Traditional reseller model paying dividends for Bytes

Managing director Neil Murphy backs reseller model, claiming public cloud services don't yet offer enough profit

Bytes Software Services saw its revenue jump 25 per cent in the first half of the year, driven by its traditional reselling model relationships with key vendors.

Total sales for H1 were up 25 per cent year on year to £150m, while operating profit was up 22 per cent to £6.3m

The figures do not include any contribution from Phoenix Software, which Bytes acquired earlier this year.

"[The growth is driven by] five key partners," Bytes managing director Neil Murphy told CRN.

"We have ever-closer links with Microsoft, VMware, Sophos, Mimecast and Check Point - those five key partners, plus others.

"Also, the strengthening of our solutions capability around Azure is paying dividends. Our Microsoft business is growing at around the 25 per cent mark, which is in line with the overall growth of the organisation, so all product lines seem to be growing well."

As well as working with Azure, Murphy said that Bytes became an Amazon Web Services partner this year and has already seen some "significant wins".

At a time when some in the channel are questioning whether the traditional reseller model is sustainable, Murphy said Bytes remains focused on its core business strengths, albeit with its services business still growing at a healthy rate.

Of the £150m revenue in H1, services accounted for between £15m and £17m.

Murphy said that Bytes' services revenue continues to centre on the likes of Office 365 and technical services, as well as software asset management.

Around half of these services are delivered by Bytes and half through partners, but Murphy said the firm has not yet been tempted to set up a public-cloud services practice, with the margins not yet enticing enough.

If an opportunity around Azure or AWS services comes Bytes' way, Murphy said the reseller tends to carry out the initial presales meetings, before offloading the services to a third party.

"We're continuing to focus on our core proposition around software asset management and volume licensing, so we're still very much a reseller," he explained.

"So far we just don't see much money being made in that [public-cloud services] area.

"There's a lot of time and effort going into it from a presales perspective and a proof-of-concept perspective, but there's not a lot of opportunity from a profit perspective in delivering those services, so we're not investing heavily in that area."