Can Microsoft & the Commonwealth Bank of Australia challenge Xero Limited?

The tech start up that is backed by US tech giant Microsoft and wants to challenge Xero Limited (ASX: XRO)

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Wiise, a new cloud-based accounting tech start up that is backed by the Commonwealth Bank of Australia (ASX: CBA), US tech giant Microsoft Corporation (NASDAQ: MSFT) and the big four accounting firm KPMG will be launched in July this year, according to an article in the Australian Financial Review today.

Wiise’s platform will integrate banking features as well as Microsoft’s artificial intelligence, cyber security and data storage capabilities. A Wiise board member was quoted in the article saying that the platform would be “more appealing” than Xero Limited (ASX: XRO) and Myob Group Ltd (ASX: MYO) for companies that operate in more than one location, have complex supply chains and high transaction volumes.

Should Xero and Myob investors be worried about this new competitor?

I think for now there isn’t much cause for concern for two reasons:

Head start: Xero and Myob have a first mover advantage and already have the dominant market share. Given the “sticky” nature of accounting software, it would take a really compelling product at a very competitive price for a new entrant to take significant market share.

Specialisation: Even though CBA, Microsoft and KPMG are big players in their industries, this is not their core business and its unclear at this point how much time and resources they will dedicate to this project. Xero and Myob on the other hand are specialists in this area and have more experience.

Reminder to innovate

I do think, however, that this will serve as a timely reminder for Xero and Myob to continue innovating so as to stay ahead of the curve. In the world of technology, disruption is welcome, and innovation is the driver behind competitive advantages.

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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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