It’s been announced that Xero has acquired Hubdoc, the Canadian headquartered data capture tool. It’s fantastic news for the founders at Hubdoc, who receive $70mil USD in shares and cash.
So what does it mean for users, particularly in the UK.
Hubdoc for those of you who don’t know, and this is taken from the Xero press release to announce the deal:
- “Streamlined data capture: Hubdoc complements Xero’s “financial web” strategy by auto-fetching financial documents from over 700 utilities, telecom providers, banks and online vendors, extracting the key financial data and source documentation and then seamlessly syncing the data into Xero.
- Real-time financial data: Xero can automatically match data imported from Hubdoc with bank feed transactions, so that advisors and their clients have an always up-to-date set of books, and can make more informed, timely business decisions.
- Organized and verified data: Hubdoc provides accountants and their clients with confidence that their financial documents are organized, secure, and always available. All data is “verified” with the source document, stored and easily searchable on any device. “
So it’s a step along the path to Xero’s dream of code free computing.
Hubdoc would list Receipt Bank, Auto Entry and Datamolino as competitors in their sector of the app eco-system.
Hubdoc has had a London office, with three sales team members since May 2018, although it started its marketing in the UK, with attendance at the Xero roadshows in March and April this year. It is building up traction in the UK, as its major selling point in USA / Canada is the fact that it has relationships with the vast majority of banks. Therefore, the major pain that an accountant has of tracking down bank records for a vast number of banks, does not exist in the UK.
Also, compared to Australia, where Hubdoc has had bigger take-up is the fact that Australians have a different buying personality – and will buy after an initial demo. “I understand the message, I’ll buy it.” Hubdoc has been nominated for a Xero Partner award in Australia. UK individuals and not just accountants, are far more cautious purchasers. It will also be interesting to note the actual user figures in Australia, not just firm’s signed up.
Hubdoc will not have been helped by Receipt Bank’s recent release of “Invoice Fetch” on July 19. With Receipt Bank being a UK based business, they will have encountered a much larger installed base of Receipt Bank users in the UK, than they have found in other markets. Of course, now they have a very large and active Xero Partner field team to promote them – that is nothing short of a CEO’s dream. Being able to sell on the back of proven relationships. We can also expect Hubdoc being given greater exposure at Xerocon Brisbane and London. I should point out that Hubdoc is already a member of Xero HQ.
One of the early adopters of Hubdoc in the UK, has been Stephen Gibson of NE Accountancy, a sole practitioner, based in Sunderland. Stephen took some persuading to adopt the cloud tools – as he is my personal accountant, it was me doing the persuading – however, he now has his cloud accounting platform in place and is starting to build out his app stack with tools such as Practice Ignition and Hubdoc, signing up for these tools at Accountex North in March 2018.
Stephen says” It’s still early days for me, but I have been very impressed with the client service from Chris Tugman of Hubdoc. My reason for purchase was simple – if it can save me time, then I’m interested. With MTD just around the corner, tools like Hubdoc will be essential, if I want to be able to cope with the increase in workload. I’ll be looking forward to additional UK companies being integrated with Hubdoc – e.g. builders merchants. Being part of the Xero family can only speed that up.”
So what are the conclusions that we can draw from the acquisition, being an outsider looking in:
Globally Xero will have issues with having to develop a product which meets different territories needs – and increasing territories at that. Xero have been keen to make money from the eco system – oh yes folks don’t think it’s all about beautiful business, you’ve got to make money. Back in 2016 Xero introduced fees for access to the Xero API (i.e. access to the Xero data for any partner, had to be paid for.) There was fury from the app community, fees were significantly reduced. Funnily enough that employee had been recruited from Microsoft – previous employment of the newish Xero MD. It also ensured that major apps strengthened relationships with Intuit, CCH and Sage.
Xero launched additional functionality in the area of projects and expenses last year, both of which are well served by the eco-system. When you are investing heavily in R&D, you need a return on your investment. Any increase in monthly fees that Xero take, will go straight to the bottom line.
Having worked with the third-party community to build the community, are we seeing Xero start to build a suite?
Having appointed a new global CEO, Steve Vamos, earlier in 2018, he will be taking a hard look at investment and asking why there is limited take up of Xero Practice Management in the UK? The acquisition of Time sheets by Intuit will not have gone unnoticed. As I mentioned before Microsoft is a business, that has performed incredibly well globally and sold through a partner channel, so I’m sure we can expect to see several of the approaches that mirror approaches Microsoft took and which the end user will be totally unaware of. Historical decisions covered with emotion, will be replaced by hard analysis – witness Exact and their treatment of the UK office.
Receipt Bank and Xero have long been business partners, but are we seeing the start of a new stage in the relationship? Receipt Bank has long been the most popular app on a global basis, accounting for approximately 33% of all connected apps on Xero. Having Hubdoc will be a major benefit to Xero, particularly in the USA, where it has struggled to get the traction delivered in ANZ and the UK. Hubdoc has existing client relationships, which can be utilised. Bundle the two products together and you have a solid solution to start your MTD service.
Working with Hubdoc will also mean that Xero gets a greater control over the data. In the short and medium term, Xero will be looking to exploit the opportunity to harvest the data that they hold on clients and can sell back to banks, retail and accountants. “Did you know Mrs Plumber that the average cost of a hand basin in Huddersfield is £200 and you are paying £300”. If you don’t agree with this piece of future naval gazing, then think about why RBS were so keen to buy FreeAgent, after a short trial. Insights can only be delivered with data.
For UK users, the major help will be that Xero will be able to bundle the two products together. We all know that MTD is just around the corner; nine months before you remove Christmas and Self-Assessment. According to my guesstimated figures, we have around 700,000 subscribers to cloud accounting tools. According to the Office for National Statistics, we have 2.55 million business registered for VAT and/or PAYE. So even allowing for a large variance on my figures, we have approximately 1.85mil VAT registered businesses, that are not using commercial software.
Accountants who have started the cloud journey – or are about to start the cloud journey, will find that data capture tools, which can fetch invoices and verify the data, are a godsend, if not a compulsory part of the offering. Therefore, a great opportunity for Xero and Hubdoc to put considerable space between themselves and competition.
For those of us in the tech sector it’s another fascinating step forward in the evolution of the accounting software sector. Clear winners are Hubdoc sales team in the UK, and the owners of course. Congratulations to them.
From the user perspective, great news for existing Xero users as the deal can only result in closer integration between the two products, if indeed they remain separate brands in the medium term. Hubdoc remaining a separate brand will help continue existing relationships with Intuit, FreeAgent and Sage, although I can’t imagine other vendors putting huge energy into these relationships. For existing users, there is no reason to change, indeed if you are using Xero, then congratulations on your choice. For future users, there is plenty of choice.
And for business IT geeks like me, it’s another twist in a fascinating story, that just gets better.
