ARN: What was the vibe of the software industry when you started?
Winkler: The late 80s, early 90s was a time of rapid change, not that it isn't now, but they were exciting times in the sense that the price per unit of processing power was dropping in a stunning kind of fashion. Small businesses were able to adopt computers for the first time at any sensible level and we saw the opportunity to really make a difference by providing them with tools to manage their operations effectively.
Around that time, spreadsheets and word processing were the upper limit of what the smaller guys could achieve, maybe with a bit of graphics. In terms of managing a business, it was really out of reach because for an accounting suite you'd be spending a couple of thousand dollars.
So, we bought something to the market which used a graphical user interface - it was actually usable by normal mortals, and was under $500. This made a dramatic difference to the market.
What enabled you to bring MYOB to the market at such a competitive price?
We had a conviction that there was a market in small businesses but we had to deliver something really useful. As we saw them adopting computers at an increasing, we knew there had to be more they could achieve than just word processing. So, if we provided something at a price point that was affordable, even though the margins on it were actually tiny, the potential volume might mean a valuable business. To be perfectly honest, we had no idea how valuable at the time, but I think we've been proven right.
From the very beginning, we realised we had to be there for our customers for the long term. We recognised that small business proprietors weren't particularly accounting savvy . . . and they shouldn't have to be. This meant we had to make our software accessible in the sense that you didn't have to be an accountant to use it. We also wanted to provide support to go with it. There was no notion of after-sales service in the computer industry at the time so that was a pretty radical offering, but it gave us a reputation for standing behind our product.
Where did the genesis of MYOB come from?
The MYOB you see today didn't properly start until about 1991 and most of the credit would have to go to [executive director and fellow founder] Chris Lee, who was the primary driver for the design. Also having the expertise of Brad Shofer [the other co-founder and now executive director] as a chartered accountant has certainly helped with the solid accounting stuff. Brad's role has been really important in ensuring that the software still does all the serious double entry accounting at the backend while keeping it out of the way of the everyday person using the system.
All three of us came from different angles in the industry, Brad from accounting, Chris from building personal finance tools, and myself from a technology aspect. We all witnessed SMEs struggling to use the available management tools, the main reason being that they were written from the accountants point of view rather than the business persons. From there it was a process of looking at what was available and saying "well, we can do this better, we can do that better" rather than just waking up one day and going "whooohooo this is it!"
Our philosophy has been that we want to translate the language of business into the language of accounting. In a nutshell, the application allows the proprietors and their accountants to go about their business without having to wade around in each other's mess.
Did you ever foresee the introduction of GST and the subsequent boom for MYOB sales?
The GST introduction period has certainly been an interesting time because we've been able to get out there and help a lot of Australian small businesses. GST really could have been a killer for a lot of SMEs and I think it's a huge bonus that we've been able to help them manage more effectively. GST is a one-off event which certainly hasn't hurt us financially - we supplied 190,000 new products through the channel in the first half of 2000 but that's not the whole business. We have operations in 10 countries and there is legislative change occurring in each one of them which our customers rely on to keep abreast of.
Was the expansion overseas something you planned from the outset?
Not really. Brad and I started in Australia and didn't have huge aspirations - we didn't even know if we would survive in business here. But then we started looking at New Zealand and by 1993 we were already working in Malaysia. We started to see that there was interest and thought we should test it out a bit. We didn't go and spend a fortune - we're pretty conservative and we just take it a step at a time. We've always tried to run the business sensibly by not getting ahead of ourselves - we recognised early that we had to be profitable if we wanted to survive. We wanted to stretch ourselves but not to the point where we could completely keel over because that's not the way to run a business that's going to be around for a long time.
When we started out we only had to sell a couple of thousand copies of our software and have a few thousand customers in the first year to be profitable. The scale of our business was appropriate and I think there are businesses today that would survive if they started with the same attitude rather than expecting to make billions in the first five minutes.
Where does MYOB go from here?
The issue for us is to make sure we're always making life easier for our customers. The technology is important but it's very much a means to an end - we use whatever technology is available to make the business processes simpler. Part of providing long-term service to our customers is that they're telling us everyday what needs improving. A couple of editions ago we introduced professional time billing into our software to give graphic artists, lawyers and other professionals additional tools to bill by the hour. We register raw demand for a certain tool and respond accordingly, either by adding it to an existing package or constructing a new one.
Number of staff: -500 worldwide, 300 in Australia Turnover: -$83 million over last six months, skewed to GST Current growth 30 per cent per annum Services: -Software publishing and distribution of business and accounting applications.