Prelude to a Price War – Intuit’s $5/Month Campaign / Xero CEO Rod Drury & Intuit VP & MD Brad Paterson Comment

[The Xero, Quickbooks, MYOB, Reckon "Accounting War" of Australia is always entertaining and the best writer covering the battle Down Under is Sholto MacPherson.    Today he managed to get the big shots @ Xero & Intuit to add their 2 cents / Rod Drury CEO of Xero & Brad Paterson, Vice President and Managing Director of Intuit Asia Pacific comment; SEE BELOW]  Sholto MacPherson for BoxFreeIT writes: On Friday Intuit raised eyebrows at the Institute of Certified Bookkeepers’ Sydney conference by promoting its top-of-the-range cloud accounting program for just $5 per month.

QuickBooks Plus usually costs $35 per month which already undercuts its main rival Xero by at least $15. But the new marketing campaign signals a new stage of the cloud accounting war – Intuit is trying to hobble Xero before it can establish itself in Intuit’s home market, the US.

It’s important to note that there are qualifications with Intuit’s marketing campaign. The offer only lasts until the end of June (although businesses subscribing that date would enjoy the $5 per month price for the life of their subscription). The special price is available only to bookkeepers and accountants who signed up to Intuit’s ProAdvisor partner program, and they can add their own margin up to the retail price ($35 per month).

Although a licence for 10 staff was included in the promotion, the extra cost of payroll in QuickBooks Online Plus (supplied by third-party app KeyPay) will be paid for by Intuit only until 31 July 2015.

But despite these, the price drop will force accountants and bookkeepers to justify to themselves and their clients why QuickBooks Online would not be a better-value alternative. Particularly with the inclusion of inventory, quotes and unlimited users.

Industry observers have been unsure about some tactics employed by cloud accounting companies in hoovering up new customers. Offering commissions or discounts is standard practice to sweeten the deal for the recommending accountant or bookkeeper.

Intuit and Xero have offered free practice management software to accountants who sold their programs.

And then there are rumours of one accounting software company giving away licences to a large franchise to beat out rivals in a major deal. Or bulk pricing for big accounting firms moving clients en masse to one program. Growth is everything, more important than profit.

With customer acquisition or retention the primary goal of the largest players, it has become increasingly difficult to understand what is a fair price for cloud accounting software. Do innovations such as online invoices and online payments, automated bank feeds, employee portals and mobile interfaces justify a $50 per month pricetag?

Or should the core aspects of accounting cost $5 a month, as CCH’s Mike Chisholm has already claimed?

Intuit’s move was no doubt foreseen by its rivals as it is the only player who can drop its prices to unsustainable levels, at least in the Australian market.

Xero’s $180 million kitty is largely reserved to fund its assault on the US and it is already losing $13 million a quarter. MYOB must maintain revenue to meet debt covenants on a $540 million loan. Reckon still has plenty of software development to pay for before Reckon One reaches feature parity with other programs.

Thanks to US$4 billion in annual revenue, Intuit could maintain this price for a long time, long enough for Xero and others to be forced to respond if not match. There will be attempts to justify higher prices with greater innovation or supporting Australasian providers.

But the tech gap is narrowing and in the SMB market, price is often the first consideration.

1. Rich says:

   March 10, 2014 at 11:23 am

   Interesting Sholto but I think you should name the company who is involved in this !!

   You wrote – “And then there are rumours of one accounting software company giving away licences to a large franchise to beat out rivals in a major deal. Or bulk pricing for big accounting firms moving clients en masse to one program. Growth is everything, more important than profit.”

   Why not get a quote from the company concerned and print it so we all know what you are talking about.

   The biggest issue with this tactic is that it actually destroys their own market and I am sure their supporter would be pretty shocked – whoever it may be….

   Reply
2. twitter_roddrury says:

   March 10, 2014 at 1:49 pm

   I have to say these articles are getting tedious.

   It’s great there is competition in the online accounting space. It’s spurring fantastic innovation which is great for the industry.

   We don’t see pressure on pricing as all companies provide excellent value. Accounting software is very reasonably priced considering the time saved, the massive investment being made and lack of infrastructure required for small businesses. We have seen low price points in the market and none of them have gained significant traction as accounting software is more than features. It’s support, the ecosystem, the community and trust.

   We know we have a lot more to do, as do all the vendors. What might be more useful this time is a state of the nation. If others want to play the game then let’s hear where are all the vendors at? That would give the industry the ability to really judge how fast the change to the cloud is and where to invest. We’re at 100,000 online paying businesses using our software in AU. It’s all puffery until we see the numbers.

   Much more exciting are topics like …

   1) how the small business and accountant side software is connecting seamlessly. That is disruptive.
   2) how banks are now investing in connectivity to small business
   3) how mobility is making small business better

   All of the vendors area making huge investments. This is a super exciting time to be in our industry. Together we are changing the game.

   My 2 cents,

   Rod – Xero

   Reply
3. Brad Paterson says:

   March 10, 2014 at 8:14 pm

   These are exciting times and it’s our objective at Intuit to make sure that all Bookkeepers and Accountants partners realise just how exciting they are and the important role that they play.

   Currently, over 561,000 QuickBooks Online customers worldwide are being delighted by the unimaginable benefits being provided by our ecosystem of financial management solution. Just look at the seamless integration with KeyPay as an example.

   It’s our objective to expose these benefits to the rest of the world – those Accountants, Bookkeepers, Developers and Small Businesses that are either using substandard solutions or none at all.

   We are simply removing price as a barrier to access and now look forward to delighting even more new customers.

   Customers and innovation are at the heart of all we do.

   Brad Paterson, Intuit QuickBooks

   Reply

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The author Sholto Macpherson is a business technology journalist specialising in cloud software. He lives and works in Sydney, Australia. You can follow the author on Twitter Here.

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