Enough firepower for tough times

MYOB’s outgoing boss Tim Reed says the Australian economy has firepower to combat gathering global headwinds.

MYOB’s Tim Reed. Picture: Stuart McEvoy.

Accounting software maker MYOB’s outgoing boss Tim Reed says the Australian economy will need to rely on every ounce of its good fortune to combat the perils of Brexit and the unpredictable trade war between the US and China.

“These global factors will have an impact — it’s a matter of when they hit not if — but the good thing is that we have a strong pipeline of infrastructure that’s being built around the country and budgets (federal and state) are largely in balance, so there’s a bit of firepower,” he told The Australian.

One key factor in Australia’s favour, according to Mr Reed, is the unprecedented bout of political stability, which has helped to mend key metrics.

“Economic growth has picked up pace marginally, real wages growth has started to pick up as well, and new business formation is higher than it has been in a number of years.

“So there are positive signs here and I think in part this is from the increased political stability coming out of the federal election and the state ones in Victoria and NSW.

“There is no doubt about the uncertainty at a global economic level but our economy has held up remarkably well.”

With 16 years under his belt at MYOB, 12 of those as CEO, Mr Reed has been a close observer of the ups and downs of the economy over the past decade. As a provider of accounting software to businesses MYOB keeps close tabs on the health of the economy, in particular the small to medium business sector, a key battleground between it and rivals Xero and Intuit.

According to Mr Reed, while the policy settings are in place for small businesses to make the most of record-low interest rates, most are reluctant to chase top-line growth.

“They are more focused on securing customer relationships and optimising their return on the investments on that front, so they are cautious about the revenue outlook and opting for incremental moves rather than large new investments.” Digital disruption is another trend Mr Reed and MYOB have had a front-row seat to. Not only has it forced MYOB’s customers to think outside the box but it has also displaced the company from its incumbent position in the market.

MYOB was the dominant player in accounting software with its desktop software a critical tool for business. However, the emergence of cloud-powered rival Xero saw a swift change in the status quo, with MYOB having to play catch up.

The journey from incumbent to challenger has been a chastening one and, according to Mr Reed, its road to recovery has taught him some critical lessons.

“As a CEO it’s important to understand the external view but not take action simply based on the opinion of those outside your business.

“We understood the market was moving online and we made our investment decisions based on when we thought that transition would happen.

“At the time we looked at it as a transformation in products, from desktop to online, but during the course of our journey we realised that this was more than that.”

MYOB didn’t just need to change its product but also completely rewire the way it operated, a task that Mr Reed said couldn’t be achieved by simply investing in digital technology.

“We needed different processes, skills and different economic models to take to our customers, we needed to become an authentic online business ourselves before we could make great online products.

“This is about changing culture, starting right at the core of the company and building out from there, this was challenging at times and required real fortitude on my part.”

Having survived three equity buyouts, the latest being the $2 billion buyout by Kohlberg Kravis Roberts, and a stint on the ASX 200, MYOB is back in the game with Mr Reed saying the business is in good hands with its new owner.

“We have transformed from a desktop player to a leading provider of online services.

“When I joined we had under a 100,000 paying subscribers and no online product. We now have over 800,000 clients using our online solutions and from a revenue perspective the business has grown 250 per cent.

“We are now worth well north of $2.5bn, so I am proud of what we have managed to accomplish and the way we have done it.”

Widely tipped as the next president of the Business Council of Australia, Mr Reed certainly has the runs on the board but is tight-lipped about any potential appointments.

“I am going to have a good break and then consider what’s next for me.”