Xero backs down on Aussie pricing

UPDATE Nov 18:  Xero has bowed to a customer backlash across the Tasman, and cancelled the Aussie leg of a series of price adjustments due to kick in next month.

In comments after a Rod Drury post announcing the price hike for some Aussie users, it was dubbed "over-the-top", "not cool" and a reason for accountants steer their clients to other software.

Nov 13: Xero has increased pricing on some of its monthly subscription plans, sparking criticism from some customers.

A competitor was quick to forward NBR ONLINE a link to Xero CEO Rod Drury's blog post this morning outlining the changes.

Of 75 comments after Mr Drury's post by mid-afternoon, many were negative. 

The changes were labeled "Over the top" and "not cool".

One comment, which appeared to have been left by an accountant, said: "Not looking forward to advising the majority of clients they will be charged $10.00 more a month and suspect I am now going to have to convert them back to the original system. Disappointing decision." 

Xero has three plans, Small ($29 for New Zealand customers), Medium ($49) and Large ($64).

The changes - which coincide with Xero's launch of a payroll module in the US, filling a key feature gap - will see plans re-named, and re-priced.

After the changes kick in next month, New Zealanders will pay $25 for a Starter subscription, $50 for Standard or $65 for Premium.

Price changes depend on geography.

Xero chief revenue officer Stuart McLean - who recently joined Xero from Google's Sydney office - tells NBR ONLINE that "Our biggest changes are in Australia, where we've looked at the market and aligned the pricing with the requirements of our customers."

Aussies on the Premium plan will have to pay $A11.45 more a month if they want payroll functionality for more than one employee.

"Like anything when you change opricing, you can never please everyone," Mr McLean says.

Ninety percent of customers will pay less than $1 more, he says, adding, "We haven’t touched pricing since we launched [in 2007]."

Asked about the price changes' impact on Xero's monthly subscription revenue - which early October the company said was running at a rate equating to annualised revenue of $70.2 million - Mr McLean said it was not his department. 

Xero has not filed to the NZX on the price changes - an indication they will not have a material effect on revenue. [UPDATE: Spokesman Richard Wood tells NBR, "Xero understands it’s obligations and will not be making a filing on the NZX"].

Mr McLean said no further changes were in the works.

In his blog post, Mr Drury emphasises  "Our core principles remain – unlimited users, free mobile app and bundled support."

However, the CEO has also been open about the fact that, long term, he sees Xero adding more features that will allow it to move beyond one-subscription per company, covering unlimited staff.

Shares [NZX:XRO] were up 1.85% to $38.85 in late trading.