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ANALYSIS: Another new head for Xero's American dream

Thursday 22nd August 2019

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Xero has a fraught history of trying to suss out success in North America with what has sometimes had all the hallmarks of an executive revolving door.

The company’s slow progress in the US has also long been a disappointment to analysts and investors.

Maybe that’s why the departure of the latest North American head happened under the radar.

The annual results presentation and annual report didn’t announce the change – they both had photos of the former US head, Keri Gohman, with a new title, 'chief platform business officer'.

Xero never explained the reasons for her move to a new role.

Her replacement was also unheralded - Tony Ward’s photo appearing on the slide with the rest of the then 12-person leadership team in the presentation.

At last week’s annual shareholders’ meeting, the leadership team shrank to 11 with Gohman’s photo disappearing and chief executive Steve Vamos saying in his speech that she decided to leave Xero after three years “to take up another career opportunity.

“We’re extremely grateful to Keri for her contribution to Xero in her roles, leading the realignment of our business in the Americas and, more recently, in leading our small business platform team,” he said.

“As I mentioned earlier, our platform is core to everything we do, so going forward we’re building on Keri’s work by aligning everything deeply into the core technology, product and corporate development functions, whilst maintaining specific focus on payments and development of our ecosystem under the specialist executive leadership and business units we have in place,” Vamos told shareholders.

Put simply, Gohman won’t be replaced. So, a 'chief platform business officer' isn’t necessary.

Gohman, whose background was as a senior executive at Capital One, the 10th largest bank in the US, had replaced Russ Fujioka in 2016 who had kept the 'president of the Americas' seat warm for 20 months.

Fujioka, who had previously worked for a venture capital firm, had replaced Peter Karpas, a former Paypal executive, who stayed at Xero just six months and was the first person appointed to head North America.

Some of Xero’s other country managers’ tenures have been considerably more stable. Gary Turner has been with the company since it first entered Britain in 2009, taking Xero from zero to the clear number one spot in his market.

Xero is also market leader in both Australia - where Trent Innes runs things and has been with the company since 2013 - and New Zealand, which is run by Craig Hudson who's been with the firm since 2014.

Craigs Investment Partners analysts Stephen Ridgewell says that “Xero’s North American business has seen top talent come and go regularly – it’s been like a revolving door.

“That said, the foundations of the business are strong globally and overall growth has remained strong, notwithstanding management and board changes,” Ridgewell says.

Other recent changes include Vamos taking over from founder Rod Drury early last year, chair Chris Liddell who stepped down when he decided to join US President Donald Trump’s administration and chief financial officer Sankar Narayan who departed at the end of last year.

Since Xero started providing separate subscriber numbers in North America in 2013, subscribers have risen from 6,000 to 195,000 in March this year while company-wide subscribers have grown from 157,000 to 1.8 million over that period.

The strategy in the US faltered a few years ago when Drury, out of frustration with how slow accountants in the US were to adopt technology, tried to go over their heads and appeal directly to their small business customers.

But a couple of years back, the company recognised that wasn’t working out too well – it had suffered much higher churn numbers in the US than elsewhere – and it went back to working through accountants, a tried-and-true strategy everywhere else in the world that Xero has ventured.

Xero’s US numbers still pale in comparison to its major US competitor, Intuit, whose online QuickBooks product had 4.2 million subscribers at the end of April, 3.1 million of them in the US and 1.1 million elsewhere where Xero remains market leader.

Fisher Funds portfolio manager Sam Dickie says he met Ward at the Xerocon event in San Diego in June. “He described himself as ‘a street-fighter salesman.’ That’s what they need over there. It’s early days, but it looks like he’s the real deal.”

Dickie is bullish on Xero’s future in North America, particularly in Canada, noting that the market penetration of online accounting software for small businesses is less than 10 percent in that region compared with more than 50 percent in Australasia.

Ward’s background is at Dropbox, Microsoft, Linkedin, Survey Monkey and Spark.

Vamos says in a written answer to questions that Ward “brings strong technology sales and product marketing knowledge and experience to lead our Americas business through the next period of growth and is a valuable addition to Xero’s leadership team.”

Born and raised in Canada, Ward has been living in New Zealand and Australia and is now in the process of relocating his family to America – Xero’s head office in the US is in Denver.


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