4-page Case Study
Posted: 9/10/2007
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Xero Software Developer Improves Service Levels With Superior Database Technology, Flexible Licenses

Xero Live Ltd (Xero) is a Wellington, New Zealand-based start-up offering Software as a Service (SaaS) online accounting for small and medium-sized enterprises (SMEs). Xero management knew the company needed a reliable platform to host its online software, including advice and licensing support in the critical start-up phase, as well as tools to help get to market quickly and support for its plans for growth. Xero deployed a Microsoft® operating environment, featuring Microsoft® SQL Server™ 2005, ASP.NET, and Visual Studio® 2005, and took advantage of Microsoft® SaaS On-Ramp and Microsoft® Empower programs for initial guidance. Less than one year after development began, the company boasts more than 100 customers using Microsoft® Service Provider License Agreements (SPLAs), is listed on the New Zealand Stock Exchange, and is poised for continued growth.

Situation

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* The best benefit of being a Microsoft partner is access to an exceptional network of other companies who become suppliers, customers, resellers, and partners. *
Craig Walker, Chief Technology Officer, Xero Live Ltd.
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Wellington, New Zealand-based Xero Live Ltd (Xero) offers a simple and affordable online accounting service to small and medium-sized enterprises (SMEs) around New Zealand. Having rapidly grown to 32 employees in its first year, Xero wanted to offer an easy to use, Software as a Service (SaaS) accounting model for SMEs.

The company needed to connect business owners, staff, bookkeepers, accountants, and financial advisors to the same financial system over the Internet. Online access would allow smaller businesses to share their financial data easily with their advisors. Further, a “pay as you go” model would require no upfront costs or installation; customers could simply login and pay for only the services they use.

Xero knew that small businesses live or die by their ability to manage daily cash flow. It wanted to help small businesses avoid the expense of outside expertise, such as from an accountant or business advisor, or the high up-front costs for installed accounting systems and the associated demands on staff time to keep up with software changes.

Encouraged by growing Internet access, advanced web development techniques, and increasing acceptance of the Internet in business, Xero management decided the time was right for its implementation. But running a successful SaaS business requires the software provider to spread the cost of providing services over many clients, so that the additional cost of adding new customers is minimized.

This requires good architecture and a solid platform to deliver the software quickly and cost-effectively. Further, Xero’s customers would need assurance that Xero offered them a secure, reliable platform for their mission-critical services.

Xero needed expert technical advice during its critical start-up phase, support for rapid product development, and a cost-effective licensing structure to reduce start-up costs. Finally, it wanted a partner that could support its vision of long-term growth

Solution

In seeking support for their plans to build a world class business, Xero turned to Microsoft. Microsoft demonstrated that it understands SaaS and the technologies and challenges that surround the deployment of SaaS applications. “Having the ability to overcome future technology hurdles is important to Xero. Microsoft also has an expansive vision of where SaaS will go next,” says Xero CEO Ron Drury.

Microsoft provided tools to enhance the productivity of Xero’s developers, and offered an integrated set of technologies that met its need for security, reliability, scalability, affordability, and ease of use. “Microsoft technologies have a history of delivering scalable solutions to some of the largest Web applications in the world. That experience gave us the confidence to build our application as we grew our customer base,” says Drury.

Xero Chief Technology Officer Craig Walker says that the company looked at many other technologies, including Ruby on Rails:  “Rails has been the technology of choice for many Web 2.0 start-ups, so we wanted to understand what it provided. We liked some aspects of Rails but did not think it was quite ready for a mission critical application such as ours,” he says. However, by using the Microsoft approach, Xero was able to better exploit the power of technology to deliver its SaaS application.

Xero’s Beta Program began in November 2006, just five months after development started. Following a successful limited public release in April 2007, the software was put on open release.

At the core of Xero is a Microsoft® SQL Server™ 2005 database running on Windows Server® 2003. These handle the load and complexity of accounting data with ease. This shared infrastructure approach, in which a single instance of the application serves every customer, leads to simpler management and greater capacity for economies of scale. Authorization and security policies ensure that each customer’s data is kept safe from that of other customers.

Microsoft® ASP.NET was selected for its power, flexibility, and security to build complex web-based front-ends with ease. Web technologies that allow rich interaction are used to deliver state-of-the-art user interfaces; Microsoft® Silverlight™ is being considered to provide a richer user experience in the future. The solution has been designed to work optimally with Internet Information Services version 6.0 (IIS 6.0).

All Xero product development work is done using Microsoft® Visual Studio® 2005, which provides a fully integrated environment allowing any style of application. Microsoft® Visual Studio® 2005 Team Foundation Server is used as the source control and team management solution, integrating perfectly with the Visual Studio 2005 Team Suite and Xero’s internal software services, including issue and release management software.

But it is with Microsoft’s Service Provider License Agreement (SPLA) that Xero found unexpected value. The SPLA allows service providers and Independent Software Vendors (ISVs) to license Microsoft products on a monthly basis, and then to provide their hosted applications to end-customers.

The monthly SPLA licensing cost is flexible and based on usage, which means Xero only pays for the services it makes available to its customers each month. This cash flow flexibility lessened cost demands on the company during start-up. The SPLA also gives Xero access to the latest versions of the licensed Microsoft products and allows it to continually develop its accounting software and incorporate the latest Microsoft features in the future, fully supporting its growth vision.

Benefits

In its search for a reliable platform for present and future expansion, Xero found that Microsoft technologies and services provide everything it needs. Not only did Microsoft solutions reduce start–up costs, they facilitate rapid ongoing product development, connect the company to a worldwide support network, and will help sustain the company in the future.

Reduced Start-up Costs

“Recent changes in Microsoft SaaS licensing meant that we didn’t need to consider riskier open source alternatives. Because we’re building a SaaS product, Microsoft very quickly put us onto a new program called Microsoft SaaS On-Ramp. This licensing scheme makes it very attractive to use Microsoft technologies by lowering the cost significantly for the first year, which is always the most important year in any new software business,” says Drury.

Rapid Product Development

Xero also tapped into Microsoft’s huge resource base by joining the two-year Microsoft® Empower program, which offers software developers access to developer tools, software, technical support, sales, and marketing resources—as well as phone support from the Microsoft ISV Global Support Team. These resources helped Xero to lower its development costs, test its software, and get to market sooner.

Worldwide Support Network

Xero has become a Microsoft® Gold Certified Partner. This required its systems, processes, and products to be rigorously tested for approval by Microsoft. Xero is the first ISV in New Zealand to be certified as a Hosted Solution Provider with Microsoft. The company also has Gold Certified Partner status in mobility.

Walker says that Gold Certified Partner status was a goal for Xero from day one. “Software as a Service is all about trust. It was a key issue for us to seek external validation of our approach,” he says. “Not only are the benefits huge in terms of licensing, but also the doors that it opens, and the credibility that it holds with Microsoft, the market, and in the wider technology community. The biggest benefit of being a Microsoft Partner is access to an exceptional network of other companies who become suppliers, customers, resellers, and partners.”

Supports Long-term Growth

Xero’s story has attracted attention from around the world. In little over one year, the company grew to more than 30 employees serving 100 customers. And in May 2007 Xero won the International Technium Challenge, a high-profile worldwide business planning competition. Xero is confident it has the foundation needed for its global ambitions, using Microsoft technologies.

For More Information

For more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234 in the United States or (905) 568-9641 in Canada. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to: http://www.microsoft.com/

For more information about Xero Live Limited products and services, visit the Web site at:
www.xero.com/nz

Microsoft Communications Sector

Microsoft Communications Sector delivers integrated, adaptable, comprehensive solutions built on innovative software. These solutions help communications service providers develop, deploy, and evolve customized and differentiated offerings that enhance the user experience.

For more information about Microsoft solutions for the Communications Sector, go to:
www.microsoft.com/serviceproviders

This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.
Document published August 2007
Solution Overview



Organization Size: 200 employees

Organization Profile

Xero is a 32-person strong Wellington, New Zealand-based company offering an online accounting system for small and medium sized businesses.


Business Situation

Xero needed a reliable platform to host its online accounting software, including advice and licensing support, tools to help get to market quickly, and support for its growth plans.


Solution

Xero deployed a Microsoft® SQL Server™ 2005 database to handle complex data, and Microsoft® Visual Studio® tools to get their product to market quickly, with Microsoft SPLA licensing for customers.


Benefits
  • Reduced start-up costs
  • Rapid product development
  • Worldwide support network
  • Supports long-term growth
  • Improved cash flow

Software and Services
  • Microsoft Office 2007 Suites
  • Microsoft SQL Server 2005
  • Microsoft Visual Studio 2005
  • Microsoft Visual Studio 2005 Team Foundation Server
  • Microsoft ASP.NET

Vertical Industries
Accounting & Consulting

Country/Region
New Zealand

Languages
English

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