Xero plays down Myob web threat

Myob LiveAccounts. Photo / Supplied

NZX-listed accounting software company Xero says it is undaunted by much larger rival Myob's launch of an online service similar to, but cheaper than, its own.

Australian-based Myob, which has the largest slice of this country's market for desktop accounting packages, yesterday launched LiveAccounts, a software-as-a-service, or web-based, version of its software which it is targeting at sole-traders and very small businesses.

The service costs $25 a month, $4 a month less than Xero's cheapest monthly business subscription, which is also targeted at small operations with minimal day-to-day accounting requirements.

The software-as-a-service approach is particularly appealing to small businesses because it means they can access and update their accounting information from any computer with internet access. It also means they do not have the up-front cost associated with buying software.

Myob's Australian-based chief executive, Tim Reed, announced in May the company was close to launching LiveAccounts and that it would compete aggressively against Xero, although at the time he refused to be specific about pricing. This sparked a public tit-for-tat slugging match between Reed and Xero co-founder and chief executive Rod Drury.

Drury has called Myob's delay in getting LiveAccounts launched "embarrassing" and said in June Xero was "taking significant market share from the incumbent [accounting software companies in the New Zealand market] who are yet to deliver a credible online product".

Reed hit back saying LiveAccounts offered better value for money for smaller businesses and noted that Xero, founded in 2006, has yet to become profitable.

Drury said yesterday Xero's strategy had always been to focus on investing significantly to develop world-class software rather than turning an early profit. The company has signalled it is on track to break even in the second half of 2011.

Xero is in a healthy financial position thanks to a $23 million share placement last year, with most of the money coming from Craig Winkler, the founder and former major shareholder in Myob.

"We're feeling very comfortable with our plans. They're working very well," Drury said yesterday.

He said from a comparison of Xero and LiveAccounts' features it was clear Myob had only invested a fraction of what his own company had in developing its software-as-a-service product.

"Our growth will accelerate now that Myob have revealed their hand," he said.

At its annual meeting last month Xero said it had signed up over 22,000 paying customers, more than doubling its subscriber numbers over the year.

According to Myob's website its software is used by over a million businesses and 10,000 accountants.