Xero.com is brilliant at leveraging partnerships to scale and develop a true platform business. Find out about their strategy and tactics from our interview with Ben Johnson, Partnerships Manager - Business Platform. Part 1/2
Xero, where you manage partnerships has an incredibly well rounded and diversified partner ecosystem. Can you explain what types of partners do you have and how they all tie together?
We actually have a few different categories of partners at Xero. And I've had the fortune of working across a couple of those areas. When I joined the business, I worked with our accounting partners which is probably what people are most familiar with in Xero, when you think of partners. Xero is accounting software for small businesses, and we work with thousands of accounting practices from the big four, down to very small kind of mom and dad, bookkeeping firms in all of our markets. We're building software for firms to use and then they will help their small business clients to get to set up Xero. That's a core partners that we have, which helps us get distribution and growth as a business for the product. And the area, the business that I now work in, is more around the platform. The API, which wraps around Xero, enables banks and other applications to build to us, so we can build to them and effectively solve product problems. We have a range of partnerships in that part of the ecosystem which I'm now responsible for managing. A few different categories, but partners all the same.
You've been working in Xero for a couple of years. How's this partnership and platform strategy started and how it's been evolving over time?
From both accounting, but also a platform partnership perspective, it started from well before my time. I joined the business in 2014 and even at that time, partnerships were really at the heart and the core of what we do. We knew that we wouldn't be able to get to every small business without their professional advisor. We feel really strongly that small businesses should have a professional advisor and believe that technology will enable accountants and bookkeepers and that's why we work so closely with them in that space. And then as a product, again, we're not going to be able to build everything, to build every feature for every business. Therefore, from day one, we were really specific about ensuring that everything we built, had API capabilities, and that we really invested and supported in that product the ecosystem to enable all these wonderful technology companies to build to us and help solve the problems for customers as well. It's been ingrained in Xero since day one. I'd like to say I had something to do with that, but it's been since really early on. We're continually growing that with people and tools and systems as well.
You have several types of partners: accountants, and then banks and then financial institutions. How do you prioritize in your mind? I'm sure they all very important, but....
Xero as a business now has somewhere around 3000 employees around the world across all of our markets. Here in the UK we have a really big team that's solely focused on working with accountants and bookkeepers and supporting them with the product. And then in the team that I sit in now, which is the platform partnerships team, we're really resourcing that with business development and partnership folks like myself and API specialists, helping everything from new technology startups to enterprise technology businesses that want to use our API to technically build great experiences. And then we have really a breadth of product marketing and legal resources dedicated to cultivating those partnerships as well. So it's really just investing in that area of the business and really ensuring that we drive success through resources.
Xero is a fantastic brand right now and I'm sure a lot of companies would love to be affiliated and they benefit from being affiliated with you. But in terms of commercial benefits of partnering with Xero, how do you pitch to your partner?
I think we're really fortunate because every small business needs to run their accounts, right? If you're running a small business, you have bookkeeping software, you need to pay tax, you need to keep records. And we've been really fortunate to be a market leader in small business accounting software. So if you're building an application, or you have an application that you want to get in the hands of small businesses, one of the problems that small business probably has to solve is record keeping. And so having an integration with Xero tends to be a pretty high priority for most technology businesses and serving small organizations. So the commercial benefit for them is generally great product fit with the customers and obviously exposure. We have over half a million small businesses in the UK on the platform, you know, thousands of accounting firms. We have a channel and we have an opportunity to create a better product for our partners. And of course, as you mentioned, there's positive brand and high NPS scores around Xero. So being a certified partner of a Xero helps to piggyback on that positive sentiment as well, I think.
We had a conversation with iwoca who mentioned you. It's a fantastic partnership. Can you walk us through one of this examples of the most successful partnerships that you have?
iwoca is a really good example. A few years ago, we started to see more demand from digital lenders outside of the main banks that were building propositions like working lines of credit or invoice finance, and to make those products really appealing for small businesses. Now, applying for a loan used to be really, really hard. You'd have to get all these documents verified and send them to your bank. And so businesses like iwoca were building a digital experience where you can effectively connect to your Xero account and almost immediately get a decision on whether they could lend you money. That's great, but we knew that being a financial product and service, we had to be pretty structured and organized around how we work with businesses like that, to protect our customers and their data and make sure they have a good experience. What we've loved about working with our iwoca, for example, and what makes them a great partner is one, they're really a technology first business, that are really focused on building great experiences. They've done some wonderful things with the Xero API to make the process for their customer, really seamless. I think it is really important.
You know, there are partnerships where it's just about distribution, but at Xero, we're really focused on partnerships that are about solving problems for businesses. We're not interested in working with someone that wants to sell chairs to small businesses. It's about how with Xero, can we help improve customer experiences and iwoca has done a great job on that from a technology perspective. They're incredibly invested in serving small businesses and working with accountants and bookkeepers, which is what we're all about. I guess that's one of quite a few examples we have. But it does come back to how do we solve a problem for the customer and culturally always sort of aligned with partners and businesses as well.
You managed to scale this partnership ecosystem. How do you think about being customer focused versus scaling? Do you see a dilemma here or not?
I think if you look at the accounting channel, which is actually where we've really driven subscription scale and revenue scale for our product. A lot of people are trying to build and sell products via accountants and bookkeepers, because they have seen businesses like Xero do that really well. I think the two things marry up really, really well in the sense that the reason we've been able to scale is because we built the best online accounting platform for accountants and bookkeepers to do what they need to do. So we don't look at accountants and say how can we sell products through you? We look at accountants and say "how can we make your job in accounting and bookkeeping easier". And of course, we need to build a sales system around that channel, we need to have account managers and we need to have billing infrastructure and all that sort of stuff.
But without actually having a product that makes their life easier, going from, "I used to have to run my business on a desktop software product and there was all this friction" to "Xero in 2006 brought accounting in the cloud and now I can build this really efficient and effective accounting practice". That is the magic, and then we were able to create a channel sales function and scale around that. So I think they are critical to marry up, because without the former, you don't get the latter. At some point, without that true problem being solved, you know the accountants aren't silly, they're gonna turn around say "well actually we're going to use something else, because it's having a more positive impact for us". That's the accounting channel side.
In terms of the platform and the technology partnerships that we have. Candidly, we're not really looking at those around "we only want to work with you because we can gain distribution". A lot of these apps in our ecosystem have far less customers than we do, but they're building really great tools for small businesses. So we're really happy to cultivate and work with any technology business that wants to use our API. And then the good thing is every now and then, a business like a Shopify or, a large organization that has a big customer base will come along and use our API. And then of course Xero becomes an appealing accounting solution for their customers as well, because they need to keep records. So hopefully that answers your question. That there is a bit of it in the platform space, but of course in the accounting channel, that's how we've really scaled up business.
Continues in part 2.