Xero to start charging developers API usage fees, replacing revenue share deals

One dev thinks this will become their second-highest cost, fears they’ll have to pass it on

Exclusive SaaS-y accounting outfit Xero has advised developers who integrate their products with its services that they’ll soon have to pay for the privilege in a new way.

Xero started its life in New Zealand and has since won over 4.6 million subscribers in 180-plus countries. In Australia, Xero displaced the dominant player MYOB. It’s a challenger brand chasing the likes of Sage and Intuit elsewhere.

Xero today emailed developers who create products that integrate with its services. The Register has seen that mail, which opens “We are deeply committed to investing in our ecosystem” and states that Xero wants to “ensure our platform supports your app development journey.”

Ecosystem-killer

Xero will do two things to meet those goals, the first of which is “introducing a tiered pricing model based on your API connections and usage.”

Developers who create products that work with Xero can bill their customers direct, or place their wares in the Xero App Store at the cost of 15 percent of average revenue per user.

The email seen by The Register links to this page, which says Xero will retire the 15 percent commission scheme and replace it with the following tiers and charges:

Xero's new Tier Fees, Connection Limits, and API Volume Usage - Click to enlarge

Xero says this scheme is “Designed to meet developers where they are in their app development journey” and will make it “clearer for you [developers] to forecast and control costs.”

The table is starkly clear to Alex Lacota, co-founder of a balance sheet reconciliation app for Xero called RecHound, because his access to APIs was previously free.

He therefore fears the change represents bait and switch tactics.

“As it stands, RecHound would be up for an annual bill of $17,340.00,” he wrote on LinkedIn.

In conversation with The Register he explained that Xero's new fees require that payment for access to an API access that allows access to transaction records, data that developers are almost certain to need as they try to create useful Xero add-ons. Lacosta said he would like to able to use other endpoints of Xero's API, but they don't provide the data he needs.

“As a bootstrapped startup – that would financially eclipse our 2nd highest annual expense by a country mile,” Lacosta said, adding that he fears Xero is therefore discouraging third party developers.

That's a sentiment we've seen elsewhere.

Jacques Malan of UK-based developer Xama Technologies wrote "This would have completely killed our ambition to integrate with an app like Xero."

"It's a sharp contrast to when we used to work with Xero," he added. "There was a lot of support from them to help smaller apps like us build the Xero ecosystem. Those days are truly over now."

Jordan Owens-Reader, a marketer at accounting recruitment firm AJ Chambers, suggested Xero's have "the potential to really damage the Xero App Ecosystem - one of the major boons of the product."

"These developers have been enticed by free API access, only to have the rug pulled out."

Lacota warned his customers that he may need to pass on those costs.

“RecHound has not once increased it's fees over the last 3 years, and I've been steadfast on keeping them as is, even while we deliver new features,” he wrote. “Unfortunately this may need to change slightly due to this, because as it stands, an API fee this high would become a huge financial burden to us.”

Lacota says he understands Xero’s need to charge for its API, but feels Xero’s prices are too high for his business and for startups.

“A fee as high to access the journals of our users would be severely impactful for RecHound, and it would render smaller, less developed apps completely unfeasible,” he wrote. “To put it another way, RecHound would not have been viable in the slightest if this were in place 3 years ago when we had started.”

Xero’s rivals are keen to point out the change. Phil Johnson, general manager of payroll and HR software house Tanda, suggested a shift to his company will result in lower bills.

The Register asked Xero to comment on its changes. It sent us text from its announcement.

The second change mentioned in the email comes in the form of revisions to Xero’s legalese to prohibit using API data to train artificial intelligence and machine learning models. The company has also clarified its language to specify “apps must not use bots or browser extensions to undermine our security controls or simulate user actions.” ®

Updated at 23:00 UTC, December 4

To add detail of Xero's response to our inquiries, additional comment from Alex Lacosta, and mention of other reactions to Xero's decision.