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For end-user businesses, saving on upfront costs, flexibility and future-proofing are driving the as-a-service market. Many would prefer to pay monthly with no-upfront costs and the ability to upgrade as required.  XaaS is attractive to vendors because they can create MRR from what was previously NRR. This means the company is more likely to grow predictably and survive severe downturns. They can hire staff to support their growth without having to lay them off if orders dry up. COVID was a disaster for NRR/project-based companies whereas MRR companies in general were able to ride it out and without laying off/furloughing staff.

To meet this need Jola offers a range of intelligent, affordable 4G & 5G routers on a rental ‘DaaS’ (Device as a Service) model over multiple terms. DaaS also means faulty routers are dealt with on an ‘Advanced Replacement’ basis and hardware can be upgraded.

As A Service Model Evolving

As the Internet has become faster and more reliable, centralised cloud-based offerings have grown in popularity. Virtually anything can be sold as-a-service and this model benefits both end users and resellers. The pace of innovation has picked up and end users don’t want to get locked into obsolete technologies. For the reseller, the cost of servicing their customers is lower with aaS and recurring margins make their business more profitable.

Key Trends

A key trend driving the as-a-service model is the move to IP and the imminent PSTN switch-off. There are millions of single-call PSTN lines in the UK that are soon to be end-of-life. Upgrading to broadband is expensive and capital costs of converters and 4G routers soon mount up. Jola has solved this problem for resellers and their customers by providing everything they need, on one affordable monthly rental. Robustel and TPLink routers, plus Grandstream ATAs and ISDN-TAs, can all be taken as DaaS.

Key Benefits

Companies with high recurring revenues are more valuable than those relying on one-off sales. This was brought into sharp focus during the pandemic when companies with a high proportion of recurring revenues featured almost exclusively in Private Equity transaction news. Telecoms resellers saw their multiples increase while more traditional MSPs had to baton down the hatches and furlough staff.

For Jola partners, the DaaS OpEx model has many benefits over CapEx purchase, not least for cash flow. From the end users’ point of view, they usually have lower set-up costs and they pay over a period of time without having to sign a third-party lease. The monthly rental usually comes with a service guarantee, support and future-proofing (the ability to upgrade within the term). Suppliers who offer XaaS products to resellers remove the need for them to invest CapEx in stock.

Xaas products are ‘in-the-cloud’ and with little equipment actually, on the end users’ premises there is less to go wrong and by removing the need for engineers to physically attend site, service overheads are lower.

In the channel, we are seeing an exponential rise in demand for mobile data SIMs, not only for use in 5G/4G routers, pre-Ethernet connectivity and Ethernet back-up but also for digital signage, gaming machines, vending machines, monitoring devices, sensors and ATMs. SIMs are being used in wind and solar farms, measuring and tracking key variables, they are also being used in smart TV cameras, which roam internationally. Manufacturers and service companies are finding new uses for mobile data daily and, as we accelerate towards 5G, this is unlikely to slow down.

It's practically impossible for resellers to provision and control SIM estates without a comprehensive, well-established real-time portal. Choosing a trusted channel-only supplier means the reseller can take advantage of their knowledge and experience when they are bidding for deals. Jola’s most successful partners involve our Partner Managers directly with their customers without fear of disintermediation. Price is really important and mobile data suppliers need to understand that their products have to be priced so that channel partners can win deals at decent margins.

Millions of PSTN lines won’t be able to use a SoGEA or FTTP type replacement due to costs, incompatibility or logistical challenges. Mobile data will be a requirement for customers replacing PSTN lines for intruder alarm monitoring, call points and many other applications.

When the networks made 4G available to the channel around 2016, it changed the game. 3G SIMs running at only a few Mb/s struggled with email but 4G started to be used as a substitute for fixed-line broadband. When, due to political pressure, MNOs swapped out manufacturers recently, they upgraded many towers to support 4G+ which offers download speeds of up to 300 Mb/s. Although the networks do not publish 4G+ coverage it is estimated that over 90% of the UK population has access to 4G+. As 5G becomes ubiquitous it will overtake the number of fixed-line data connections very quickly.

The opportunity for the channel is significant and for those resellers not sure where to start, Jola has productised its unique process of helping customers successfully sell mobile data. It is called The Mobile-Data Revenue Generator (The MRG) and it helps partners to identify low-hanging fruit and win their first significant mobile data opportunity. From there they can start to productise mobile data and develop the eco-system required to sell, support and bill it.

Jola was setup such that we would be ready to transact at any time. We didn’t know the exact date and we didn’t want management distracted from growing the business. So;

1. We operate a 3-year rolling financial plan, re-forecast quarterly for cash flow purposes. The first 12-months is the budget, which is fixed in April, followed by a 24-month outlook. There is a new draft 12+24 every January, finally signed off in March to start in April. In my experience operating only a 12-month budget and writing a business plan just when you need an IM is a mistake. We re-define and hone our strategy every year but this tends to be more about emphasis than direction. Our fundamental strategy has not changed since 2016 when we pivoted the company into mobile data. Our overall approach makes the production of an Information Memorandum much more straightforward.
2. We are paperless. This is really important for Due Diligence. All our IP is documented, and we had all our contracts and service agreements completed and checked by lawyers in the first year. We resist non-standard agreements, even down to insisting on our own NDA. If we have to amend our terms it is recorded and done via an addendum, A buyer’s lawyer is going to have to read everything in DD and very often the seller pays for this, so by minimising exceptions we cut out a lot of time and cost. We opened our data room the day we started Jola with £50k in 2014.
3. We made ourselves known to the market and started building relationships with PE very early. We focussed on specialist TMT Private Equity because they ‘get’ technology, won’t wince at the multiples and will help with origination of deal flow for a buy-and-build strategy. We talked to credible analysts like Megabuyte and were very open with them about our numbers and strategy. Some PE firms won’t do minority investments and some won’t do secondary-only so I found it saved time to be upfront about our intentions when approached by PE firms. Receiving offers from PE and growth funds is very affirming for both the strength/depth of management and the general and financial health and strategy of the business. However if you are immature in these respects but still want to raise money you could consider a syndicate (sometimes called deal-by-deal) arrangement. This only really works for a minority stake and you will still need an IM, but the due diligence, process is much lighter and shorter.
4. They say good advice is cheap but there is some very expensive bad advice out there too. For TMT Corporate Finance advice and deal assistance there are only a few in the UK I would recommend. My last deal was 2012 so to bring myself up to date I asked people I trust and respect about their recent experiences. This was invaluable. Above all we made sure we had the best CFO we could afford. We only needed someone part time when we weren’t transacting and we found the best CFOs were often plural anyway. Supported by Pinsent Masons, our CFO and I did all the heavy lifting on all deals, shielding the management team as best we could. We short-listed corporate lawyers for their track record and it was a bonus if they had worked for some of the buyers on our shortlist and knew their redlines and ‘gives’ on the SPA. Three legal firms bid for the work.
5. Most processes take around six months and we knew it was important not to lose focus and miss our numbers in that period. We didn’t want to make our investor nervous or give them a reason to try and chip us on the agreed price.
   

Many SMEs will leave it to the last minute but larger organisations have realised the potential scope of a PSTN/ISDN Replacement project and Jola partners are already seeing tenders from their flagship customers. As with many new technologies, organisations prefer to award these contracts to existing suppliers, but only if they can demonstrate the capability to deliver the entire project.

They usually require three types of IP solution 1) where ISDN and PSTN numbers need to be ported onto a fixed broadband or Ethernet connection 2) where existing numbers need to be ported onto a 4G/4G+/5G mobile broadband connection, and 3) where the requirement is for a mobile broadband connection but a landline number is not required and a 07x number is preferred.

Number porting in the UK is still not a fully matured process and early projects have run into difficulties where the reseller has tried to juggle a number of different suppliers.

One of our partners showed us a tender they were working on recently and one of the questions was,

“Do you have your own real-time SIM management portal or are you providing third-party access to the Networks’ portals?”

A very specific question born, I surmise, out of bitter experience. The project was for thousands of SIMs in physical security devices, 2.5 years into a 36-month term. The incumbent had not been invited to tender.

For redundancy, every device had two SIMs, one unlimited and one multi-network and the end user had found having to log on to two completely different web sites exasperating. They had different features, different CDR formats and not all the processes were automated, creating MAC delays, especially out of hours.

If that’s the experience of the end user, imagine the frustration of MSPs who want to sell all the networks to multiple end users.

Most suppliers will say they have a self-service portal but if they don’t have their own they are putting their partners at a significant disadvantage.

Jola is an award-winning, channel-only supplier of business communications, specialising in mobile data SIMs. We are a global data specialist, providing innovative IoT and mobile data solutions to MSPs, ISPs, IT Support companies and Telecommunications Resellers.

According to Ofcom 8500 organisations in the UK have a RID code but, despite it being the fastest growing product in the world, only around 1000 of these sell mobile data. Why is this?

Resellers feel it is dominated by the mobile networks direct.

Well, yes it is, or at least until recently it was. However, early movers in this market are now hoovering up huge deals by working with aggregators offering products (like Multinet and eSIM) that the networks cannot deliver but their customers demand.

Managing thousands of SIM assets is difficult and resellers have been burned by high overages in the mobile voice and data market.

Agreed but aggregators that offer a real-time comprehensive portal remove the headaches associated with ordering, provisioning and managing SIMs and have eradicated unexpected data overages completely.

It’s hard to sell and too niche.

Resellers often conflate mobile data and IoT. IoT is a subset of mobile data and requires resellers to either partner-up, or develop their own sector ecosystem. Conversely M2M projects for applications like CCTV, coaches, signage and car parks often only need a specialist router and a SIM.

The ARPU is too low and the margin is eroded by the MNOs direct.

Again, you’re probably thinking of IoT projects and the mobile data market is far bigger than just IoT. That said aggregators now have powerfully differentiated IoT solutions that help resellers beat the networks and at decent margins.

The market is not worth the effort.

Seriously, does anyone really still believe this? Mobile data is now the fastest growing ICT product in the world and mobile data companies are valued by the market at 3x the value of traditional comms companies.

The Internet? Smartphones? Social media? Credit cards? No.

After only 4 years 4G had over 1bn users and 5G is set to do it in 3.5 years, making it the fastest adopted technology ever. The Internet took 14 years and credit cards 74 years.

Although most of the growth in mobile data has come in the consumer world, business is catching up fast. 

From what was already a high base, Jola saw M2M and Mobile Broadband connections treble last year, and usage quadruple. At the same time speeds increased exponentially (4G-Advanced can reach 300Mb/s) and cost per GB plummeted. 

In 2012 you could buy 23 Big Macs for the price of 1GB of data and today, based on average EU prices, it’s zero. Furthermore, in the UK mobile data prices are half that of the EU average when compared to the CPI augmentation.

In 2020 Jola signed a record 246 new partners who in turn found some huge deals in their customer bases. Many on long term contracts, and others for temporary COVID-related applications.

Most importantly it made MSPs realise that mobile data/M2M/IoT can be easy to sell, provision, support and bill, and with the right channel supplier there is enough differentiation to beat the MNOs at a decent recurring margin.

As if we don’t confuse people enough with our industry acronyms, we are now using the same name for two completely different things.

You may know that a Cat5 cable supports speeds up to 100Mb/s, Cat5e up to 1000Mb/s and Cat6 up to 10Gb/s, but does this mean that a Cat6 LTE 4G router supports speeds up to 10Gb/s? No.

The LTE Cat6 is part of the LTE-Advanced standard for routers and supports downstream speeds up to 300Mb/s. Cat4 LTE supports theoretical speeds up to 150Mb/s but our real-world experience is more like 100Mb/s. Confused yet?

Many people understand that 4G speeds have increased significantly recently with the introduction of the LTE-Advanced Standard, and can’t work out why their 4G router only ever speedtests below 100Mb/s.

This is because most people have Cat4 routers and don’t know they need a Cat6 LTE router to run faster.

Cat6 LTE routers are usually around twice the price of Cat4 routers so if you paid c£100 or less for your LTE router it is probably Cat4.

There are plenty of Cat6 LTE routers out there but before you buy one, consider that the new 5G Standard also supports Cat6 LTE. 

5G routers are expensive but will come down in price rapidly with volume, so you may want to wait a few months and go straight to 5G.

Most successful businesses subscribe to a credit rating agency for their prospective customers, but how many credit check suppliers?

You should, because:

1. If they go bust, they could take you with them.

When a company calls in the administrator, their suppliers will act immediately to mitigate financial risk - often cutting off supply. This may not matter in some industries, but where you have been reselling their service it could be disastrous. In the telecoms and utilities business your customers may suddenly find themselves without service. Not only do you then risk losing them, but you may have breached your own contract and be open to litigation. Even if the administrator is able to sell the contracts to someone else (often another supplier), or where the supplier has step-in, service may still be interrupted, and you may find yourself in a much worse position subsequently.

2. They may be poorly managed.

Excellent employees, with good judgement, do not choose to work for financially unstable employers. If the quality of your suppliers’ staff matters to you (e.g. where they are selling with you), avoid low credit scores. Also poorly managed companies are often difficult to deal with. If the relationship requires regular purchases and joint support of your customers, you may want to find another supplier.

3. They are unlikely to be investing in new products and services.

In many markets, companies without money to invest in product development find their core products are quickly commoditised, and they have to compete on price. Gross margins come under pressure and they are forced to cut cost, often staff, in order to keep going.

4. They may not be in a position to negotiate well.

Their suppliers are not going to be inclined to offer better rates or payment terms to them if they have a poor credit score. More likely they will apply a risk premium to the account, often insisting on payment in advance. This exacerbates the problem of thin margins.

5. They will be less forgiving, supportive and accommodating.

When an organisation is in trouble and operating off minimum margins, bid support suffers. Whilst they would love to help you win large tenders, they simply can’t afford to take the business on at lower margins. Cash flow is likely to be an issue and they will be more inclined to be heavy-handed with late payers. Good suppliers will be understanding if you suddenly encounter a cash flow issue yourselves, and need some time. Financial unstable suppliers cannot afford to, because a couple of late payers could push them into liquidation.

Of course, there may be legitimate reasons for a low credit score. For example, late accounts, and extraordinary write-offs, which will be corrected in due course. Don’t be afraid to ask your supplier. They may not even be aware, and the low score may be due to an error in the interpretation of their filed accounts.

On the positive side, suppliers with a high credit score and good growth may benefit your business, especially where their success depends on yours. It demonstrates they are doing something right with their products, pricing, processes and support. If a supplier is constantly innovating, and negotiating with their suppliers, this means differentiation for you, and lower prices.

Salespeople are like hotels in Monopoly. Buy as many as you can afford because the more you have, the more income you generate.

Of course, it’s never as straightforward as that. Under-performing salespeople are a drain on management time and your biggest mistakes won’t even pay for themselves, let alone make a positive contribution to gross margin.

This is why you need to be hiring all the time, especially if you are a growing business in a growing market. If you wait until the position comes up in the budget, or you lose someone, you are likely to miss the best people. Moreover, because you’re a little desperate, you are likely to compromise, take a risk, and make a bad hire.

Continuous recruitment requires a strategy. The objective is simple; whenever a person that fits your target profile starts to look around, they must know about, and consider, your company. Achieving this is a little more challenging.

1. Maintain an advert constantly – web-site, LinkedIn, Facebook, trade publications. Whatever you use to communicate with your industry. Make people aware that you are growing and always hiring the best people.
2. Write posts, blogs and articles regularly highlighting the successes of your salespeople and (if you’re in the channel) their resellers. You don’t have to use names, but you want to give prospective candidates a feel for what they will be doing, and a confidence that you will provide an environment in which they can succeed.
3. Operate a comprehensive, structured and strict recruitment process. This should have several stages, testing different aspects of the behaviours you desire. Include role plays, behavioural interviews and presentations. Understand the minimum requirement for progression at each stage. Do not truncate the process and do NOT compromise.
4. Make a list of companies where your ideal candidates currently work. Monitor this list for instability: new management, mergers, tough trading conditions. Try and develop contacts in some of these target companies who will let you know when people there may be looking around.
5. Use your existing salespeople. If they are happy and making money, they will be pleased to tell old colleagues with their previous employer and friends working in your target companies. Encourage this and offer an incentive for them to put people forward.