How did the Xero accounting SAAS solution scale?

Xero's subscription model helps them grow sustainably. They have trained and positioned Xero experts around the globe. The experts serve a region and sign up subscribers underneath them. By targeting professionals who may already have a client base that is in Xero's target market (for example, CPA's who advise startups or Bookkeepers who may be searching for something more user-friendly than Quickbooks) they have been able to scale quickly. It helps that their user interface is intuitive, as well.

SaaS is a software application licensing and associated services (delivery, support) model. In this model, the Software application is normally hosted centrally, software/user licenses are delivered over the Internet and users are expected to use a browser when accessing it. Services such as software updates are delivered by the software provider/author whereas other services such as education, customer service, implementation can be delivered either over the web, telephone or in person. The term “Software as a Service” (SaaS) is considered to be part of the nomenclature of ‘Cloud computing’, along with infrastructure as a service (IaaS), platform as a service (PaaS), desktop as a service (DaaS), managed Software as a Service (MSaaS), mobile backend as a service (MBaaS), and information technology management as a service (ITMaaS). Finally, DbaaS (Database as a Service) has emerged as a sub-variety of SaaS.
Under a SaaS licensing agreement Software, you can normally find,
i. licensed on a subscription basis (per use monthly, annual, transaction/volume based etc.),
ii. centrally hosted by the software provider and
iii. delivered to and can be accessed by users via a web browser or a mobile application.
iv. some services are included in such an agreement e.g. support, implementation of initial project/pilot, education etc. and additional services (‘premium’) can be purchased separately from the software vendor or its partners.
The SaaS licensing model, although well accepted these as a delivery method, has been on the ascendancy for quite some time and today many if not all, business applications, are available under that model and nearly all leading software organisations now have a SaaS product range in their portfolio including Financial software, Human Resources/Talent/Payroll processing Software, Sales & marketing software, office software, messaging software, Database software, security software, management software, Social media/ Digital media and content management software, project/collaboration software, invoicing/payments software, customer service software, CAD software, advertising, engineering software etc.
In general, there are two main varieties of SaaS solutions:
A. Vertical SaaS Solutions i.e. Software that addresses answers a specific industry requirement such in finance, real estate, healthcare, agriculture. etc. and
B. ‘Horizontal’ SaaS Solutions i.e. Software that more generically address common business such as sales and marketing, Human Resources, information technology.
Most of the SaaS solutions are designed and implemented by the vendors on a multitenant architecture. This architecture normally requires a single version of the software application, along with a single system configuration that includes any hardware, network and operating system, for use by use by all ‘tenants’/customers/users. To achieve scalability in what can be many application users around the world with perhaps different internet communication issues, the software application can be installed on multiple server machines (‘horizontal scaling’). In addition to the above some vendors set up additional versions of their software for select customer groups e.g. Beta approved customers, for testing purposes. It should be noted that some SaaS solutions do not use multitenancy and instead use other mechanisms e.g. virtualization techniques, to manage many customers. SaaS applications updates are more frequent and, in many cases, done on a weekly or monthly basis and some applications are updated many times daily. This is enabled by several factors including:
1. Central hosting of the application is hosted centrally. When an update is made by the vendor not the customers.
2. Single configuration application helps expedite development.
3. Single version means minimal resources required by the software vendor to continue updating and maintaining previous versions.
4. Design and regression software testing is faster because the software vendor has access to all customer data.
5. Software vendor can easily identify areas of improvement as, with the use of digital technologies, can easily analyse customer experience on their application(s)
6. Agile software development methodologies and associated tools and practices, most evolved in the mid-1990s, help the roll out of frequent software releases.
SaaS limitations: It is wide accepted that SaaS applications growth has been outstanding over the past few years. However, there are limitations which slow down the acceptance of SaaS and occasionally prohibit it from being used.
Below are some of these limitations:
1. Applications required fast response (milliseconds) are not appropriate. SaaS applications are slower as they hosted in the cloud
2. Customization is not easy due to the application architecture.
3. Integration to company sensitive applications/data is risky and can conflict with data governance regulations.
4. Changing SaaS vendors may be a difficult task especially if transferring very large data files over the Internet.
5. Adopting new software versions may mean unexpected training costs for the customer organizations and related user errors.
6. The user may lose access to their software and perhaps data, in the event that a SaaS vendor were to go out of business.
7. Internet performance and reliability is still an issue in some countries or geo-regions.
8. Data security is always a consideration as data are being stored on the vendor’s servers.

Now we will investigate Xero to understand how these two are related.
Xero is a New Zealand domiciled public technology company, listed on the Australian Stock Exchange. Xero is a cloud-based accounting software platform for small and medium-sized businesses. The company has three offices in New Zealand (Wellington, Auckland and Napier), six offices in Australia (Melbourne, Sydney, Canberra, Adelaide, Brisbane and Perth), three offices in the United Kingdom (London, Manchester and Milton Keynes), three offices in the United States (Denver, San Francisco and New York), as well as offices in Canada, Singapore, Hong Kong and South Africa. The Xero accounting software uses a single unified ledger, which allows users to work in the same set of books regardless of location or operating system. Its features include automatic bank feeds, invoicing, accounts payable, expense claims, fixed asset depreciation, purchase orders, bank reconciliations, and standard business and management reporting. Xero claims to have more than 200 secure connections with banks and financial service partners around the world. Other features include an API to integrate with external applications and Xero claims to have been integrated with over 800 third party apps, and more than 200 connections to financial service providers around the world.
Xero is the winner of THE CLOUD AWARDS 2016-17. The cloud computing awards program, which is now entering its seventh year, celebrates excellence and innovation in the rapid-growth cloud computing market. The awards program accepts entries from across the world, from organizations of all sizes. Xero is basically designed for accountants and bookkeepers. Xero helps build a trusted relationship with small business clients through online collaboration. Xero works closely with our customers, partners, and other friends to push innovation forward. This turns Xero into the most vital online business platform for small business operators. Xero is one of the fastest growing SaaS companies with a mission to become long-term global leader in small business software and achieve a vision of millions of businesses growing on their platform.

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