MYOB ready to up the ante

Wellington software company Xero's battle with Australian rival MYOB is about to enter a new phase in which there may be only one winner.

Xero faces a fresh test as MYOB, the trans-Tasman incumbent in small business accounting, readies for the launch of AccountRight Live, a product which threatens to slow Xero's rapid growth.

MYOB's Melbourne-based chief executive Tim Reed said the privately-owned firm had spent more than $30 million developing AccountRight Live, an online version of its "flagship" AccountRight product.

AccountRight Live is being piloted by 500 businesses in New Zealand and Australia ahead of a likely launch later this year, but there are no signs of nerves at Xero's headquarters in Wellington, now home to 159 staff.

Helping matters is the revival in Xero's share price which is almost back up to $5, recovering from a brief wobble that appeared to be prompted by some clumsy disclosures of directors' trades to the NZX.

MYOB still has market muscle on its side, with more than a million clients on its books compared to Xero's 100,000.

But Xero's argument is MYOB's legacy - its software code and changing private equity ownership - are tough shackles to throw off.

Reed said MYOB was not yet ready to commit to a commercial launch date for AccountRight Live because it was not certain how it would perform if lots of existing customers switched to the system.

The company will offer AccountRight Live as a free option to all existing AccountRight customers that are paying software maintenance fees. Reed says the product itself is not under question; rather, doubt sits around MYOB's ability to populate it sufficiently quickly with data from automated bank feeds - details of customers' financial transactions that are supplied electronically by major banks via Kiwi intermediary BankLink.

"If we turn this on and we have 100,000 people we are processing bank feeds for, which is what we are building our systems to do, we need to ensure all of those parts of the system ‘scale'," he said.

"It is more a back-end process of working with the banks because that is a large amount of data for them to start sending out."

Once that's sorted, the differences between AccountRight Live and Xero will be partly architectural. Unlike Xero, AccountRight Live does not run in a web browser and can run offline as well as online. Reed indicated that was a deliberate choice on MYOB's part. "When businesses start spending a bit more time in an application we think the limitations of the browser start to grow and grow, slowing down data-intensive processing.

"Secondly, AccountRight Live does allow you to ‘check out of the cloud' and take a back-up of your data and hold that locally. One of the largest concerns we know in adopting the cloud is data security and losing data."

But Xero founder Rod Drury disputes that rationale.

"What MYOB have done is what they had to do. They already had a big investment in desktop applications when they saw things moving to the cloud so they have tried to protect that investment and have come up with a really compromised model where your data syncs from the client back to the cloud, rather than a pure cloud solution."