Tech Tidbits for SMBs: What’s Behind Xero’s Online Accounting Discount for Non-Profits

Earlier this week, I had the opportunity to speak with Jamie Sutherland, U.S. President of Operations for Xero, which provides an online accounting solution for small businesses. Jamie discussed what makes non-profits tick, Xero’s latest announcement, which is a 25% discount for non-profits, and other Xero news.

Laurie: Jamie, can you start by giving us a little bit of background about what Xero is and what it does?

Jamie: Definitely! Xero is beautiful online accounting software designed specifically for small businesses. At the very outset, when we built the application, we went around to a number of small businesses around the world, and uncovered their workflows and the way they do business. We set out to solve key processes for them in an easy to use fashion. What was born was Xero as an application. Ever since we’ve been expanding rapidly with customers in over 100 countries now, and doubling our customer base and revenue every year. So it’s quite exciting.

Laurie: How do you define small businesses?

Jamie: Our definition is between 0 and 100 employee businesses, with a specific effort around the lower end of that spectrum. Now businesses take many shapes and sizes, and one distinction is around services-based businesses versus those that carry inventory or are involved with manufacturing or wholesale. So we’re more focused on the services-based businesses.

Laurie: So Xero announced this week that it is offering 25% off to all nonprofits?

Jamie: Yes. We know that non-profits are essentially small businesses, and are experiencing the same types of challenges other small businesses have. With the slow rebound of the economy, non-profits also have challenges around fund-raising and managing their finances. We did a panel and discussed this with a number of non-profits. We learned that managing their funds is one of their biggest challenges. So we want to make it easier for them to manage their finances.

But what we also know is that not every non-profit has an accountant or bookkeeper on staff—they typically use a volunteer to staff this position. The volunteer may not be as adept as an accredited accountant or bookkeeper. So we want to make it very, very easy for non-profits to do finances. Again, Xero is built in a very user-friendly fashion, which is helpful for the non-profit sector.

Laurie: So how does the 25% discount for non-profits work?

Jamie: Xero has 3 pricing plans. We have a $19/month, a $29/month, and a $39/month plan. All three plans include unlimited users. So no matter how many people are working in the business or non-profit, this one monthly fee covers everything, there are no additional charges. That’s unlike many of our competitors. That 25% discount is right off the monthly plan price.

Laurie: What are the differences between the three plans?

Jamie: The $19/month plan is our entry-level plan, which allows you to send up to 5 invoices a month and a certain number of bank reconciliations. For $29/month, you get the full feature set of Xero minus the multi-currency capability. The $39/month plan includes multi-currency. The majority of our customers are on the $29/month plan.

Laurie: When we do our SMB surveys, we always include non-profits, because we also see a lot of similarities with small businesses. So I’m just wondering, in what ways did you find that non-profit needs differ from those of commercial small businesses?

Jamie: We did research across the U.S., Australia and New Zealand. We found that non-profits’ needs don’t differ that much from small businesses. They focus on cash flow to make sure that cash coming in can cover expenses. Like small businesses, they have issues with employee turnover, complying with rules and regulations, etc.

But non-profits are unique in that they typically have a volunteer workforce. Whether small or large, this is very different from the typical small business.  The other big difference is that people running non-profits tend to understand finances less than the average small business owner. So something like Xero accounting, which makes it really easy to understand your finances, can help out.

Laurie: Are there some tips or best practices that came out of the panel that you can share?

Jamie: Budgeting is a big thing. There’s a budgeting tool in Xero to budget and forecast. It’s important to any business. You can import and export from Excel, and track what’s going on. So if you have a lot of volunteer turnover for accounting or bookkeeper roles, you can still have consistency around your financial and monthly reporting. With an online solution like Xero, you have real-time access to info anytime, anywhere in the world. This is helpful to anyone doing accounting or bookkeeping.

Laurie: Before we wrap up, I’d be remiss if I didn’t ask if there is anything else on tap for Xero that you can fill me in on?

Jamie: Yes. It’s been a busy 6 weeks or so. We recently announced 100,000 paying customers across the globe. It took us 5 years to get to 50,000 and then we added the next 50,000 in 10 months. So we’re starting to see much more rapid growth and adoption.

We also announced  payroll integration with ADP, the world’s leading provider of HR and outsourced solutions. The payroll integration we developed with them lets you do your payroll online with ADP and seamlessly sync with Xero. This alleviates the need for duplicate entry between the two applications, which is also exciting.

We’ve also put together a partner advisory council in the U.S., the Xero Partner Advisory Council. The council will look at the things we’re doing in the market, the products and our strategy and help us really try to cater to the needs of small businesses and make everybody better off.

Sage Turns a New Leaf: Top Takeaways from Sage Summit 2012

At this year’s Sage North America 2012 event, Sage North America CEO Pascal Houillon unveiled Sage’s strategy to reckon with changing market realities, rationalize its product strategy and set clear directions for itself, its partners, and its position in the market.

Houillon set forth Sage’s strategy to move from a heavily decentralized product management and marketing approach to one that is more centralized and focused—and to put the company on a stronger growth trajectory. By streamlining its offerings, Sage intends to provide customers and partners with a more integrated experience and more flexibility to take advantage of new cloud-based connected services .

Rebounding from Rebranding

At Sage’s Summit 2011 event, then newly appointed CEO Houillon announced that Sage NA would embark on a phased approach to drop individual product brand names  (such as MAS, Peachtree, etc.) in favor of the Sage brand. The reasoning was that a stronger, more unified brand would drive cross-selling opportunities in the Sage installed base, and elevate consideration among small and medium businesses (SMBs) not yet using Sage products.

Last year’s rebranding announcement initially sent shock waves across the partner and influencer community. While the initiative was designed to strengthen the Sage North America corporate brand, many expressed concerns that it would erode the brand equity that individual brands had built up over the years.

My minority view at the time was that this decision would produce some short-term pain, but was necessary for Sage’s long-term gain. By this year’s Summit, it seemed that many more people agree with this perspective. While the name changes are still confusing for many customers, most of those I spoke with were neutral to enthusiastic about the rebranding, and a few told me that it was time for Sage’s brand identity to catch up with the vendor’s actual size. And although some partners were still grumbling about the costs of revising marketing materials and educating prospects and customers about the name change, most seem to have accepted the rebranding and moved on.

Realigning for Growth

Sage executives focused their keynotes on plans to reinvent and reinvigorate the company. Sage has been stuck in a rut for a long time, with revenue growth in the low single digits. And although millions SMB customers use Sage products, about 2/3 of them aren’t currently buying anything from Sage—whether upgrades, add-ons or support.

Dispersing development, marketing and service investments over its gangly portfolio of 60-plus North America offerings had become untenable. The company needed to reset, refocus and re-energize for growth–something it hasn’t seen much of in recent years. The company has set its sights on three high-level goals: growing the addressable market, increasing market share and growing share of wallet among existing customers.

Sage is relying heavily on customer input to help achieve these goals, conducting personal interviews with more than 300 SMB CEOs to better understand their requirements. In these discussions, Sage heard a recurring theme. SMBs want to put the power of technology innovation—whether mobile, cloud, social or analytics to work for their businesses. But they want this innovation delivered to them when, where and how they want it, without minimal business disruption.

Bringing the Core Portfolio into Focus

Houillon indicated that although 22% of Sage’s employees are in R&D roles, this investment has been spread thin across too many products and projects. So Sage is focusing to differentiate between “core” and “non-core” applications. By deliberately focusing on core products, Sage believes that it can deliver the innovation and the simplicity SMBs require, and drive its own growth.

Core solutions include selected accounting, ERP and related solutions (payments, payroll, CRM, etc.) that Sage believes are best suited to helping it drive growth in key SMB markets. For instance, Sage has designated Sage 50 (formerly Sage Peachtree) and Sage 300 (formerly Sage ACCPAC) as core accounting solutions, and Sage CRM as its core CRM product. Most innovation will happen in this core set of products, and be shared across them.

Sage has also anchored its core portfolio strategy around the needs of three distinct market segments—which align directly with its growth goals.

  1. Cloud-based Sage One, for micro-businesses with 10 or fewer employees. Sage introduced Sage One  for North America in May of this year. Built on open-source Ruby on Rails, Sage One is a cloud-based business services solution that provides invoicing, project tracking, payments, expense management and collaboration in an integrated solution. Designed for true small businesses without any IT support (or VC funding), Sage One is aimed squarely at helping Sage grow the addressable market with a true entry-level solution. Sage One offers a free 30-day trial, and is priced at $29 per month per business for an unlimited number of team members, and includes 5GB of storage and support. Sage One also features a friendly interface–you don’t need to be an accountant to understand how to manage your books with it.
  2. Hybrid solutions for small and medium businesses. Sage announced that it is partnering with Microsoft and using its Azure platform to help its existing ERP and accounting customers bridge to and take advantage of cloud solutions. Sage is surrounding its existing applications with integrated, cloud-based connected services. For instance, Sage will provide common mobile, payments (Sage Exchange), identity management and in-context support (Sage Advisor) to all core products via these connected services. Over time, Sage will move more functionality from ERP and accounting to more flexible cloud services that customers can turn on and off as needed. Sage is betting that this approach will not only help it increase wallet share among existing customers, but make it more attractive to new, off-base prospects as well.
  3. Sage ERP X3 for midmarket companies. Sage ERP X3 is a comprehensive, highly customizable ERP solution for midmarket companies and divisions of larger companies with a two-tier ERP approach. Sage announced a new subscription licensing offering for Sage ERP X3, hosted on dedicated databases at Sage data centers. Sage also revealed Project Syracuse, the next-generation, fully web-enabled version of Sage ERP X3, which is very strategic to helping Sage grow share in this market. The new version, scheduled for availability in 2013, takes advantage of RESTful architecture, and features a cleaner UI, more modular design and enhanced mobility capabilities, among other things.

Non-core Doesn’t Mean Over and Done

What happens to the rest of Sage’s North America portfolio? Sage is basically grouping the rest of its products in two different buckets:

  1. Products that Sage will continue to support, but plans to phase out within a few years. This primarily include accounting, ERP and related products such  as Sage BusinessWorks, Sage DACEasy, Sage 500 ERP (formerly MAS 500). These generally older products are not the best fit for applying the common R&D innovations that Sage has on the drawing board.  Sage committed to clearly communicating what it will phase out and when, and to help partners and customers with migration to core solutions.
  2. Products that are strong and have a long life ahead, but that Sage needs to manage differently. These include industry-specific solutions such as Sage 300 Construction and Real Estate (formerly Sage Timberline Office) and Sage 100 Fund Accounting for non-profits and government. It also includes Sage ACT! contact manager and Sage SalesLogix CRM, which have been used primarily as standalone (not integrated with Sage accounting and ERP). Underscoring the likely longevity for at least some in this group are the fact that Sage Construction Anywhere is Sage’s first offering built on Azure; and that Sage is developing a new SaaS-based version of ACT!, slated for release in 2013.

The Rest of the Story

There is a new vitality at Sage that I haven’t seen before. In his year at Sage, Houillon has retained some of Sage’s strongest executives, including Himanshu Palsule, Chief Technology Officer and Head of Product Strategy, and Connie Certusi, EVP Small Business Solutions. At the same time, he’s attracted impressive new hires, such as Joe Langner, Executive VP, Mid-Market Solutions; Doug LaBahn, SVP Product Management; and Brad Smith, EVP of Customer Experience. The team appears realistic about Sage’s position, but confident and energized about the path they’ve charted to elevate that position. Partners and customers seemed much more upbeat about working with Sage, and appreciative of Sage’s clear-cut roadmap.

That said, Sage is taking the turn a bit late in the game and its course will not be easy. But Sage has taken those essential first steps to make the changes it needs to prosper and grow.

Today’s SMB Social Media Market Creates Opportunities for Tomorrow

Sanjeev Aggarwal's Blog

SMB businesses are increasing their adoption of social media solutions year over year–rising from 44% to 53% in small business (1-99 employees) and 52% to 63% in medium business (100-999 employees). But what business functions are SMBs using social media for, and what social media tools are they using in different areas?

Just released results from the SMB Group’s 2012 Small and Medium Social Business Study paints a comprehensive picture of the functions that SMBs are using and planning to use social media for in their businesses. The study, which is the second annual survey we’ve completed on this topic, queried 665 U.S. executives in detail on this topic. As we look at trends from 2011 to 2012, we see several data points that reveal interesting opportunities for vendors to better serve this market.

Data Highlights

We found that similarly to our 2011 study results, SMBs in 2012 are adopting…

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