Xero buying Australia's Paycycle

Peter Dinham
Friday, 22 July 2011 02:04

IT Industry - Deals

Online accounting system vendor, Xero is to acquire Australian payroll company, Paycycle, for A$1.5 million in a deal comprising half a million dollars in cash and $1 million in Xero shares.

The shares will be vested over three years.

Xero Australia managing director, Chris Ridd, says the acquisition is an exciting development as the company seeks to appeal to the 830,000 small business employers in the Australian market.

According to Ridd, the acquisition of Paycycle will accelerate Xero's growth in Australia and 'enhance Xero's online accounting offering for small businesses and their advisors.'

'Xero's software-as-a-service (SaaS) model has changed the way accountants and small business owners manage their accounts and we know that one of the things our customers' value most is our ability to act quickly on their feedback. Our customers have told us that we can make their life easier by completely integrating payroll into the Xero offering and we're really excited that we've been able to work with Paycycle to make this happen.'

Payroll specialist Stuart McLeod and IT specialist John Freeman founded Paycycle in 2009 with the idea of creating a payroll system that would be easy to use for small business owners.

Mcleod says the company has grown quickly to service 750 customers providing a 'user-friendly online payroll system.

'Because both are SaaS products, the integration of Paycycle into the Xero platform will happen mainly at the back-end, with minimal change for users. Once the integration is complete, customers will have the convenience of being able to access both systems from their Xero user account The payroll functionality will be included in Xero at no extra charge, which shows that SaaS innovation doesn't come with higher prices,' McLeod said.

Paycycle is one of a number of payroll providers which integrate with the Xero software through its providers, open API. Under the acquisition, Paycycle will be part of the Xero platform, with the Paycycle team moving over to Xero.