James Riley
August 17, 2015

Xero on data driven public policy

Xero on data driven public policy

Rod Drury: Public-private partnerships on data yields good policy results

Kiwi-based cloud accounting wunderkind Xero says aggregated private sector cloud data can be used to help government make better decisions across the economy, and to implement policy changes faster.

Xero chief executive officer Rod Drury says cloud technology has emerged so fast that governments are still catching up with the potential uses for the data that’s being collected.

It’s not government data Mr Drury is talking about, but the aggregated customer data of private sector service providers. In Xero’s case, the company is already pressing government to open up its systems and processes – not so the company can extract public data sets, but so that it can pass on its own aggregated customer data, a rich ongoing snapshot of small business activity across the whole economy.

“As we have got to scale, we’ve seen this really interesting public-private sector partnership start to form,” Mr Drury said.

“In New Zealand we have 25 per cent of small businesses using our platform now – which is nuts! – and in Australia it’s probably 10 per cent and growing very, very quickly,” he said. “What’s happened now is that it’s the private sector that is driving a lot of the agenda here [about how this architecture and data can be used], where we are pushing government to hurry up.”

There are a couple of sides to the benefit to government of private sector cloud architecture. Firstly in flexibility and faster turnaround in policy delivery.

The global financial crisis provides the example. When the GST hit, some countries changed their consumption tax rate (GST). This is a policy that easy to say, but potentially extremely expensive to do for industry.

“Because we were a cloud provider, we were able to do that quite quickly and do the heavy lifting [in terms of changing the software]. So the private sector was happy to invest – and it actually drove a lot of new customers to us who wanted the flexibility.

“And it gave government the ability to move the policy much faster, because of the amount of co-investment that was going on.”

On data issues, Xero has been working with the Inland Revenue Department putting its quarterly business survey through the platform. Previously the survey had been filled in manually by business, and processed by the department – bringing with it all the hassle to business and cost to government that paper brings.

In the meantime, Xero had also been working with government, pressing for infrastructure like the National Business Number. Its aggregated data had become more and more comprehensive as more customer “opt-in” to the point where it is able to provide “real,” economy-wide snapshot of business activity.

This includes real-time bench-marking by industry, or by region, or by whatever other measure might be useful. And this is where Mr Drury sees value for public-private partnerships for the provision of consumption of data.

“Basically we have got real-time analytics about what it happening in the economy, at scale,” Mr Drury said. “We are able to use real data and a large sample size to get a picture of what’s going on across the economy.”

“If you can meter things and know what’s going on [in the economy], you can drive much better policy, much faster,” he said.

Speaking on the sidelines of the RISE Conference in Hong Kong earlier this month (where Xero was plotting the next move), Mr Drury said the company’s home market had proved an excellent petri-dish for the creation of programs with government.

“This is where New Zealand has been a great test lab, where we have been able to prove things and then deploy learnings across the Australian market quite quickly,” he said.

Xero’s Australian managing director Chris Ridd is understood to be focused on replicating in Australia the same strong links into government that the company enjoys in New Zealand. The company is understood to be working with the Industry Department, as well as the Australian Taxation Office, and the Malcolm Turnbull’s new Digital Transformation Office.

Mr Drury said the best thing that governments can do to help innovative small businesses get their start in the world is to work with them. Even if it starts in a small way, the ability to use government contracts as reference-able work is a huge boost.

Meanwhile, Mr Drury confirmed the company is committed to seeking a further listing in the US, probably next year. The company is already dual listed on the New Zealand Stock Exchange and Australian Stock Exchange.

“We like to be listed in the markets we’re in,” he said.

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