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On SaaS Pricing, Functionality and Risk Aversion

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Lots of SaaS accounting news at the moment – from Saasu, Xero and MYOB. Firstly Australian SaaS accounting vendor Saasu (more on them here) recently announced a change to its pricing. Already one of the most economically priced offerings in the marketplace (and I use those words purposely to differentiate form services that monetize in some other way), Saasu has upped the ante and is yet again dropping the pricing on it’s solutions. Xero’s not standing still either and announced its basic payroll service. Meantime MYOB has announced a delay to it’s long-awaited cloud accounting app. Lots of stuff to talk about in those three seemingly disconnected announcements so let’s dive right in.

In it’s announcement, Saasu has chosen the favorite word of my friends at Rackspace and are now articulating their desire to provide “fanatical” value to their customer. So what does this mean? Saasu recently introduced automatic bank feeds, a feature that many see as the first true “added value” offering that a cloud application can bring. I’ve been using automated bank feeds for a few years now and can confirm that they are indeed a game changer. Interestingly given the power of the feature, Saasu has chosen to provide bank feeds to customers as a free upgrade on all paid plans. So an “professional level” plan on Saasu, with full inventory,payroll, bank feeds and all the functionality that a small or medium business needs now costs $25 per month.

The release announcing this move is clearly aimed at local competitor Xero. In his blog post, Saasu founder Marc Lehman stated that;

We are often perplexed by online systems that charge more than much older software products.

That competitor that Marc is alluding to hasn’t stood still however. Arguably in answer to the competitive landscape that exists, Xero rolled out it’s own new feature, giving customers a basic payroll system for the same monthly fee they had previously been paying. This post isn’t the place to discuss the issues that Xero’s move causes – some would argue that the Xero payroll is some uncomfortable compromise between introducing true payroll and in the process annoying the ecosystem on the one hand, and keeping the status quo with no payroll functionality on the other. We need to look at the move however at a distance, and reflect on what it indicates about this new generation of software vendors.

To that point we have MYOB who have long talked of the cloud-enabled version of their accounting product being the development that will see them able to compete in the new world – where software is connected, is developed nimbly, and is charged via a subscription model. Interestingly enough, MYOB Corporate affairs GM Julian Smith said that;

The launch has been delayed because of feedback received from beta testers… This has forced an extension in development times and the company hasn’t finalised the release schedule. The code base for the AccountRight family is more than 10,000 A4 pages, so it’s highly complex

It’s an interesting comment and one which highlights the cultural differences between the new vendors on one hand, and the traditional vendors trying to change their model on the other. One could criticize the announcements of both Xero and Saasu – Payroll lite may be a bad move for Xero, not providing enough real functionality while at the same time dismaying their ecosystem partners. Meanwhile a pricing drop may be an unnecessary move from Saasu – if they can differentiate on the product itself, why bother trying to differentiate on price (especially when they’re already cheap compared to their competitors. Regardless of the criticisms of these two vendors however, the fact is that they’re happy to travel uncharted waters – we’re seeing a level of innovation in terms of business models and functional spec that is very much a case of experimentation – some things stick while other quickly get moved aside.

Meanwhile MYOB seems to be bringing a traditional development approach towards their product. They’ve had extensive beta testing which, one assumes, identified a huge number of product suggestions. Rather than simply get the product to market and iterate in the marketplace – MYOB appears to be looking for some perfect result and is reluctant to release prior to this result is achieved. Of course MYOB has much more to risk – it has a massive customer base that simply will not put up with MYOB “experimenting” on them – the tragedy of incumbency I guess.

This is far from a zero-sum game – all three of these vendors will likely do well in the future, it is however interesting to contrast and compare the relative approaches they all take.

Disclosue – both Xero and MYOB have been clients of Diversity Limited

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Published at DZone with permission of Ben Kepes, DZone MVB. See the original article here.

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