Here’s a question that we get a lot from service providers under a white label UCaaS provider: “At what seat threshold does my own platform license become a viable answer for my business?” Many of our prospects follow that up by noting a 5 to 10 thousand seat range as their understanding of where they can start to make money using a Unified Communications platform. If you are on a session-based pricing model, this number is FALSE.
We’re here today to tell you that the actual number is FAR lower. In fact, even if you only have 1,000 seats, but are growing at the industry standard of 18%, it makes financial sense to switch over to your own platform license from your white label UCaaS provider.
So, how do you know what we’re saying is true? Here’s the deal – we have been doing some behind-the-scenes conferring with our current customers and have done the math with them. For our purposes here, we’re compiling all this research into one example case, called Service Provider A.
In your typical scenario, Service Provider A gets started selling Hosted PBX or UCaaS features to under 500 individual customers. Dipping one’s toe in the water as we like to say. Here, going with a typical white label UCaaS provider might make sense. Often, such providers offer complete end-to-end UC solutions that come with a fixed list of carriers, phones, a basic UC web client, and other associated equipment.
For Service Provider A, who is just starting out, this simplicity is attractive, especially when they consider their other costs. To be fully up and running, Service Provider A likely needs to spend money on billing platforms, data center space, firewalls, servers, data switches, support staff, and associated maintenance fees. At a point between 1,000 and 2,000 seats, however, the math changes.
With Service Provider A, 500 seats are typically not enough for them to make any monthly profit. In this scenario, cost per user is on the high side – think over $40. On the other hand, at 2,500 seats, our research demonstrates that Service Provider A will make significant monthly profits. With cost-per-user down more than four-fold! The higher they go, the better the profits and the lower the per-user costs. If you look at the ratio between 500 seats and 2,500 seats, we find that Service Provider A will move past the break-even mark into profitable territory anywhere between 1,200 and 1,800 seats.
So, what does all this mean for smaller-size service providers? Well, the obvious point is that platform providers, such as netsapiens, become a preferred partner a lot faster than many in the industry think! Though a white label provider offers simplicity to service providers just starting out, they can make more money using their own sessions license much sooner than they have likely been led to believe. Our research shows that with your own sessions license, as your business scales upwards, you can experience exponential profit growth and a decrease in total costs for each user.
What the numbers we report demonstrate is that at some point, the simplicity of the typical white label UCaaS provider’s business model turns into an inconvenient rigidity that stifles your incentive to grow.
At netsapiens, we believe in selling universal sessions licenses based on concurrent sessions. Not per-seat like every other UC platform provider. As we’ve noted in a recent blog post, the sessions-not-seats licensing model enables service providers to oversubscribe their PBX. And this is the key to profitability.
In fact, we’re now seeing oversubscription rates of 25:1, up from 15:1 in 2016. Right now, for one session license, you, as a service provider, can assign 25 seats to it. We make it so you want to keep adding new end-users and growing. This is different from providers that bill per feature or per seat, in which case there’s no extra incentive to scale upwards, because fixed costs keep increasing.
Speaking of costs, we recently launched a new Managed IaaS product. That’s right! Now, instead of purchasing, operating and maintaining your own infrastructure, you can let us do that for you. This can improve your time to revenue by 66% and reduce your costly UCaaS workflows by 77%. Taking this major cut in costs into consideration, the Managed IaaS route basically means that the number of seats at which a service provider can become profitable with SNAPsolution is likely even lower than our research is suggesting. Watch our webinar on the 5 Reasons Service Providers have shifted their UC platform to M-IaaS:
Here’s the bottom line. We give you the freedom to grow and generate exceptional profitability. While white label UCaaS providers have their charms for service providers just getting into the UCaaS space, they should only be considered a short-term gateway. Where netsapiens, on the other hand, is your long-term investment. If you’re with a white label provider right now and currently sitting at under 2,000 seats, give us a call. Make the switch today. You won’t regret it!