XERO founder Rod Drury has escalated his attacks on MYOB, claiming its prospectus does not give enough detail for investors to decide whether it is losing the fight with them.
Mr Drury said he had hoped to see more detail on its cloud-based customers in NZ – where the NZX and ASX-listed XERO is headquartered – and customer numbers on a product basis.
Prior to the launch of the MYOB listing roadshow on Tuesday, Craig Boyce, a director US private equity firm Bain Capital which owns MYOB said previous criticism by Mr Drury was "outrageous" and inaccurate.
On the same day, XERO released a press release announcing it had reached 200,000 paying customers in Australia out of a total customer base of 400,000, with 119,000 in NZ and 61,000 in Britain.
MYOB's prospectus says they have 505,000 paying clients across Australia and NZ, with 116,000 of those cloud based customers paying a subscription. It has a further 716,000 non-paying customers using its desktop software, which MYOB says are potentially convertible into paying customers.
"We have a unique situation," Mr Drury said. "They have a directly comparable competitor which has been listed for seven years. MYOB is a great brand and I have investors who want to see what has happened with it. With a clear comparison like XERO, it seems to me that they should compare themselves directly."
His contention is that XERO is doing far better than MYOB in NZ and it is repeating its success in Australia, as well as expanding outside the region.
"In NZ it is acknowledged XERO has won. If that is the case, investors will want to know if it is going to happen in Australia too. It is hard to know without breaking out the numbers," he said.
He repeated previous criticism that MYOB's organic growth is low compared to XERO's in-cloud subscriptions, which is where all competitors in the market acknowledge the industry is headed. He said the growth MYOB has achieved is via acquisitions, including NZ-based BankLink, which allows small business accountants to take direct feeds from client bank accounts into MYOB's accounting software. But Mr Drury claims to be siphoning off customers from this product in NZ.
"We have been booking literally thousands of BankLink customers. Investors would want to compare them by product," he added.
Staying local
MYOB is sticking to the Australia and NZ market, arguing there is enough room to grow here and it is riskier to spread themselves globally.
XERO has moved into several major markets overseas to compete with the likes of NASDAQ-listed Intuit, which offers Quickbooks and is also competing in Australia and SAGE.
He maintains online-subscription based software costs a lot to maintain due to the need to have programmers constantly updating software and so it requires scale.
"These [software as a service] businesses require so much investment. So we have customers in over 180 countries and very large developer teams," Mr Drury said.
"You are effectively writing SAP for small business. You have got to write millions of lines of code."
MYOB has been asked for a response.
