Xero – Review

Introduction & Background

Xero is a New Zealand based company that publicly listed last year on the NZ stock exchange. It was founded by serial entrepreneur Rod Drury and in a short space of time has built an impressive team of developers, marketers and product specialists. Currently Xero is available in the UK, Australia and New Zealand, with a US version slated for a 2009 release.

Pricing

Like other SaaS providers, Xero offers a 30 day free trial. Thereafter their is a tiered pricing structure as detailed in the table below;

The user experience

Xero is gorgeous – it’s hard not to gush about their UI – to the point of them being awarded one of the Top Ten UI awards for 2008. Undoubtedly many hours were spent designing the look and feel of Xero – it is consistent, intuitive and elegant. Below is an example of a UK specific Xero dashboard;

The basic functionality

Xero is a complete double-entry application, it’s been built from ground up with the advice of accountants (in fact one of the founders is a chartered accountant) and has all the "under the hood" featured that a business’ advisor will want.

Like most SaaS business applications, Xero has a dashboard view (see screenshot above). Xero users have somewhat limited customisation options with the dashboard, they can add specific accounts to a dashboard "Watchlist" but other than that it is fairly fixed – that’s not necessarily a bad thing as the Xero dashboard covers the major areas of need. There will be the odd inveterate tinkerer however who would like to slice and dice the dashboard a little bit.

Not surprisingly for a business whose go to market strategy included partnering with business advisers, with Xero one can invite advisers into ones instance of Xero, thus enabling real-time, two way and transparent collaboration between the business and their advisers. Of course the ability to do this doesn’t necessarily translate into the actuality – to this end Xero have been pushing hard to build relationships with accounting firms sufficiently liberal to dive into a new way of doing things.

Xero is only available within it’s existing jurisdictions. Rather than providing a cut-down international version, they have chosen to enter markets only when the software is customised specifically for that market. This strategy will potentially slow growth, but is bound to make users happy, providing as it does a robust solution.

Xero is primarily focused on providing a solution for smaller design, technology and professional businesses. In keeping with this focus it does not provide for inventory functions so potentially isn’t a fit for a manufacturing or retail operation.

The value adds

Automatic bank feeds – One of the killer features for Xero is automated bank feeds. Available from most New Zealand trading banks and a couple of the Australian banks, every night all account transactions are automatically uploaded to Xero where they await the users classification. As would be expected Xero "learns" about the business and suggests transactions based on previous history.

I’ve been using Xero for six months or so and this feature alone is worth making the switch from older legacy systems – it really brings an element of "game playing" into the formerly austere role of accounting. Of course an even more killer application of this killer feature would be the ability to make payments in Xero and have them automatically transacted from ones bank account – without this function its still something of a one way conversation.

The Mobile Web – The team at Xero have long evangelised the iPhone as a game-changer. Gven that it’s not surprising that Xero works beautifully on a mobile device – it’s not just Xero lite – rather it’s a well thought out specifc function set for the mobile device. Check out a demo of Xero for iPhone below;

Xero iPhone walkthrough from Xero on Vimeo.

The security issue

Xero take security seriously – they’re constantly audited by Aura which runs routine penetrative attempts on Xero’s platform. Xero also have a multi faceted security approach that conforms to industry best-practice – one would expect this of a company dealing with that most sensitive of data – money.

All forms within Xero can be downloaded to the desktop – they do not however have a user controlled function to extract all data, rather they undertake to provide the raw information should the user ask. I’d personally feel more comfortable having the ability myself, and potentially being able to automate a routine dump to another location – just to be safe. That said Xero is a publicly listed company and that in itself gives a significant boost to the credibility and robust nature of their businesses.

APIs – connecting the dots

APIs and the ability to integrate with other on-demand applications are one of the keys drivers behind the success of SaaS. This success however is predicated on the ease of use of the API itself. Xero have added a handful of API partners – from project management, to payroll, to specific vertical offerings. The best answer I can give to questions over the ease of use of their API is to quote one of their API partners who, after completing the integration, said;

What took me three months for an older, legacy accounting system, took all of three hours with Xero – their API is simple, well built and easy

Glowing praise indeed. At the end of the day the best test for the API of a SaaS provider is to see how the ecosystem builds around it – we’ll be watching out for further developments on this in the months ahead.

Summary

Xero is truly a best-of-breed application. However to succeed in this space takes a good product, a good business model and a fair degree of luck. Xero was lucky IPOing when they did and the listing has given them fuel for the next year or two. Thereafter it’s a case of having to scale fairly quickly – the SMB market is huge however and Xero is well placed to make inroads into it. Watch out in 2009 for a US launch to follow it’s current NZ, AUS and UK presence. The product itself is great – if the functional offering it provides thus far meets your requirements, and if you’re in one of the geographies where Xero is supported, you could do a lot worse than going with Xero.

Accounting 2.0 at CloudAve

In an ongoing series of reviews and analysis pieces, CloudAve will be taking a deep look into accounting software for the new world.

See the other posts below;

Accounting 2.0 – Thought Leaders and Product Reviews

FreshBooks – Helping SMBs Ride Out the Storm

Less Accounting – Review

FreshBooks – Review
Free Agent – Review