Recurring Revenue vs Project Margins: What Actually Scales
13/2/26, 9:00 am
Why This Matters for Partners Today
For decades, many communications and IT resellers have been built around project-based revenues - selling hardware, installations, and refresh cycles. But the market is changing: customers are increasingly buying services on subscription, not hardware with one-off margins.
Cloud communications - including Unified Communications as a Service (UCaaS), analytics, and collaboration - is a subscription business model. That means long-term, predictable revenue but also a different set of skills and expectations.
The big question for partners is not whether recurring revenue matters - it’s how and why it matters more than traditional project margins. The answer directly impacts your business sustainability and competitive position.
Understanding the Fundamental Difference
Project-Based Revenue
- One-off sale (hardware, installation)
- Profit recognized upfront
- Dependence on refresh cycles
- Revenue cliffs when sales stall
Recurring Revenue
- Delivers predictable income over time
- Aligns with subscription pricing
- Encourages ongoing customer engagement
- Increases customer lifetime value (CLV)
Economists and industry analysts widely agree that recurring models create significantly more long-term value than project-oriented ones. For example, a study by Bain & Company found that customers on recurring revenue contracts can be worth up to 5–7× more over the lifetime of the relationship than those on one-off deals (Bain & Company, 2024).
The Business Case: Predictability > Peaks and Valleys
1. Revenue Stability
With project sales, revenue is lumpy:
- You may have spikes during refresh cycles
- Long droughts in between
In contrast, recurring revenue:
- Offers monthly predictable income
- Helps with cash-flow forecasting
- Reduces dependency on seasonal or cyclical demand
For a partner business, this means you can plan growth, hire staff, and reinvest with greater confidence.
2. Customer Lifetime Value (CLV)
Project margins typically capture value only once, at the point of sale.
Recurring revenue captures value every bill cycle. Even if the initial margin is smaller, the total value over time is far greater.
A simple example:
- One project sale at $10,000 today vs.
- A recurring contract at $500/month ($6,000 per year) - this becomes $30,000 over five years
That’s 3x the value, with the additional benefit of long-term predictability.
Customer Demand Is Shifting to Recurring Services
The world’s largest enterprises and SMBs alike are moving toward subscription models for communications and collaboration:
- According to Statista, the global UCaaS market is projected to grow at a CAGR of 12%+ through 2029 as organisations replace legacy voice systems with cloud platforms.
- A Forrester survey found that 78% of businesses prefer subscription pricing models for communications and collaboration services over traditional capex investments.
These trends are business-level choices, not technology fads. They reflect how organisations want to procure, budget, and consume services.
Why Some Partners Resist the Shift
It’s understandable. Switching from a project-centric to a recurring-centric model means:
- Changing sales incentives
- Rethinking pricing structures
- Adjusting operational support
- Reframing customer conversations
These are not trivial changes.
But the alternative - clinging to declining refresh cycles - exposes partners to margin erosion and long-term competitive risk.
How Recurring Revenue Actually Scales a Partner Business
1. Higher Lifetime Value
Recurring customers stay longer and transact more over time. They:
- Buy add-ons (e.g., analytics, contact centre, AI)
- Expand services as they grow
- Renew consistently
2. Stronger Customer Relationships
Contracts that recur encourage:
- Ongoing engagement
- Consistent touchpoints
- Opportunities to upsell and cross-sell
This builds relational value - not just transactional value.
3. Better Business Valuation
Businesses with a high percentage of recurring revenue attract stronger valuations from investors and acquirers because their revenue is:
- Predictable
- Measurable
- Less volatile
This matters if your strategy includes growth, scaling, or exit planning.
Debunking Common Misconceptions
“Recurring revenue means lower margins.”
Not necessarily.
- Initial margins on services may be less than on hardware.
- But total margin over time is almost always higher because of longevity and retention.
“Customers don’t want subscriptions.”
The data contradicts this.
- Subscription models are now preferred across IT and communications markets because they reduce upfront costs and align with operational budgets.
“Service delivery is harder than project delivery.”
Cloud platforms are increasingly engineered for partners to:
- Use streamlined deployment tools
Automate onboarding
Rely on vendor-managed infrastructure
This lowers operational lift compared to traditional hardware installs.
Positioning Your Business for Both Today and Tomorrow
You don’t need to eliminate project revenue entirely - but the future clearly favours hybridised partner portfolios where:
- Recurring revenue is the foundation
- Legacy hardware becomes a supporting role
- Partners offer services that customers depend on
This mirrors how end customers are buying and budgeting today.
Conclusion: Transform, Don’t Lag
Project-based revenue has its place in history - but the market’s momentum is toward services that deliver continuous value. Sure, recurring revenue requires a shift in mindset and capabilities, but it also provides:
- Financial stability
- Customer stickiness
- Higher lifetime value
- More predictable growth
For partners ready to embrace this shift, the opportunity is not just financial - it’s strategic.
