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Idealog—in the ideas business

Cloud Opportunities—Rod Drury

Rod needs little introduction, he is the founder and CEO of Xero, the NZX-listed online accounting solution for Small Businesses. Xero was listed in the top 10 best User Interfaces for 2008 by Jacob Nielson (usability expert) and has just secured its second round of funding, no mean feat in there troubled times. Rod also won a World Class New Zealand award in 2008 and was NZ Hi-Tech Entrepreneur of the Year in 2006 and again in 2007. Rod won the Absolutely Creatively Wellington Award in 2007.

Rod evangelised just how able we are in this day and age to build globally competitive businesses from New Zealand, that the fact that everyone within the industry, and even outside of the industry, knows each other and are close enough to meet and talk about the issues. Internally we're really accessible and that enabled Xero to form a great multiskilled team much more readily than would have been the case in any other country. It's no longer really about the technology Drury said, it's about building a business - marketing, fundraising and general management.

Drury pointed out that Xero is a very young company, but when it was started Twitter didn't even exist. Utilising these new tools has allowed Xero to bypass the traditional advertising channels and get direct communication channels with their customers, and more importantly their potential customers.

Drury spoke of the revolution that Cloud Computing is bringing - where devices are trending towards free and becoming truly ubiqitous tools - the barrier to entry to the access point is dropping rapidly. This provides a huge challenge for traditional vendors like Microsoft who need to flip their business models to a software as a services type model. The innovation however comes from the small players so Drury is adamant it's a fantastic time to build a SaaS start-up in the expectation that a trade sale would be viable in the next year or so.

Building a business is not a case of "build it and they come" - monetisation is hard and so founders need to find a space within which they can provide a service that people will actually pay for. Start-ups are not just funding their development - they need to fund a sales and marketing operation as well.

So where to invest? Drury feels the obvious place to invest is in the enterprise SaaS space - young businesses are able to pull off some big deals which fund their costs readily - selling into a consumer market however this is much harder. Drury used the example of Atlassian who produce enterprise SaaS solutions but leverage a social media approach towards selling and have built a profitable and growing business in doing so.

What concerns Drury about the move towards cloud computing is the cost and availability of fast, ubiquitous internet connectivity. We need to do something to avoid the digital divide between New Zealand and the world - all this data we're creating ends up overseas and that costs significantly in terms of transfer. For that reason some sort of state involvement in the data network, at least at an infrastructure level, is a necessary and worthwhile move. That involvement should give the end users cost-plus data access to anywhere in the world.

Drury exhorted the attendees to join in the call for a better connection to the world - and this connection can achieve for New Zealand (and for Xero if ulterior motives are to be admitted) the ability for us to work and play at a world class level.

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Agreed Rod,

It's a good time to be doing what we do. SaaS is set to come of age in NZ and those that are on or get on the bandwagon soon will be well positioned to reap rewards in the coming years. NZ is a fantastic stage to launch globally from.

I've seen many businesses trying to grow in NZ with little regard for monetisation. Rather they tend to focus on marketing or development but forget that ultimately they're in business to make money. So I encourage SaaS startups to be very conscious of their business models, cashflow and bottom dollar.

Whilst our connectivity isn't great, if you look at Xero, ProWorkflow and TradeMe as well as others, you can see that there is enough connectivity to start and to actually create great businesses. But I'm in agreement that better connectivity is necessary to really compete strongly at a global level.

Julian Stone - CEO

SaaS Project Management Software