Drury made the comments as Xero launches its push into Australia - a potential market of well over 2 million small businesses.

Drury says Xero officially launched its software as a service into Australia on September 30 and will now be building an Australian channel. Key to that will be support from banks and Drury says he is finalising deals with two major business institutions that he hopes to name before Christmas.

Xero has taken something of an unconventional route across the Tasman, launching in New Zealand and then into the UK, although that was assisted considerably by its win in the International Technium Challenge in 2007.

However, Drury says the Australian push was always going to be a big ask, because of the country's complex tax system. "There is a huge amount of compliance for us to work through, especially with BAS, the business activity statement, demanded from businesses by the Australian taxation office. Compared to New Zealand and the UK, the Australian tax system is complicated. But that's great for us, because Xero makes these processes easy for businesses."

Asked if he was concerned about MYOB's move last June into the SaaS space, he was upbeat: "It will be good. It confirms the legitimacy of our own business model."

Pressed further, he said the MYOB SaaS offering had been panned by critics, and he thought the project was now on hold. "It's very difficult to move into a totally different business model. I think theyare still 12 months away."

He also dismissed MYOB claims that its half-year drop in New Zealand revenues was due to difficult business conditions: "In fact, that's often when small businesses look to simplify processes and you'd think accounting packages would do well." He said the Xero offering was obviously impacting on MYOB's business.

The next priority for Xero over the next quarter in Australia will be to establish channel partners and market the product. "So far though, we've had a fantastic response," he said.