Just over a month ago, accounting software company Xero, one of our biggest tech success stories, was NZX listed and led by its charismatic founder Rod Drury. Drury was as synonymous with Xero as Mark Zuckerberg is with Facebook.
How things have changed.
On February 2, Xero delisted from the NZX to trade solely on the ASX. And today, in an announcement which took the market by surprise, Drury said he will step down as CEO on April 1. Instead he will move to a non-executive director role, handing over day-to-day management to Sydney-based tech executive Steve Vamos, who's been tasked with transforming the software firm to a multi-national organisation.
Vamos has consulted for Xero for the last 18 months and is a former head of Microsoft Australia and Apple Computer Australia and New Zealand. He is currently a director of beleaguered construction firm Fletcher Building and Telstra.
The company says the handover leaves Drury able to focus on innovation and strategy as a non-executive director, with the board placing a high priority on the accounting software company's succession planning, it said in a statement. Drury told the Australian Financial Review he realised when Vamos started consulting for Xero that the company would need a new leader to achieve significant international growth.
"In the next five years we have to build a multinational business and I didn't have those skills."
Xero chair Graham Smith told a conference call the appointment offers a smooth succession for the Wellington-based company to transform from a founder-led company to a multi-national entity, with the scaling up of the business requiring a different set of skills. The board had been discussing succession over the past year, he said.
"Success of the next phase relies very much on leadership alignment and continuing to hire the very best talent for global execution," Smith said. "We did look at internal candidates - there are certainly several people internal to the company, but at this point, we felt we needed Steve's skills, particularly that he's gained over many years from large multi-national corporates, so that's where we ended up."
The board chose to keep its succession planning confidential to avoid creating "a huge amount of uncertainty both inside and outside the company", he said.
Drury helped set up Xero nearly 11 years ago, listing at an early stage of the business's life and gaining momentum as the company attracted customers. The Wellington-headquartered company shifted its listing from the NZX to the ASX last year to boost global fund managers' ability to hold Xero as it heads towards profitability. The company has more than 1.2 million subscribers, operates in more than 180 countries and employs more than 2,000 people in 17 offices. It has a market cap of A$4.55 billion.<
Sydney-based Vamos said he doesn't plan to make any changes immediately to the company's Wellington base and that he'll be spending a great deal of time in both Australia and New Zealand.
"I"ll take my time, but I'm open to moving and place myself to where I think I can best serve the business," he said.
Drury told the conference call he has been thinking about succession for the last few years.
Xero has a "very, very clear" innovation roadmap in place and now needs to prepare for the next five-to-10 years, with the aim to generate revenue of $100 million monthly rather than quarterly.
"We're moving from an Australasian company with good success in the UK and US to a business with pretty complex operations across a number of territories," Drury said. "It's clear we needed the next set of skills from someone who knows how to take this business from a great foundation and really get international connectivity."
Vamos officially starts on April 1 and won't join the board of directors.
Xero's shares fell 4.5 percent to A$31.39 on the ASX, before recovering a little. The stock has gained 15 percent so far this year.