UK pricing for Xero is being reduced from £28 to @19 per month. The announcement is on the sponsored feeds area, I’ve received emails about it wondering whether it is tough times and CloudAve is using the occasion to have a dig at Xero.
Ben Kepes CloudAve posting is egregious in its misrepresentation of what Xero is and drawing comparisons with Kashflow and FreeAgent. He says:
The UK seems to have a real abundance of SME accounting providers – KashFlow, FreeAgent Central and Xero are all competing in a similar space. KashFlow and FreeAgent (CloudAve reviews here and here) are both below the new Xero monthly price (although the gap is more palatable than before Xero’s move).
All of that is true, with more providers entering the market. But it masks the fact that each product has different capabilities and appeal in the market. Neither does it take into account the fact that Xero is correct to refer to price alignment. Check the ZN$ and GBP exchange rate.
Tangentially – does Ben have a point about the general cost of saas solutions? So far we’ve seen emerging solutions that tend to do one thing very well but they are not the fully baked article. A few days ago, FreshBooks announced it has integrated with Oprius CRM. As an incentive, Oprius is offering a one time $20 incentive. The service costs $14.99/month. FreshBooks costs from $14/month but as realistic price in any small business is going to be $27/month. Put the two together and you’re facing $42/month or about £30. That’s not too bad, even with a lousy exchange rate. Whether you get value is another matter but I would argue that even at these prices, saas is a high value proposition. Why?
It comes back to my oft repeated refrain that saas allows collaboration in ways that are simply not possible with incumbent systems. They help collapse time and therefore help dissolve the problems that latency encourages. Back to Xero.
Xero is on an aggressive growth plan. It knows the UK represents a solid market for its wares and a genuine alternative. That costs money, takes effort and time. The company is being brave given that its cash burn rate recorded in its last reported accounts looked frighteningly high. But then I know from many conversations elsewhere that bringing a general saas solution to larger markets is hideously expensive. Heck, even the mighty Salesforce.com is only barely profitable.But a bare reading of the acccounts doesn’t tell the whole story by a long stretch. Check what happened with Twinfield from 2006 and 2007 to see what IS possible with the right business model.
With those thoughts in mind, I spoke with Hamish Edwards who is leading the Xero charge in the UK: “We announced a global product in December and it didn’t make sense to have pricing in different territories that was out of line. That is especially the case with the plans we have im place for further expansion.” Asked how the market is performing for Xero, Hamish added: “We’re certainly doing as well as we epxected and then some. I can’t get into the specifics but I’m more than happy with progress.” I’m not surprised. Counter cyclical economic conditions favour saas models because they remove the requirement for a capital outlay while providing a predictable outgoing.
I have long held the view that saas accounting applications have almost no intrinsic value except for the collaborative opportunities. The real value is in the data. I envisage a number of business models built around saas data but so far, I’ve not seen any vendor really try and leverage it. It’s probably too early. Therefore, in the models I look at, saas could almost go free – say £5 per month. We’re some way from that and as Hamish said: “We’re not seeing any price pressure yet.”