Bytes sees success with AWS as it moves away from being 'Microsoft-centric'

MD Neil Murphy highlights new revenue streams and becoming 'vendor-agnostic' with cloud services

Bytes is celebrating record-high revenues of £565m as it moves to become vendor-agnostic when it comes to cloud services.

For the 12 months ending 28 February 2019, total turnover jumped 60 per cent, while operating profit rocketed 77 per cent to £20m.

MD Neil Murphy attributed this growth to winning new public sector deals - including a mammoth £150m NHS contract - as well as growing demand for cloud services, including Amazon Web Services (AWS).

"We've had a lot of growth with our AWS business which has gone from nothing last financial year to giving us £25m in annuity this year," Murphy told CRN.

"The demand for AWS is out there and we've gone to our existing clients and converted them to buy through Bytes as opposed to their existing channel partner, or many of them were buying directly from AWS.

"It's grown very quickly and is giving us the opportunity to be more vendor-agnostic when it comes to cloud solutions for our clients.

"In the past, we've been very Microsoft-centric but now our clients are seeing us as a consultant around cloud and advising on the appropriate platform for them. It's a good position for us to be in."

The company has long been associated with Microsoft and saw sales of Azure jump 85 per cent in its results.

Murphy admitted that Bytes was late to jump on the AWS bandwagon - unlike its rivals Softcat and Computacenter - but said it is making up for lost time in becoming a "vendor-agnostic" reseller.

"It helps our business become less dependent on Microsoft moving forward, particularly as the reward mechanisms change from Microsoft to the LSP community," he said.

"So we have to be able to grow our profits with other vendors, while at the same time continuing to grow our Microsoft business, as is evident from the growth in the last year.

"We will definitely carry on with that focus - it is the biggest and most important partner we have - but it's important to us to diversify the business in the next five years."

The tech giant's decision to make Azure available directly caused partner wariness earlier this year, and partner strategist James Marshall told CRN this week that partners shouldn't be threatened by the move, stating that it would remain a partner-led business.

However, Bytes' move to widen its cloud portfolio was "without a doubt" influenced by this move from Microsoft, according to Murphy.

"We have to diversify the business more, given the potential that Microsoft doing more direct [sales] poses to us," he explained.

"It does pose a threat - that's unquestionable. Our business has been 60 per cent Microsoft for the past five years, but as long as we can maintain the additional services and value that we add, I don't see it being a threat to our profitability.

"On the plus side, 99 per cent of what we do with Microsoft is collaborative and positive.

"I'm aware of the threat, but given that we grew in the last year and did $800m of business with Microsoft, I'm not losing sleep over it."

The software reseller also saw significant growth in its data solutions business, with Murphy stating that it has developed stronger relationships with the likes of HPE and Cisco, among others.

"We've created new business units to be able to sell datacentre solutions using HPE, Cisco and Nutanix among others. We've created a new revenue stream there," he said.

These results mark the first time Phoenix Software has been included in full-year results since its acquisition by Bytes 2017.

It contributed £164m to overall revenue - a 25 per cent jump based on its own financial report from last year - and £5.1m to the £20m operating profit.

Murphy is optimistic about smashing the £600m-revenue barrier in this financial year, stating that he has not seen any wariness among customers to spend.

"I suspect we'll go above the £600m mark," he declared.

"The economy at the moment doesn't seem to be affected by the negativity around Brexit. Most of our customers still seem to be investing in new technologies and my feeling talking to customers is that they don't see a downturn in investment."