Forum Topics XRO XRO Bear Case

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actionman
Added 3 years ago

@innuendo Im still positive on Xero and agree with @harryd. There are many levers they could pull. A good example is Microsoft recently pushed through a 9% price increase to cloud enterprise customers in Australia. Theres not a lot customers can do about it.

Xero still seem to be increasing revenue and profit so the issues you point out may not be having such an impact and it may be best for them to focus on growth. In regards to switching to a competitor, it may not be as easy if you compare like-for-like including integrations to feeds and add ons.

SaaS vendors can spend significant amount of effort on security rather than bug fixes or new features so Xero may have to prioritise their effort away from seemingly obvious fixes. But as a user perspective I get your point, but it may make business sense.

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Strawman
Added 3 years ago

Xero enjoys a great 'trap door' moat -- very sticky product due to high switching costs (largely the cost of time and effort in this case). Another great example is enterprise software; just look at companies like SAP and Oracle, or Technology One (ASX:TNE) here at home.

So I agree @PeregrineCapital, its a huge pain to switch. Especially when business owners always have a thousand other more pressing issues to deal with. And that's why these companies also have great pricing power too, as @actionman alluded to.

(It's also why the banks hate the idea of portable account numbers)

Given all of that, competitors have tried to make switching a much more seamless experience. EG. Apple has an app for android users to easily switch from android. Chrome makes importing data from other browsers super easy. VOIP companies put a huge emphasis on portable phone numbers back in the day to overcome customer intransigence.

There's probably better examples, but you get the point. Switching in these areas is laughably easy nowadays, but I remember when it was a real hassle.

I note that Intuit uses a product called Dataswitcher to import from Xero to Quickbooks. It's not yet available in Australia from what I can tell, and the process seems fairly involved, but I'm wondering if such programs become better and more widespread over time?

ie. Could it be that in (i dunno) 5 years time switching between one accounting package to another, at least for a small business, is really just a matter of going through a 5 min guided process? And, if so, does this have a material impact on retention and pricing power?

And, of course, it goes both ways (xero uses JetConvert to import Quickbooks data).

I honestly don't know, and am just wondering aloud.

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Valueinvestor0909
Added 3 years ago

Just heard a podcast where someone gave advice not to get in between high quality compounders and also share his own experience selling PME, AD8 and ALU and how he feels about it rightnow...

In a hindsight so easy and in real time when you are in that situation so bloody hard...love it...

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thunderhead
Added 3 years ago

@Strawman was doing the same kind of lamenting with ALU and AD8 on the latest Motley Fool Money Pod :D

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Valueinvestor0909
Added 3 years ago

I actually meant him only. Wanted to see if he actually reads a comment or just puts thumbs up....seems like he hasn't noticed.

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Strawman
Added 3 years ago

oh i read it @Valueinvestor0909.. and had a little cry on the inside ;)

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thunderhead
Added 3 years ago

There, there...as someone who has done similar things with some of my positions, I can attest to how hard it can be to hold when the valuation gets well ahead of itself. You also tend to lament in the other direction when there are big drawdowns from clearly overvalued levels, so you just can't win!

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