One of the UK’s more prominent software-as-as-service success stories, Ffastfill, announced today that it has received an offer to buy the company by Pattington, part of Dublin’s Ion Group. Pattington previously acquired another UK company operating in a similar space, Patsystems, so this looks like a consolidation play. Ffastfill’s directors have recommended the offer, which values the company at £106m – a premium of 32% on yesterday’s price.

We first wrote about Ffastfill in some depth just over a year ago. All that we said then, still applies – in particular the issue of scale. Few, if any SaaS companies are making much profit today – even the mighty Salesforce.com. Although Ffastfill operates in a very specialised niche with few direct competitors (unlike Salesforce), the SaaS model still doesn’t allow it much room for manoeuvre on pricing: many of its clients compare Ffastfill’s headline (subscription) cost with the price to install a desktop client from its on-prem competitors, while ignoring the cost to install and run the server-side component, which comes from a different (IT) budget. Ffastfill, on the other hand, has to absorb the cost of servers, operation and the rest within its SaaS subscription fees.

Yet we also know that Ffastfill’s customers love it – we’ve talked to them. But there just aren’t enough of them (yet) to give that looked for scale economy. While the company’s been working to improve its offer, building a bigger customer base in this market is a slow process. So, being part of a bigger group should help bring more scale quickly.

That said, for a fiercely competitive small company with a charismatic and independent-minded CEO like Hamish Purdey to be subsumed into a larger group with an erstwhile competitor, of sorts, can bring all sorts of problems: culture clashes, taking the eye off the ball in product support and development – this is all well-known territory. But scale economies should help to raise those elusive profits and give the company – and its investors – the returns they have undoubtedly earned through their hard work.