Xero to hire extra 36 staff

Xero will recruit 36 more staff and add new features to its online accounting application after raising $23.3 million from a capital raising.

The 50-person Wellington firm has created a fresh buzz with a series of positive developments, pushing its share price above its original $1 offer price for the first time since soon after it listed on the NZX in June 2007.

These include an $18m investment by the founder and former major shareholder of Australian rival MYOB, a doubling of customer numbers to 6000 over three months, and a deal under which Telstra will promote Xero's software through its T-Suite software-as-a-service hub.

Xero chief executive Rod Drury says the coming year should show whether Xero's application can "sell itself" online in sufficient volumes to generate profits for the company.

Selling the service individually to customers using dedicated sales staff is expensive.

Chief operating officer Alastair Grigg, Air New Zealand's former chief information officer, says Xero will take on up to 15 more developers in Wellington, who will make it easier to integrate Xero with other software products.

The functionality of Xero will also be increased by adding features such as those that would let customers' employees manage time recording, inventory and stock management and do job-costing using the software.

Extra sales staff for Britain, Australia and New Zealand and customer support staff will also be recruited. Xero plans to lower the cost of providing improved support by combining a web-based help service with an online forum that customers could use to exchange tips and advice.

Telstra will earn an undisclosed share of Xero's subscription revenues in exchange for promoting the application through its T-Suite, meaning its selection of the software over rival Australian software packages is an indication of Xero's confidence in the value of the partnership as well as Telstra's.

Xero entered into a similar arrangement last year with Telecom, which is promoting Xero through its small business hub. "It doesn't necessarily mean that things are going to go nuts," Mr Drury says.

"There is a potential that it will. But what these relationships generate is brand awareness that you can't buy. What Telecom gave us was a bunch of credibility."

Some of Xero's sales have been of a cheaper version of the product, produced at the request of accountants. Mr Drury says the company will disclose revenues in its annual report.

"We have done exactly what we said. We have delivered stunning software, we have got the accountants on board. We have got all the New Zealand banks on board, and the big three Australian banks. We are selling in Britain. So I think we have substantially 'de-risked' the business.

"We are putting the structure in place to grow the business to 50,000 customers and at 50,000 customers we are wildly profitable. It will take us a few years to get to 50,000 but we want to get there as fast as we can.

"The key things to watch are our customer growth and revenue growth. For the next financial year people should expect substantial revenue growth. If we can catch the imagination in a couple of these big markets - who knows?"

The Dominion Post