Accounting and Finance

NZ's Xero Growth Rate Brings Chances and Challenges

Cloud accounting software company Xero, based in Wellington, New Zealand, is growing fast. Sales are on target to meet CEO Rod Drury's predicted 80% increase for the financial year ending March 2014, while the share price has quadrupled over the same period, from $10 in March 2013 to $40 in March 2014.

New Zealand is quite isolated geographically and, although it has its fair share of growing businesses, the majority of those are based in Auckland, which is much larger than Wellington and has more direct international transport links. So Xero is unusual in basing its operations, which now account for three office buildings, in the smaller capital city. One might also think that the country's population of just four million people could be a hindrance in hiring staff with the right technical skills and experience.

But Duncan Ritchie, Xero's CPO (chief platform officer, a role encompassing everything from IT product planning and design to development and implementation) thinks not. He explains that this is less of an issue for a cloud-based business than might be the case for organisations with physical, tangible products to sell. The internet makes it easier for companies in small countries to have an international presence.

"We have IT operations in Wellington, Auckland and Denver [in the US] to give us great hours of coverage, business continuity and a broader talent pool," he says.

Even so, NZ can't compete with the sheer amount of bandwidth available in larger countries. But the solution to that is simple: "We run our customer-facing systems in the US, so from that perspective there is no issue," says Ritchie. In this respect Xero is a truly distributed business.

Pursuing an aggressive growth strategy in territories such as Australia and the US, Xero has different IT challenges compared to traditional, non-cloud accounting software vendors. Whereas the latter don't usually need to worry about their customers' data because it's stored on their customers' computers, Xero has to handle financial transactions recorded by more than a quarter of a million users worldwide.

This user data needs to be fast to access, served on a collaborative basis so customers can share information with their staff and accountants, and available on various platforms including PC, Mac, iOS and Android. In charge of keeping all this data safe, secure and readily accessible is Ritchie.

Tasked with managing Xero's own internal IT systems as well as the client-facing server setup, Ritchie has a lot on his plate.

"Our production data storage requirements are growing at about 7.5% per month,” he says. “It's quite different to a conventional enterprise IT environment."

Xero runs completely separate system structures for customer-facing and internal IT, with the latter mostly held on hosting provider shared storage or on space supplied as part of specific third-party business applications. It's the customer data side of things that takes up much of Ritchie's time.

"It's a substantial task,” he says. “We need forward planning for capacity: for raw space and also for scaling the performance of the storage platform."

The type of storage technology in use depends on the application. Xero uses NetApp systems for pre-production, partly for ease of cloning. "We can duplicate data sets without having to worry about manually allocating disk space, so management is easier."

Xero's production server workload is handled by EMC Vmax SANs (Storage Area Networks), with production DR (disaster recovery) sites using a similar setup. These SANs use a combination of SSD drives and conventional hard disk. The former, which account for about 8% of the storage capacity, are designed to look after the high performance data requirements, while the spinning disks handle the volume capacity requirements.

This arrangement represents an increasingly common use of SSDs in the SAN market, since it offers the best of both worlds: customers get performance and capacity at an accessible price. According to a Gartner report entitled Solid-State Drives Will Complement, Not Replace, Hard-Disk Drives in Data Centers, in 2012 the hard drive industry delivered 66,358PB (petabytes) in 63.4 million business-critical and mission-critical drives, whereas the NAND industry delivered only 1,781 PBs in 5.7 million enterprise-grade server and storage SSDs.

Auto-tiering is built into these SAN offerings, which means some of the management overhead (that is, deciding which data requires SSD performance and which can be served via conventional hard drives) is reduced. But not all of it.

"We have to take a multi-discipline approach: we still have to manage capacity versus performance even with auto-tiering, and we need to do this carefully in terms of the available performance/capacity of the SAN. We chose EMC VMax because of the ability to grow the system in terms of the number of engines/headers over time. That means we can scale up the performance horizontally as required. We're not limited in terms of performance per header."

Xero also uses a small amount of shared storage from Rackspace: traditional SAN storage paid for on a per-gigabyte basis. "We also use some cloud storage from Amazon S3 and Microsoft Windows Azure, for specific elements of functionality."

Ritchie has to consider longer term architecture plans as well as existing storage requirements. "We're evaluating the SQL server load and whether to continue with a SAN or move to JBOD or other direct-attached storage model, where storage capacity is adjacent to or even inside the server doing the work. Traditionally that was quite difficult, and we had to have all the workload on the SAN to handle load-sharing and balancing. But now it can be done at the SQL level. So it's possible we may move to a configuration with local attached storage, though that decision hasn't yet been made."

If the current monthly data growth trend continues, Xero's storage requirements will more than double on an annual basis. Duncan Ritchie should have plenty to keep him busy for the foreseeable future.


Freelance technology journalist Alex Cruickshank grew up in England and emigrated to New Zealand several years ago, where he runs his own writing business


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Alex Cruickshank

Alex Cruickshank has been writing about technology and business since 1994. He has lived in various far-flung places around the world and is now based in Berlin.  

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