MYOB came out swinging with the release of its latest figures which showed that 94 percent of its A$287 million revenue was recurring. “Three years ago we had not yet taken our SME flagship product AccountRight to the cloud. Now we are in the cloud across all areas of our business,” CEO Tim Reed said in the media release.
I caught up with Tim on a phone call today to find out where the growth in revenue would come from in the next 12 months.
Digital First: You now have products in SME, accounting practice and enterprise. How are you splitting your R&D over those three areas?
Tim Reed: We are investing on all fronts. On the SME solutions side we’re investing heavily in BankLink and have made the decision to take it online. So we’re investing in the current on-premise solution and the cloud.
We are investing in MYOB Essentials, we have several other things in development I can’t talk about now. And MYOB AccountRight there are also updates including Smart Bills next quarter.
Digital First: Are you planning to give MYOB Essentials the same number of features as AccountRight?
Reed: We’ll keep the portfolio approach. Essentials is quick to use, and simple. There’s not going to be feature parity with AccountRight. People want to get their accounting done and get back to work. It’s a big segment of the market, up to five employees who love and treasure that it’s easy, not over-featured.
We are also investing in AccountRight.
Digital First: What’s the long term plan for EXO? Will you dump it for MYOB Advanced (the cloud ERP)?
Reed: We think for a number of years that the world will operate in parallel. Gartner estimates that 20 percent will move over in the next four to five years. We will have on-premise and cloud for growing enterprises for many, many years to come. We have a team that’s still working on EXO and adding new capabilities, while launching Advanced.
That is why we needed to increase R&D spend from A$23 million to A$49 million.
Digital First: What are your plans with payroll? Can PayGlobal work with end users?
Reed: PayGlobal is an on-premise software that runs payroll for medium to large enterprises. MYOB is a client. All our payroll is done on PayGlobal, our leave management, payslips, payment summaries. So it’s for employer and employee.
Advanced People will be a cloud-based version (of PayGlobal). It’s just like MYOB Advanced Business is EXO, Advanced People is PayGlobal.
Digital First: What are the details of the Acumatica agreement (the software behind MYOB Advanced)?
Reed: There are multiple components to Acumatica. We made a minor investment in Acumatica and we have sole distribution rights to Acumatica in Australia, New Zealand and South Pacific. The contract is decades in length.
Digital First: Can you explain MYOB’s approach to distributing other software versus building it yourselves? How does that work?
Reed: The most important thing is that we have a great client experience. MYOB Advanced has the same single sign-on as our other products. If a client uses Advanced and one of our other products we have single billing, single sign-on, we need a consistent brand and portfolio.
There’s no doubt that the agreement with Acumatica means we can dleiver a localised ERP system far faster and with less investment than if we had to build it ourselves. But our investment is spread between accountants, enterprise and SME.
We are making a heavy investment in MYOB Accountants Office and Accountants Enterprise to make it ready for SBR (Standard Business Reporting). The R&D is weighted towards practice and SME.
Digital First: You have a lot of products now to divide your R&D. Do you think you’re spreading yourself too thinly?
Reed: It is a lot of development but I’m not concerned about it because we have the capacity to do that. MYOB is profitable and generating positive cash flow so you can make those investments. There are many software businesses that are going after bigger markets. With what we’re focused on and the strength of the P&L we can invest appropriately and do some really smart things.
Digital First: We now have several global competitors in Australia with Intuit, Xero and soon Sage. How can MYOB not respond with a global plan? Won’t it need to access a bigger market than Australia and New Zealand to compete?
Reed: To your point about not spreading investment too thinly;. I think all those businesses run the risk of that and not doing a fabulous job for clients everywhere. Look at the massive productivity drivers we are putting into our products. Why wouldn’t you have a mobile payments solution? Intuit has done it for North America but not for everyone else.
Look at Sage – they have done it for the UK because they understand the importance of mobile payments but not outside the UK. So they’re all offering compromised solutions outside of their home market. Why should clients outside their home market receive substandard solutions?
Digital First: That is only true while we are on this huge innovation cycle. Once it slows down then they can bring other countries to feature parity. I guess the question is will we keep on this innovation cycle? I can’t see the market maintaining this frantic pace forever.
Reed: Yes, I think it will. I think it has quite a way to run. If you and I sat down for a coffee we would have five years of innovation on the whiteboard. I think the cycle is still speeding up and it has a long way to run.
