Nope, there's no money in on-prem software licensing...
Except, THERE IS. Look no further than the latest numbers from Bytes Group
Microsoft may be making life harder for enterprise volume licensing resellers but there’s still money to be made from flogging on-premise software in the old way. Just ask Bytes Group.
The Surrey-based specialist has filed its results for the year ended 28 February, and they reveal a business whose waistline is expanding from both a top and bottom line perspective.
Bytes Software Services reported turnover of £148.4m, up 14 per cent year-on-year. UK boss Neil Murphy told us it felt some benefit of inclusion in the government’s £6bn Technology Products framework.
“Corporate sector business is much more profitable but the public sector drives up revenues with key vendors to help us secure maximum discounts and rebates from them,” he said.
Public sector spending accounted for 20 per cent of Bytes' turnover, and the “buoyant” commercial enterprise segment the rest.
Around 70 per cent of Bytes's turnover pertained to licensing Microsoft software, with the remainder made up by product reselling for Symantec, Citrix, Oracle, VMware, IBM and some services.
Microsoft revenues grew 25 per cent year-on-year, and while it is harder to maintain profits (given the cuts Redmond has made in recent years) there are “still opportunities out there”.
“If licensing was dead, all of the major vendors would make no revenues, the cash cow for Microsoft and others is licensing, it’s their bread and butter,” he said.
Microsoft slashed the fees partners make on enterprise licenses in recent years, on more than one occasion, is paying out proportionately more for cloud stuff and rejigging reward based on customers’ consumption of software rather than straight sales.
Cloud business was worth £7m in the year for Bytes and managed services some £3.5m. Murphy said it is investing in those lines and plans to double the revenues each year for the next few fiscals.
Operating profit came in at £5.5m, versus £4.6m in the prior year, and after tax, and interest payments/benefits, net income was £4.32m, up from £3.58m.
The other side of the house, Bytes Security Partnerships, had a less fruitful year than its sister company. Revenues were up 1.7 per cent to £14.3m, with half of the sales generated from providing consultancy, product reselling and help desk services for CheckPoint.
“We struggled to recruit talented sales heads and lost three people to security vendors, and this did impact the sales numbers and dented the performance. But we are trying to scale operations by recruiting,” said the company.
Bytes has a new academy graduate training scheme kicking off in February with places earmarked for 24 people, and it is out in the wider channel trying to unearth experienced hands.
Gross profit edged up in the year to £2.96m and this dampened operating profit, which fell to £1.35m from £1.65m. Net profit was £1.06m from £1.269m.
So all in all, a decent fiscal 2015 trading period for Bytes Group, but if vendors are to believed, it's likely those cloud services may highlight the limitations of old school licensing in the not-too-distant future. ®