Xero to bundle free integrated payroll

Kiwi SaaS start-up Xero plans to bundle integrated payroll in two of its existing accounting products within the first quarter of 2011.

Xero, hosted in Australia by Telstra T-Suite and marketed in a resale deal with ANZ Bank, celebrated hitting a milestone of 50,000 customers this week. The company said it has 200,000 active users and that its software has been used for some $50 billion worth of transactions.

Xero Australia managing director Chris Ridd said that Australia was the fastest growing geography for Xero globally, representing a “fair chunk” of the 40 percent of revenues earned outside of Xero’s native New Zealand.

The company acquired Australian SaaS payroll software developer Paycycle earlier this year, and now employs 24 staff in Australia.

Ridd said that the company saw a small uptick in local customers after the Paycycle acquisition, but he expects the real benefits to flow when Xero finishes the integration of the two products early next year.

Xero is available in HTML5, whereas Paycycle was originally developed using Microsoft Silverlight.

“Our intent is to offer integrated payroll at no extra cost for existing customers,” Ridd said. “That would be consistent with our strategy all along – we are conscious our competitors in the desktop space are bumping prices up, whereas we are introducing new features for the product at no extra cost.”

Currently Xero customers can either pay $29 per month for a SOHO/freelancer edition, $49 per month for an SMB edition and $64 per month for larger businesses that do international transactions.

Xero’s largest customers hire little over a few hundred staff.

“We’re creating a new market: customers coming from no accounting software.The lowest price edition suits those people that have been running a business out of a shoebox or a spreadsheet,” Ridd said.

The current thinking is to bundle integrated payroll into the top two plans. 

Partners

Ridd said much of Xero’s growth in Australia has come from a partner community – which now includes over 500 accounting professionals/bookkeepers.

The company also has a strong third party developer community and offers a rich set of APIs for developing add-on products.

He promised developer partners the acquisition of Paycycle wasn’t a strategy Xero was likely to repeat.

“It was a little bit off-strategy,” he said.“We have strong partnerships with third party developers. It just wasn’t the right combination to approach the Australian market with our accounting software and a range of third party payroll apps. Accountants told us that if it was integrated, they would put many more clients on.”