- Most popular plan for businesses with staff increased by $11
- Price changes to come into effect 9 December
- Silver and higher Xero partners not affected until July 2014
CORRECTION: The minimum number of clients for Xero Silver partner is 25, not 50 as previously stated.
In a pricing revision announced yesterday, Xero reduced the number of employees on its most popular plan from a limit of 20 to a single employee. A stream of angry comments by disgruntled users and Xero partners erupted on the company’s blog which revealed the changes. (For details, read a side-by-side comparison of old and new prices.)
“Cost was a big issue for (our clients) but they wore it on our recommendation. As the Xero champion, I feel betrayed,” wrote a commenter, Matthew. “Guys, you’ve got a good product but your decision on this one makes you look like every software vendor that Xero users have been trying to get away from.”
“Sorry Rod, but 90 percent of my clients are now going to be paying $11/month more. They are currently on medium plans and have < 10 employees. They have no need for multi currency or auto super. To now limit this plan to one employee is absurd!!” wrote Cassandra Scott, a prominent Xero bookkeeping partner.
Xero CEO Rod Drury responded in the comments on the company blog that the change in pricing would only raise prices for 10 percent of its customers and that the company hadn’t raised prices for seven years despite adding many innovative features.
Users’ outrage focused on the short notice Xero gave – the price change will come into effect within four weeks on 9 December – and a new restriction for the most popular plan which pushed businesses with more than one employee onto premium plans costing $60 to $90 per month.
Xero’s medium plan under the existing scheme cost $49 a month in Australia and covered many businesses because it gave users the ability to generate hundreds of invoices and transactions and could be used with up to 20 employees.
The plan, renamed as “Standard” under the new scheme, cost $50, and could only service a single employee.
Several users said they thought the price rise was justified but were disappointed at the way it had been announced.
“We will pass this cost onto our clients and most (if not all) won’t mind but many will want certainty this won’t happen again. We are gold partners but we cannot give any certainty to our clients about the cost of xero now. The trust is gone. Not good,” wrote a commenter, Mark.
Xero management pointed to the number of updates to the accounting program which could improve the productivity of a business in managing their finances. In particular, the auto-superannuation included on the premium plans generated enormous time savings and reduced errors, said Xero supporters. The extra $132 a year was easily justified, they said.
Prices were based around the number of employees on payroll and the auto super function, Chris Ridd wrote in a response to comments. Auto super would become compulsory in taxation reforms in Australia next year which was why Xero had decided to include it in its premium plans. “Other vendors in the market charge anywhere from $1 per employee per month (for auto super). When you factor this into the pricing based on comparative offerings, these pricing plans should be easier to justify,” Ridd said.
A minority of respondents welcomed the price rise and condemned the “overreaction” of other posters.
“I would think for most entities the increase will be from $49 to $60 per month. So that’s $132 per year. That represents maybe two or three hours of bookkeeping time in Australia? Or a tank and a half of fuel? A lot of you are forgetting the value (of the software),” wrote Peter Morgan.
Xero offered to fix current prices for Silver, Gold and Platinum partners until July 2014 when accountants reissue work agreements with their clients. But Bronze partners who hadn’t met the 25-client minimum for Silver status had to pass on the cost to clients from December or pay the price rise themselves. (Gold status is 100 clients.)
“The offer to silver and above does nothing to assist or incentivise the many many partners who are in the early part of their Xero journey,” wrote a commenter, Sam. “I, like many others at the encouragement of Xero, have based my model around benefit of fixed fee service to convince many clients to change to Xero from their existing software.
“This forces all the pain on the very advocates working hard to promote and grow your product, seemingly at our cost and reputation. Very uncool way to treat the very people who are doing most of the ‘heavy lifting’. Not happy Jan.”
Xero had spent months planning the price changes and had to draw the line in offering price protection, Ridd replied.
“I believe we have made efforts to acknowledge the hard work and advocacy that is present within our partner channel. I’d also add that very few vendors give advanced warning when making pricing increases,” Ridd said. “Nor is it an industry norm to offer price protection for a period of time.”