This article was written for publication in Business Plus Magazine. You can also read it on their website, bizplus.ie.
Solutions for small business: the old guard or the young pretender?
There’s a lot happening in the accounting software space for SMEs and the two leading competitors, Sage and Xero, are battling it out for market share. Sage is a well-established company with a variety of products – mainly desktop and server based – whereas Xero is the new disruptor ‘born in the cloud’. The good news for SMEs is that increased competition in this area is resulting in better choices, better features and lower costs. But what are the main differences between these two offerings?
Sage and Xero: past, present and future
Sage was founded 35 years ago in the UK. Over the years, it has helped many SMEs move from manual systems onto computerised solutions – removing the need for businesses to develop and support their own accounting software. Firmly rooted in its desktop roots, the company offers a range of products – solutions such as Sage 50 and Sage 200, payments and payroll solutions, and their newer entry-level cloud offering: Sage One. Xero’s solution is purely cloud-based. The New Zealand firm has been around for just seven years, but has invested heavily in product features, usability, support and integrations – a real SaaS model. While Xero has yet to make a profit, it is gaining significant global market share and stock markets know that profits will come. In May, we anticipate that Xero will announce it has overtaken Sage’s leading product, Sage 50, as the leading accounting package for SMEs in the UK – where they both have over 100,000 business users.
Features and benefits for the non-expert user
Usability is perhaps the biggest differentiator between Xero and Sage. Business owners typically love Xero because it is intuitive, they can get immediate access to useful financial information and it integrates with lots of other applications. These same people typically struggle using Sage as they say it is written for accountants; simple requests can be hard to execute and the user interfaces can be off-putting. Accountants and bookkeepers tend to be stronger supporters of the Sage products as they are familiar and comfortable using them.
Integrations are the second big difference between Sage and Xero. Sage, in the traditional fashion, controls its software environment and only offers integrations with other Sage products. It also doesn’t facilitate the transfer of desktop customers to its cheaper cloud product. Xero, on the other hand, has open APIs and integrates seamlessly with thousands of other systems.
A typical customer of Sage 50 will have a licence (or upgrade) cost, a support cost, a per-user cost along with the cost of servers and backup systems – all of which could total over €200 per month. For Sage 200 it could be double this. A typical Xero subscription is under €30 per month per business (unlimited features, users and transactions) with a multi-currency requirement bringing the total to around €35, a significant saving for businesses moving to the cloud. Sage’s own cloud offering, Sage One, is only €12 a month; unsurprisingly, Sage doesn’t assist existing Sage 50 or 200 customers to move to Sage One.
In terms of customer service, Sage has a mixed reputation, with some clients finding it excellent and others complaining of long hold times with tech support. Xero has a vast repository of online help resources (mainly video-based, so accessible for all user levels). However, while Xero’s email support is very good, staff are UK-based and face-to-face support in Ireland is provided through accountancy partners such as Beyond Accounting.
What’s the best investment for an SME?
It is pretty clear that cloud is the way forward for SMEs, and certainly global trends support this. Xero’s achievement of 600,000 SME customers in six years is no accident. We’ve been working with cloud accounting products for the past four years and know that there are big advantages for SMEs in terms of accessibility, usability, integrations and cost. As a cloud solution, Sage One looks pretty nice on the surface and has a fairly comprehensive set of features. With a price tag of just €12 a month, we recommend that freelancers or very small entities with simple requirements look at this. For more serious businesses, Xero is definitely the number one option and the feedback from the first wave of Irish business users (approximately 5,000 now) is extremely positive.