By Andrew Patterson
Xero has become a NZ technology success story that few people would have thought possible even just a few years ago.
And while the high profile accounting software company still has its share of doubters [will we ever get rid of NZ’s infamous tall poppy syndrome?] there can be no doubting the spin off opportunities it has created for companies to partner with Xero and ride on its success coattails.
One of those partners is Unleashed Software, which specialises in inventory management systems.
However, founder Greg Murphy doesn’t fit the stereotype of your typical IT entrepreneur.
Establishing the business in 2009, he freely admits he left school with no qualifications. Instead, it was his first job working in a warehouse that was to sow the ideas for a software business that would eventually be the genesis of Unleashed.
“I didn’t like school at all and couldn’t wait until I was 16 so I could leave. In fact, I left without any qualifications at all but got steamrolled by my mother into doing a warehousing course, which in retrospect worked out really well because I got to learn quite a bit about warehousing from a young age.”
“After completing a three month course, my first job involved putting dice into Yahtzee on a conveyor belt. That in turn led to a warehousing role and I became a storeman at the age of 17 for a multinational which was a lucky break, and again, in retrospect, it was a great foundation for what we do now, which is designing and building inventory software.”
It was the opportunity to gain valuable insights into warehouse inventory systems combined with a natural bent for hard work that galvanised young Murphy’s brain about the world of possibilities that might exist in the future.
“I remember having to pick orders off the shelves and I thought: wow, I wonder if this stock could be a bit closer [to despatch] so it’s a bit more efficient; I wonder how quick I can pack this order ‘cause the other guys seem a bit slow. It was then I started to realise the efficiencies you could generate with proper stock layout. I remember I unpacked two containers by myself in one day, just these little things, but it was all about trying to see if you could do things better and faster and it just so happened to all revolve around inventory.”
“There was something that definitely clicked, not because I was born with it or anything like that, it’s just something that came to me as a result of that early warehouse experience.”
Eventually Murphy began to move himself up the corporate ladder; a reminder that it’s often those who push themselves forward and take advantage of unexpected opportunities who ultimately get ahead in life.
“I stayed with that multinational for about nine years in the end because I got stuck into the computers to receipt stock and they could see that I wasn’t too bad at it and I got promoted to sit in the offices and it was then I began to focus on shipping. So that involved doing all the costings, the acquisitions, ports charges and eventually I ended up running all of their warehouses in New Zealand.”
“I found I could talk quite well, which is a big part of it. So I learnt to communicate, I’d learnt this big, clunky AS400 system and they were customising it, so I was the one putting in requests to the tech guys to modify things. But probably one of the best things that happened was about a year before I left they decided to upgrade to SAP globally, and I was part of that conversion team.”
“I got stuck into understanding how data should be formatted and imported and exported as well as understanding all the processes that come with a new software system so that gave me a real taste for what was possible.”
Murphy admits it was at that point he had surprised himself at how well he’d done given his lack of any formal qualifications.
“It sounds a bit lame now but I left because they wouldn’t give me a company car and so I thought, right, I’m out of here; as you do when you’re in your twenties and you don’t get your way.”
“So I went to other roles and set up warehouses and did project management and probably spent about three or four years just doing other bits and pieces; chasing the car and the six figure dream. It wasn’t until I ended up at Sealord running the Australasian supply chain and getting stuck into software that I realised I’d reached my goal and I thought actually, this is kind of boring.”
“I reflected on the fact that in all the career choices I’d made I’d got to see quite a few businesses and I’d come to realise that while a lot of businesses were running accounting software they were using spread sheets to manage their stock outside of their accounting software.”
Realising there was an opportunity to build an inventory management system that could not only be customised, but would integrate into an existing accounting software system, Murphy set about gaining some qualifications that would enable him to develop his business.
“I did end up going to Uni and doing a post-grad diploma in Operations Management, but I didn’t study, or anything like that; it was really to get the piece of paper. As luck would have it, I’d met a guy on the course who had the same idea and we ended up working together. He could code a bit and access databases, I knew my stuff and could talk a lot, so I thought: well, if I sell the stuff, you can build it. So we started building customised inventory apps which would integrate with accounting software.
That was over seven years ago, but key to the success of the business was the decision early on to join Massey University’s incubator programme.
“Looking back now that was a key turning point for us, but not for the reasons we thought at the time. Initially I thought: oh, I’ll just work from my dining room table, but soon realised that I wasn’t out of my pyjamas by midday and I realised I needed separation.”
“I’ll never forget the interview at Massey because we had about ten ideas which were all going to be successful in six months and we were going to be millionaires; it’s amazing how you think sometimes once you get an early taste of success.”
However, Massey became the reality check the fledgling business needed.
“The first thing they said to us was: pick one and stop being silly. We actually got told off in our interview and it was a bit deflating really, but they accepted us in. Initially they said okay, we’ll wrap some accounting people around you, give you some legal advice and help you structure the business but beyond that they pretty much left us alone because I think what they look for is not just great ideas, but the people who can deliver on those good ideas.”
“In retrospect you’ve got to have grit because a lot of people have these ideas and after three months of not making money, they just stop and try and do something else, and there’s no point in supporting people like that.”
“I think they saw that we did have plenty of grit because we spent two years annoying people. Yes, we were building crappy software, delivering it late, overpromising, under-delivering, and our first set of tools weren’t even online, but we were out there pushing ourselves. So it took us a year, much to the disgust of our wives, before we started to get somewhere. We had no money, working 100 hour weeks trying to make this thing work, but we were determined to make something of it.”
“At that time, the online software option was just starting to come out and I had this vision to play golf and make money; I didn’t want to have to work for it. So I thought: here’s a really good excuse because you can just charge customers for monthly hosting. And it’s actually a valid charge, as compared to installed software with some magical service charge of 20% a year, or something like that, which you don’t actually get anything for. We thought: this is good, this is what we’ve been waiting for.”
“We soon realised we had to start bootstrapping. So we started contracting again, working literally day and night, hired a couple of pretty bad developers and over the period of a year we built the second iteration of what is now Unleashed. It was very powerful online inventory software; it did more than our current software does, but its architecture was a disaster and it was way too complicated.”
The rise of Xero
Timing is everything, as they say, and early success in building the new iteration of the software could have easily turned to disaster had it not been for the appearance of Xero on the scene, just in the nick of time.
“I remember vividly thinking: heck, we’ve been doing this for two-and-a-half years, and now we’re going to have to start all over again and that’s when Xero popped up and we realised they could be our lifeline so we started talking to them. They were well funded and we soon realised there was an opportunity to partner with them.”
“I look back, and our good decisions were not planned. But probably the best decision we made was to just stick to doing inventory. And in hindsight now, just doing that means you’re part of an ecosystem without as many crossover competitors.
But it’s the cloud that has really been the game changer for software companies like Unleashed. Without it Murphy freely admits he might still be stuck up that creek without the proverbial paddle.
“It’s been essential for us because even now, if people don’t want to go online, there’s no point in using these apps. There are offline software options that do more because they’ve been around for 10 years. But it’s the uptake and the trust that people have developed in the cloud that has really changed.”
“When I first started, I reckon in New Zealand, 5% of businesses would have trusted online software to run their business on, yet in the past five years, that’s probably grown to about 50%.”
Illustrating that change in mind-set, IRD recently gave Xero the green light to be able to store tax data in the cloud which has effectively given the new technology the official seal of approval.
“It’s fantastic having the sign off from IRD and between them and banks people trusting online apps is just getting bigger and bigger, and I think we’re really only about five years into a 15 year journey globally and to some extent New Zealand is actually leading the way with that trust, which is really encouraging to see.”
But without Xero, could Unleashed have achieved the success it has? Murphy is unequivocal.
“I doubt it very much. Because they did everything really well from the outset they allowed us to effectively ride on their coattails. Their founders were smart, they marketed themselves well right from the start and got plenty of traction, they had access to capital whereas we were just bootstrapping and growth is generally very slow when you’re in that mode.”
Following client need
Unleashed also points to its customer driven strategy as the basis for its success.
“What we learnt from that second iteration of Unleashed is that while you can build what you want, because we’re inventory geeks, we realised very quickly that was the wrong way of going about it and you really had to understand the system from the customer’s perspective.”
“You’ll find that customers are quite loud with what you should do and we started off by wanting to be an inventory management system but what we’ve realised is that the world sees warehousing inventory as pretty much the same thing, but a warehousing system is actually quite different. So we’re now going down that path because we know between things like warehousing and assembly options; the world doesn’t really have it yet, and they’re screaming for it.”
So what of the future for Unleashed? Murphy is quick to respond.
“When I first started I would have thought: wow, it will be amazing in a few years to have a $10 million company,” I thought that would be pretty awesome, but you know, that’s obviously evolved as we’ve seen the opportunities ahead of us evolve and so now we’ve set our sights on being a billion dollar company.”
“And we might even look at an IPO somewhere down the track too. That would be fun.”
|Sector:||Software as a Service (SaaS)|
|Annual % growth rate||300%|
|Fastest growing market:||Australia|
|Domestic / Intl sales split:||30 / 70|
|Recent highlights:||Xero Partner of the Year 2013|
|Expect to IPO:||Possibly|
|5 year goal:||$1 billion company|