Xero vs QuickBooks Online – What do the Numbers Say?

Accounting Software


Rival accounting software companies Xero and Intuit released financial statements recently and the numbers make for interesting reading. Two weeks ago Intuit announced its second quarter results which showed there are now 561,000 paying customers worldwide using QuickBooks Online (QBO) cloud accounting software and that 45,000 of those were added in the last quarter.

Meanwhile Xero has announced that globally it has 250,000 customers, approximately 100,000 or 40 percent of which are in Australia. The remainder mainly in New Zealand (its birthplace), US or the UK. Xero also advised that it is adding 200 to 300 Australian customers a day which equates to around 78,000 a year. So Intuit is outpacing Xero in both the total number of customers and the acquisition rate.

Chris Repetto, Intuit’s director of corporate communications, provided additional breakdown of the figures. Approximately 70 percent of QBO’s new customers were not migrating from Intuit’s desktop software – i.e. they were start-up businesses, businesses migrating from a shoe box/spreadsheet system, or migrating from another software product.

The remaining 30 percent migrated from QuickBooks desktop software. About 90 percent of its customers were US-based and the remaining 10 percent were mostly from Canada, UK, Australia and India. That means 28,000 of the 45,000 new QBO customers last quarter were new US-based customers. So even excluding the customers converting from desktop, QBO is outpacing Xero in the US.

There is more to it than just numbers. Intuit has long been a dominant player in the US small business accounting software market and has a high level of brand awareness and accountant participation giving it an edge over Xero there.

Xero arrived unknown to the shores of Australia some six years ago and using the disruptive marketing techniques for which it is now well known, caught the dominant Australian software company, MYOB, off guard. MYOB was not ready to launch a major cloud offensive (although MYOB LiveAccounts made a small splash) and Xero was able to effectively woo accountants by selling the benefits of a cloud solution with its collaboration and single ledger philosophy and take market share from MYOB.

Having refined these techniques in Australia, Xero is ready to make a move on the US market. However, this time the dominant player has not been caught napping. Intuit quickly recognised the threat from Xero and has virtually disrupted itself before Xero could do so.

Intuit’s cloud program, QBO, has been on the US market for around 10 years – well before Xero came along. And there were many similarities with the desktop product transition was relatively easy making it a possible option. However, the user interface was cumbersome, inconsistent, disorganised and outdated. You had to be really committed to want to use it.

Intuit quickly recognised these issues could be exploited by Xero and set about overhauling the interface and last October released the new user interface which overnight transformed the product into being easy to use, vibrant and interesting.

So last quarter, with the release of the new interface, about 13,500 existing Intuit customers who could well have migrated to Xero from the QuickBooks desktop program instead migrated to the revitalised QBO. A further 31,500 new Intuit customers started to use QBO – validating the strategy.

So while there is some robbing of Peter to pay Paul, it means that not only are existing customers staying with Intuit but it confirms that Intuit can attract new customers at an increasing rate. (Previous quarters the increase in QBO customers had been around 28,000-29,000 per quarter.)

An aside; there wasn’t a commensurate increase in QBO revenue in the last quarter – the increase was pretty much the same as previous quarters. Maybe that was due to price discounting in a period when Xero generally increased its subscription costs.

It doesn’t look as though Xero may not make the same waves in the US partly because Intuit met the challenge there much more quickly than MYOB did in Australia, but also because of the size of the US market where there is a lot more scope for multiple players.

Intuit is now firmly entrenched in Australia. I don’t know how the numbers of QBO users here compare with Xero’s 100,000 but QBO is certainly gaining traction here (partly at least due to extensive price discounting).

It will be interesting to see if Australia is ready for another round of disruption or if Intuit will use other techniques here where brand awareness and product familiarity is limited.

Xero vs Quickbooks Online, who can sustain hitting its target numbers in the following years?

This is an edited version of a post that originally appeared on the Cloud Accounting Buzz blog.

Subscribe to our newsletter

Subscribe to receive the latest stories and new guides to your inbox. No spam, we promise.

By subscribing you agree to our Privacy Policy.