As managing director of Mclowd, Ashley Porter has just launched a free SMSF administration platform. He tells Darin Tyson-Chan how this is just the first step in a bigger plan to change the method of delivery of professional SMSF services to the industry.
How did the inception of Mclowd come about?
It was the reflection of the frustration I experienced in seeking to help my mother manage her SMSF. During this exercise I saw the lack of empowerment she was experiencing. She’s a widow and she was managing an average-size SMSF and was concerned for the future of her children and grandchildren. She didn’t want to be dipping into her capital, but was consuming a large amount of superannuation income on professional service fees. That was the key driver because I knew from my own experience technology and online work practices were capable of delivering significant cost savings and there was no difference why SMSF administration couldn’t be the same.
Was it always your intention then to provide a free administration platform?
It was always going to be free. When you start a new business you’ve really got to think about longevity. As an entrepreneur there is little prospect of success if all you’re doing is replicating existing models because you will struggle to gain traction. Ultimately this venture is about the economics of cloud computing and it was always going to happen. For sustainability there was no point in charging $2 a month or $5 a month for the platform because somebody would just come along and make it free. Google is a good example of what I mean. Google chose to give away its core product because multi-sided business models are more powerful in terms of market entry and again it comes back to the economics of cloud computing. We didn’t invent the concept of free accounting software; it already exists, but not enough people know about it.
Is this the next stage in the use of cloud computing in SMSF administration?
Yes, in the sense that the cloud is very empowering, so moving the intellectual property into the cloud makes it much easier for us to set up our advisory board and give them courage to look after the governance of the platform because you don’t need an army of engineers or hardware engineers. In that way it has dramatically changed the workflow associated with software development. It has basically democratised the software industry and the trustee community is going to become very empowered and they will decide the level of governance they’re comfortable with. It means it will become increasingly difficult for vendors to argue people have to rent intellectual property from them because there are numerous market entrants in the cloud space delivering free offerings.
You’re also going to be relying on the SMSF community to help develop the platform like Wikipedia. How will this benefit your offering?
By encouraging the SMSF community to effectively take over the software it should encourage a greater level of adoption. It also actually reduces the capital Mclowd needs to deploy because instead of having a group of people managing the ongoing evolution of the platform, you’ve actually given that role to the users and you’re not paying anything for it. But at the end of the day it’s about driving adoption and using it as an avenue to other services we’re looking to provide.
On the back of the administration platform you’re also looking to service the SMSF sector by using crowd sourcing. How will that work?
What we would like to see is for SMSF trustees to learn a different way of managing professional services rental. So traditionally managing that relationship involved an organisational intermediary, for example, you went to an accountant who worked for an accounting firm, and they were geographically proximate and sought because their organisation demonstrated a breadth of knowledge on the subject. I’m looking to establish an SMSF marketplace using crowd sourcing and what I would like to see this achieve is for that organisation model or that organisational context to be no longer required. I know that will be particularly galling to incumbents in the professional services space, but you’ve only got to look at the growth in something like Elance.com to know that’s already happening and will continue to happen. I’m just facilitating it in the SMSF space. Mclowd is a consequence, not a cause and it exists because of fundamental changes in the way technology is delivered and the way organisations are configured, and those changes were always going to happen.
How long do you think it will take for the marketplace to gain traction?
I think the adoption of the platform will be much quicker than the adoption of the marketplace. They’re fundamentally different launch strategies where the platform is going to an existing market and customers understand the product and people are already signing up to use the service, so we have validation people will adopt the platform without too much assistance. Adopting the marketplace will be a very different story. That will require an extended period of education I expect will take years. So I would expect the marketplace to evolve steadily over the next three to five years. We have very little expectation about generating significant revenue from the marketplace in the next six months.
Will you be providing any educational facility about the marketplace?
When I have a problem the first place I look for a solution is the crowd. So there has been a notification that has gone out from the advisory board to the user community to set up chapters. Mclowd is not going to hire an army of people and spend lots of money for an education program. What we are going to do is reach out to the SMSF community and describe the problem and describe the solution to solve the problem. Google never had a marketing budget for their search engine and yet they became the world’s biggest search engine and it’s my intention to do the same thing with Mclowd. We’ve already got people contacting us to say I want to be part of that process.
Cost structure and transparency of SMSF services are the areas you want to change with the crowd aren’t they?
One of the important things to emphasise about the marketplace is that it is just like eBay, so we don’t determine price and we don’t determine selection. What we will facilitate is transparency and that’s to quality as well as price. So I could make predictions about price deflation based on what I’ve seen in other services marketplaces, but ultimately price will be determined by supply and demand. We now live in a global labour market and our marketplace is there to facilitate this environment. At the end of the day we don’t determine price, but you would expect price deflation with SMSF services.
How difficult will it be to monitor quality in the marketplace?
The beauty about crowd sourcing is that it is completely transparent. So there are no resumes, there are no professional indemnity insurance measures because the risk profile of crowd sourcing is actually now vastly superior to full-time employment. There is such transparency to quality that any individual who seeks to offer services and falls short of global standards will be crushed by the crowd on their level of quality because their customers will quickly see they have delivered sub-par performance. Again it will be just like how eBay works. On eBay people are concerned about their feedback score and this will be exactly the same and a far bigger deal with crowd sourcing because on eBay if you get a bad feedback score, the next time you sell something you might get a lower price for the item. And with crowd sourcing you’re talking about the careers of professionals and people’s livelihoods, so the emphasis on quality will be even greater. Some of the people we’re already dealing with in the crowd have been chosen because of their reputation and this relates to multiple criteria. Transparency drives quality and that’s a concept to keep in mind.
How long did it take to build the operation?
We started building in February last year and we just used lean start-up principles. So there was no grand vision; there was just a series of steps we took based on validation. It was literally just a month-to-month process as we raised capital and deployed it to what was needed to get Mclowd up and running. It was a 12-month back-ended process with 70 per cent of the work done in the last 90 days because at that point we received sufficient validation to deploy the capital we received.
What’s your greatest challenge over the next 12 months?
The goal I have set for Mclowd in terms of the platform is to exceed AMP’s assets under management. That means 10,000 users with $10 billion in assets under management and to do it for no more than $500,000 in capital. At the moment we’ve spent $200,000, so achieving this target will be our biggest challenge over the next year. At a more detailed level, one of the challenges will be the transaction cost of data feeds.
