Magazine Article | April 13, 2016

SaaS Model Pays Long Term

By The Business Solutions Network

This ISV passes up short-term money for long-term recurring revenue from SaaS contracts and payment residuals.

Those with a long history in the POS business have witnessed the influx of new tablet-based software companies within the past few years. While many of these companies are still playing catch-up when it comes to features and functions the old school software companies provide, they have some advantages in that many were born in the cloud, have no old code to support, are nimble, lean, and hungry. Glen Blanch, owner, of Premier Systems, developer of POSi-tab Pro, a POS software for Windows 8 tablets, is one such ISV. A good example of how his business model is playing out can be seen with an installation he did for Chuck’s Bicycle Repair in El Paso, TX.

Blanch recalls that the owner of the bike shop was looking for a POS system with integrated credit card processing that could manage work orders for bike repairs and manage special orders for new bikes and parts. The ISV was passed a lead by payment partner Worldpay. For his solution, Blanch sold the bike shop a 10.1-inch Winbook tablet; mounted enclosure; POS-X receipt printer, cash drawer, and scanner; and a Brother 2-inch label printer.

According to Blanch, he won the business because he’s willing to customize his software. “Many other POS software providers don’t allow or perform customizations based on customer requests,” he says. “We strive to meet the customer’s needs through customization.” While many ISVs try to limit customization for customers, Blanch has embraced the idea of customization. “Any enhancements we make for one customer makes our product stronger for all our other customers, including those in the future,” he says. In fact, Blanch is such a believer in this model, that he oftentimes doesn’t charge for customizations. “Making a little money short-term doesn’t interest me as much as making a better product,” he explains. If anything, he says, the company charges enough to cover its own costs, but that’s about it.

That said, Blanch isn’t in business to give his software away. The base software costs customers $49 per month. Add-ons (which started as customer-requested enhancements) can cost a customer more each month. In the end, depending on what the customer needs, prices vary. No matter what the price, Premier Systems’ as-a-Service model yields recurring revenue for the company.

One important feature the bike shop owner found lacking in his previous software was the ability to generate labels for inventory. Premier Systems worked on building this functionality as well as some others for the bike shop. Today, the bike shop can print a unique bar code label for each bicycle and part. Every time a bicycle or part is received, he can scan the bar code and inventory is updated, along with a purchase history. All combined, the bike shop utilizes POSi-tab with custom add-on modules for work orders, special orders, inventory management, and serial number/shelf labeling. All in, Chuck’s Bicycle Repair is paying $89 per month for the POSi-tab software.

Additionally, Premier Systems receives a cut of the payment residuals that can really add up. To facilitate integrated payment processing, Blanch partnered with Datacap Systems, creating an integration with the company’s IPTran LT gateway device. The integration process took a week of developing and testing. Blanch says his experiences with other gateways who claim an easy or fast integration have come up short and cost him a lot of time and heartache. He’s also completed an integration with Datacap’s NETePay.

Once the Datacap integrations were complete, Premier Systems now has an EMV-compliant solution and the freedom to work with a variety of different payment companies as situations dictate. Most often, Blanch says, he prefers to use Worldpay. When involved in the payment portion of the solution, Worldpay gives the ISV a SPIF (sales performance incentive fund). Additionally, the Datacap IPTran device typically costs $300, but Worldpay has a usage program whereby the cost of the device is covered by the payment company. Rather than pocket the SPIF and $300 rebate, Blanch builds it into his proposals as a Worldpay promotional discount to sweeten the deal. Again, the ISV believes long-term recurring revenue from an on-boarded customer outweighs any short-term small sum of money. For the bike shop, the initial cost of the hardware portion of the solution was just over $1,000, which was close to break-even for the ISV.

Looking forward, Blanch says the bike shop is planning to expand its IT by adding a second lane that will only handle credit card transactions during busy times. Blanch says the IPTran LT Mobile device can accommodate multiple lanes so there won’t be any additional cost to process those cards. In addition to accepting credit cards, the Datacap integrations allow for gift cards, either through a processor (handled like a credit card) or as a stand-alone database. Premier Systems has opted to develop its own gift card module to keep fees lower for customers and increase the odds they’ll buy the add-on module — and add to the recurring revenue the ISV receives as a result.