an evolution of the dot.com model. I attended the last big industry Conference in Orlando, FL in May 2000, and the bulk of the exhibitors and attendees were at ASPCon rather than ISPCon. It was all the rage back then. In fact, it was my job to evaluate ASPs in terms of whether or not to become a channel partner for them. I have done this in both New Zealand, and Australia. So I am well acquainted with the whole model.

    Today the SaaS business model is just as unproven as it was back in 2000. Those original ASPs ended up folding due to never making a profit, and ultimately running out of cash (due to the clanging shut of investors wallets due to the market crash. Oh wait, that won't happen again will it?). The only thing that changed is that there is a new bunch of investors and media people who were not around in 2000, who had never heard of ASPs, and thus think that SaaS is something brand new (well, I guess that's why the industry renamed it. Similar to how global warming is now called climate change).

    Now having picked apart many commercial ASP/SaaS financials, I can tell you profitability comes down to the split between fixed and variable costs. If the vast proportion of costs are fixed, then the Saas model would work, as there ultimately would be a breakeven point where the customer revenues cover the costs. However, if the bulk of costs are variable (sales, commissions, and support are the biggies) then the only thing that happens is that the more customers the company acquires, the more money they lose. There is no breakeven point (but if you own the company who cares? You got stock and are worth millions. So long as you stick to the story you should be able to milk the market for years and retire comfortably).

    This is why the important metric for XRO is not customer numbers or revenues. It is the accelerating rate of losses. If Saas was to work, more customers should see shrinking losses. So this suggests that XROs cost base is a variable one, not a fixed one. And until they reign in their costs (which they have no intention of doing) there will be no breakeven, and no profits.

    And then there is churn. After acquisition, churn is the second most important thing to a SaaS company. XRO faces two risks - one is that their customer base is inherently unstable, 4 out of 5 small businesses fold within 2 years. Secondly, don't underestimate the intelligence of the customer. For those small businesses who make it, they may end up evaluating the Total Cost of Ownership of accounting software, and decide that for the long term they are better of buying the software outright (ie. desktop) and capitalising it, rather than paying a monthly fee forever and expensing it. If I ran a small business, this would certainly be one of the things I would be considering. Consequently, I would expect XRO to have a high churn rate (which makes it different to enterprise SaaS companies whose customers are more sticky). In this instance Intuit and MYOB would have a competitive advantage, as they can loss lead customers on to their online platform, and then shift them to desktop when it suits the customer to move.

    You combine a high churn rate with customers leaving before you have reached the point where you are making a profit on them, with the high variable costs of acquiring them in the first place, and you have a recipe for escalating losses, and a company where the only shareholders who win are those who founded the company or bought in early. The rest are just grist for the mill.

    Lastly, a bit of context. Last financial year, Intuit spent $1.2 BILLION dollars on sales and marketing alone (or 29% of revenue). Research and Development was $685 MILLION. How does XRO plan to compete with that?

    Its nice that a little ole NZ company is pluckily trying to stick it to the giants, but I wouldnt be betting my retirement on their success. In the business world, he who has the most cash wins (the Microsoft and Facebook models). Get back to me when XRO is cash flow positive and profitable.
    Brilliant post. Last time I looked there were over 200 different accounting programs out there. What makes XRO so special, NOTHING.

    Why didn't I think of this for my practice, the bigger it gets the more money it loses and I float that idea on the market and make millions. What a brilliant way for certain executives to make money.
    How the market hasn't woken up to the many flaws in the system I'll never know, OH WAIT, it is starting too.

    With over 50 states in the U.S.A. all with different sales taxes and quirks in their systems it could be quite a bugger writing programs to make all that work smoothly and lets not forget one salient thing, regulators are changing taxation legislation on an extremely frequent basis so all those people out there thinking one day XRO can stop paying all those bright programmer's $250K+ better think again.

    Variable costs will see to it that it is unlikely this company will ever be profitable to such an extent that values the stock where it is, I couldn't agree more.

    Put me down as another one that people can get back to me when its trading on a realistic multiple of EPS, not losses or sales.
    Last edited by Beagle; 14-10-2014 at 11:56 AM.

  2. #4792
    ShareTrader Legend bull....'s Avatar
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    People i have spoken to say xero is better to use than the others out there in the same category, but it lacks all the features of some of the others, so to be better than the opposition they need to do everything the others do and more, sadly they are not in that category yet so thats why i believe they struggle in the us
    one step ahead of the herd

  3. #4793
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    What real values do you guys place on the SP if the US was taken out of the equation. Lets say Rod gives up on the US, or it's the 'US-blue-sky' is removed out of the value. I've seen anything from $3 - $15 thrown around

  4. #4794

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    Quote Originally Posted by boofters View Post
    Hey Abstractions,
    I gotta ask what "does not have a internet model for its applications that let you merge your services at the application design model base level"
    actually means?

    I have had 20 years in finance IT across the SDLC and this sounds like some of the best bulls%it bingo I have ever heard.

    rgds

    your right actually

    a some words constructed to cover a multitude of technologies that allow your objects to merge themselves with the base framework

    using either a proxy server interface for your classes using registered callbacks for your injected interfaces to the app framework or any one of a number of technologies using meta data or even runtime dll loading

    now if they have used DOT NET for the base oop classes which MS may or may not hate as they have opened sourced it

    one option for xero is to use the OOP framework that allows runtime loading of the assemblies so your stuff gets loaded when your private version of the APPS run

    as you know they only allow 2 private apps

    now that has been around for since an early version of dot net

    i use some russian code to load assemblies on windows written in c++ and assemble, lovely stuff and i just specify the interface to load and the russian assemble code does the rest..

    no i dont understand the assemble code i just use it


    now you will excuse me i have to get my old body off for some hill repeats on the bike, lets it for me, good luck, im being removed i hope ...
    Last edited by abstractionsInsoftware; 14-10-2014 at 02:32 PM.

  5. #4795
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    Quote Originally Posted by abstractionsInsoftware View Post
    your right actually

    a some words constructed to cover a multitude of technologies that allow your objects to merge themselves with the base framework

    using either a proxy server interface for your classes using registered callbacks for your injected interfaces to the app framework or any one of a number of technologies using meta data or even runtime dll loading

    now if they have used DOT NET which MS may or may not hate as they have opened sourced it

    xero may have used the OOP framework that allows runtime loading of the assemblies so your stuff gets loaded when your private version of the APPS run

    as you know they only allow 2 private apps
    Hahaha surfersteve, you're back.

  6. #4796
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    Quote Originally Posted by abstractionsInsoftware View Post
    your right actually

    a some words constructed to cover a multitude of technologies that allow your objects to merge themselves with the base framework

    using either a proxy server interface for your classes using registered callbacks for your injected interfaces to the app framework or any one of a number of technologies using meta data or even runtime dll loading

    now if they have used DOT NET which MS may or may not hate as they have opened sourced it

    xero may have used the OOP framework that allows runtime loading of the assemblies so your stuff gets loaded when your private version of the APPS run

    as you know they only allow 2 private apps
    You really now confused me on how to understand the business that is Xero But what I can tell you is, they use .Net too as one of their programming languages.

  7. #4797

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    Quote Originally Posted by RGR367 View Post
    You really now confused me on how to understand the business that is Xero But what I can tell you is, they use .Net too as one of their programming languages.
    of course they do, read the developmetn docs, they use IIS

    ok check out the xero dev center web site and download VS and have a go, anyone can be a xero developer, you can have 2 private apps!!

    well i hope one day we might allow people to have as many private local apps as they wish but they will have to site off line as xero wont allow you to just develop your own stuff for your data on there site...

    bike time, sorry got to go

  8. #4798
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    Quote Originally Posted by abstractionsInsoftware View Post
    of course they do, read the developmetn docs, they use IIS

    ok check out the xero dev center web site and download VS and have a go, anyone can be a xero developer, you can have 2 private apps!!

    well i hope one day we might allow people to have as many private local apps as they wish but they will have to site off line as xero wont allow you to just develop your own stuff for your data on there site...

    bike time, sorry got to go

    Sorry mate but your grammar is awful, it takes ANY credibility out of your argument.

    Now please stop trolling.

  9. #4799
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    Quote Originally Posted by abstractionsInsoftware View Post
    .............anyone can be a xero developer, you can have 2 private apps!!...

    bike time, sorry got to go
    ........ anyone can be a Xero developer? Of course anyone can be a "developer" but not necessarily be a Xero one. Lol. Yeah, better bike my friend as the more you talk the more ignoramus you become.

  10. #4800

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    Quote Originally Posted by RGR367 View Post
    ........ anyone can be a Xero developer? Of course anyone can be a "developer" but not necessarily be a Xero one. Lol. Yeah, better bike my friend as the more you talk the more ignoramus you become.

    come to think of it where is that easy to use accounting computer scripting language they are building using "roslyn" that would allow apps to be developed and loaded at runtime by the assembly loaders..

    that is in the R&D department right? due out anytime soon no doubt

    yes you have go through the partner process, so that you havnt developed an app that could open up the API beyond there control ... naughty nuaghty
    Last edited by abstractionsInsoftware; 14-10-2014 at 04:37 PM.

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