How a Sydney MSP launched a software start-up

TechFlare is the example of a managed services provider that spotted the trend to the cloud early, made the transition to the annuity model, and evolved to become a software vendor.

Compatriots who have already trodden this path include professional services outfit Hands On Systems, with its Financials for Office 365 application, and Salesforce.com partner PRM Australia, which founded PRM Cloud.

TechFlare has quietly rolled out a business management system to tackle the fragmented market around ERP for office-based businesses, says managing director Geoff Olds. The business management software covers planning, marketing, management, CRM and workflow through to invoice.

TechFlare has poured in $800,000 to develop Working Cloud through its Indian programming team and is selling it for $199–$399 a month. The company is taking a softly, softly approach as it builds out features. Working Cloud includes 18 sales reports and sales funnels with new dashboards coming out in late February.

Olds says the biggest difference in making and selling cloud software compared with on-premise installs is holding back on upgrades until the software has been fully tested.

“You have to go slowly with cloud software. With on-premise installs, if something goes wrong you can go≈back and fix [the customer’s problem]. If you have 1,000 subscribers, [a bug in cloud software] impacts 1,000 people. We’ve got a window and opportunities but we have to make sure that the product is mature enough,” Olds says.

Unusually for a SaaS service, TechFlare gives customers the option to customise it; TechFlare takes on this work itself. A business analyst consults with the customer to create a blueprint for their custom solution and TechFlare’s agile development team brings it to life.

As Olds tells it, selling SaaS was inevitable for TechFlare. “We started the process of doing annuity models in 2004. I went to a CRN function in 2010 and they said what about your revenue models, you’re now doing things as opex. We’ve been doing it for years.”

TechFlare sits across a very broad base of services that includes telco, software development – web, mobile and custom – as well as professional and managed services. The company has recently restructured itself as a group so Olds can start hiving off divisions into separate companies.

TechFlare intends to sell Working Cloud through its own channel by piggybacking the partner ecosystem of cloud-accounting software Xero. These partners are more business consultants than break-fix service providers. Olds wants people “who understand business and understand Xero and understand teams”, he says.

“They understand that they can make some good cash around implementations, but as they build up 200 to 300 implementations, they understand there’s money to be made in support and services,” Olds says.

A Working Cloud reseller will need the right combination of IT guy to set it up and a consultant who can set KPIs for the staff. Apart from implementation and ongoing services, the partner will receive 20 percent commission.

Unlike other cloud vendors, Olds has been through the journey of taking TechFlare from transactional to annuity revenue model. His tip for handling the sales team transformation is to set a monthly budget, and only once they hit their number do they get a percentage of ongoing revenue.

TechFlare’s sales team is not just motivated by commissions but by values, Olds claims. Other incentives to promote a long-term view include an employee shares plan.

Why is TechFlare backing Xero rather MYOB? Nothing personal, Olds explains. “We don’t need to plug into Xero, and we will plug into [other accounting programs] down the track, but Xero is the key one. There are a lot of people in the Xero hemisphere.”

This evolution in the SaaS sphere shows the successful expansion of TechFlare, a company begun in Olds’ parents’ attic in 2004 and has since grown to 35 staff.

Over that time, TechFlare has landed in the CRN Fast50 four times, having appeared in the inaugural awards in 2009 when it turned over $1.3 million, most recently sneaking into the No. 47 spot in the 2013 awards with a revenue of more than $3.5 million, and is now anticipating revenues to get past $5 million.