Xero Kills Sage (Peachtree) in UK, QuickBooks

Mike Block for Quickbooks Xero Blog writes:  Xero is killing Sage in Sage's UK home.  Sage bought Peachtree years ago. It soon dropped a Peachtree multi-user add-on version, which many thought was the best hope for its future. It also raised the price of Sage add-on listings to $1,000 a year. That quickly cost it ALL add-on listings.

A Sage U.S. Securities and Exchange Commission filing for Peachtree said Sage would cover the Peachtree cost by upgrading users to more expensive software. Few users know that Peachtree (now Sage) only wants them in expensive products.

Here are new developments. Morgan Stanley issued an underweight rating on Sage after the Xerocon London conference, though Sage is the dominant UK accounting software player by a wide margin. Morgan said:

(Xero has) 200,000 customers and expects 80% revenue growth in 2014 (Sage's expects 4%). 60% of new Xero customers used incumbent accounting platforms (Sage, Intuit, etc.). This shows risks incumbents face as cloud understanding and adoption increase in small businesses.

1,256 UK accounting pratices adopted Xero (including 40 of the UK top 100). This compares to 82 practices that adopted Sage One. This drove UK customers above 22,000 (now 30,000) for Xero (up 100% a year), vs 12,000 for Sage One.

Credit Suisse also issued an underperform note, so Sage lost more than 3% in value. The 2013 Xero London conference was two days, vs a day in 2012. There were 500 attendees, vs 230 in 2012. Xero said the British market was "approaching a tipping point." as more accounting firms consider cloud-based software to cut costs. Customers and practitioners love Xero, but have many complaints about Sage 50, such as bank reconciliation.

Intuit surveys showed that QuickBooks add-on users were far more loyal and likely to upgrade, Despite this, Intuit changed its free QuickBooks add-ons interface to a paid proprietary one. It soon charged 20% of add-on revenue, with a minimum of $1,000 a MONTH. It also made developers keep rewriting add-on interfaces. A top developer recently wrote Demise of the Third Party QuickBooks Add-ons Developer. His reasons made QuickBooks lose 70% of add-ons links in 21 months.

Xero committed to a free industry-standard RESTful interface that keeps getting better. It now has 274 add-ons, up 100% this year. QuickBooks desktop already lost 17% of users.

Xero will have many more add-ons than QuickBooks in a year and more users than QuickBooks Online in two years.