Here’s a true story. Two technicians walk into a 100-seat publishing company to carry out maintenance under a managed print contract. An employee asks them which reseller they belong to and one technician replies, “We’re from the vendor. It’s much cheaper buying managed print services if you cut out the middle man.”
For years printer vendors have trumpeted managed print services (MPS) as the way to higher margins, annuity revenues and multi-year contracts. The timing could not have been better as resellers watched margins on hardware fall through the floor.
However, the cost to entering managed print made it difficult for many to take up. Managed print requires technicians with vans, expensive inventories of parts, not to mention the effort of transitioning a business from a transactional sales cycle to the flatter cash flow of an annuity business.
Most printer vendors have their own managed print services divisions which target the enterprise and have encouraged resellers to seek out SMB customers.
But what chance does a reseller have when a vendor decides to target SMBs with their heavily resourced direct team?
There have been concerns about the ability of resellers to compete in the MPC space given the fact that so many print companies are going to market directly.
Anthony Toope, sales operation manager with Fuji Xerox Printers (FXP) Australia, concedes resellers have their work cut out in trying to compete with direct- selling manufacturers, especially for bigger customers.
“You have vendors that have a direct selling arm and also sell to the channel as well,” he says.
“Partners get a little bit left behind with MPS.”
There are more than 800,000 small businesses in Australia, with only about 5 percent engaged in any form of MPS. In contrast some 75 percent of companies with 500 or more staff have deployed MPS in some form.
According to analyst group Gartner, companies spend on average 3 percent of their total earnings on printing and document management. However, it has been shown in many cases that the deployment of MPS solutions can shave up to 40 percent off these costs.
And it would appear the message is well and truly getting through, with Gartner also reporting Australian MPS revenues were a little over $200 million in 2009 and expected to reach $326 million by 2012 based on a compound annual growth rate of 20 percent. Gartner projects that the Asia Pacific market will be worth more than $942 million by next year, surpassing $1 billion by 2013, at which point the US market is expected to be worth almost six times that.
Despite concerns about the ability of resellers to compete head-to-head with direct-selling manufacturers, most vendors are quick to highlight the channel as one of their most important weapons to meet what is expected to be a big surge in demand amongst SMBs for more sophisticated print services.
Fuji Xerox Printers, not to be confused with Fuji Xerox Australia, sells 100 percent to the channel. The company has 40 MPS partners in Australia, 15 of which came on board in the past 12 months. Looking to bring still more partners into the fold, FXP putting the finishing touches on a new channel program which it says will provide more surety for partners, especially in terms of managing more of the risk often associated with MPS.
“At some point in a MPS program someone has to take the risk for the coverage,” Toope says.
“In our case we just bill the channel partner for the customer’s needs.”
For instance, end customers have access to a cloud-hosted portal from where they can order consumables such as toner and paper. So rather than the office junior running down the road to Harvey Norman or Officeworks to buy toner, the client just orders it online.
“The end customer gets access to a portal which is hosted in the cloud,” Toope explains. “They [the customer] then has peace of mind in terms of visibility of products and cost.”
One of the more effective programs run by Fuji Xerox for the channel is PagePack. This is a simple way for resellers to on-sell an affordable, flexible, cost-per-print solutions which can be tailored to customer’s needs. Customers get a single point of contact for support, monthly invoicing, ordering and billing all delivered according to a pre-agreed service level agreement.
“Our position is to enable channel partners with the best quality tools,” says FXP Australia’s Toope. “We believe our channel partners are especially well equipped to manage the mid-market.”
Toope stresses that while there are many vendors out there with channel programs targeting MPS, many are merely adaptations of direct programs and therefore don’t address the key concerns of the channel very well.
“We are different from most of our competitors in that our program is a proper channel program. It’s built from the ground up, rather than being a direct program that’s been adapted.”
Chris Thorley, A/NZ marketing manager with printer company Oki, says there is definitely a problem for the channel with major vendors choosing to sell direct in certain markets.
However, he stresses Oki sells its MPS offerings exclusively through the channel, for which the company has developed an exclusive product range. “We’re certainly going the other way,” Thorley says. “We’re empowering our partners to deliver MPS. We need them to do it.”
Thorley spearheaded Oki’s push into managed print services over the past year with the launch of an Executive series range that can only be sold by its managed print resellers. Thorley says managed print has boosted revenue by 20 percent – and he says there is more to come.
SMBs’ needs are special
According to Richard Bailey, Hewlett Packard’s vice president for South Pacific imaging and printing, while the majority of the company’s MPS deployments in the enterprise to date have been handled directly, the SMB market demands an entirely different approach to sales and ongoing support which is often best handled by the channel.
HP offers four levels of partner program designed according to the existing experience and expertise of the particular reseller, with the company reporting that the model is proving successful in the market.
HP Laserjet CM6040 MFP
Last year HP, with its channel partner Imagetec, managed to help the generations-old Waterford Wedgwood Royal Doulton save 35 percent on its printing costs after implementing an MPS solution.
The company reported greater control and visibility over costs, better service levels and reduced
demands on the IT department. Things such as toner management were automated, relieving staff of the responsibility for monitoring it.
WWRD also gained access to detailed data to support the analysis of demand and matching print services with the needs of the business as well as enabling the review of supplier performance. Before the deployment, the company had 23 printing and copying devices for 120 staff, all of which were largely being managed separately. Now it has just the one invoice for all of them.
HP has identified this end of the market as presenting huge opportunities for MPS. In fact, according to Bailey, HP is actively seeking to limit the number of MPS customers it serves so as to free up more resources to target the SMB space. “The reason is to be able to extend our reach and move deeper into the SMB space.”
Key to this, he adds, is developing an understanding of the key vertical markets for MPS.
“This very much influences our discussions about growth. In terms of partners it allows you to say who has expertise in this vertical, while it also applies to geographic issues,” he says.
Among the key verticals being identified in the MPS space are real estate, financial services, legal, medical and several levels of government.
Within these verticals it is expected new opportunities will emerge for suppliers to market new and emerging technologies from 3D printing to QR/Color code and context-enriched printing. QR/Color code enables the printing on multiple surfaces of coloured patterns designed to interact with mobile phones and other devices, while context-enriched printing allows for targeted messages to be incorporated into printing and other document management activities.
Both present exciting new possibilities for marketing and communications. Cloud-based printing services are also expected to really take off in the next few years, especially in industries where there is an emphasis on mobility. Voice operated devices are expected to find favour within a broad spectrum of industries.
According to Ed Elliff, MPS manager, Lexmark Australia, while there is “a lot of activity currently in the channel space around MPS, . . . there are many road blocks for resellers to navigate.”
The company says it has made significant investments in consumable and inventory management in a bid to reduce the risk for its channel partners. “Lexmark takes on the risk and resellers gets to maintain customer relationship.”
There is an argument that big vendors lack the resources to give smaller clients the attention they deserve. Depending on the program, it may not be a big jump either to augment an existing usage-based program with value-added services or to add MPS to an existing portfolio of offerings.
Furthermore, as decisions about printing are increasingly made by IT managers and not office administrators, traditional IT resellers are viewing greater opportunities to enter the MPS market.
“There’s a huge number of SMBs, and resellers already have relationships in this space,” says IDC
lead analyst Trevor Clarke.
It ain’t vacuum cleaners
The other side of the coin though is that MPS offerings are increasingly being subjected to far greater scrutiny than in the past and must therefore be more rigorously designed. “With the IT manager, they have real financial accountability for these things,” says Mark Davies, group business analyst with listed ICT company and printing specialists CSG. “They have to demonstrate value for the business.”
But while the debate continues about the role of the channel in MPS, the fact remains that it is only those companies which strike the right balance of skills and technology that are going to make any headway in this market.
“Many organisations are discovering that it [MPS] is a little harder to deliver than it is to sell,” says Neil Tilley, CEO and co-founder of print specialists Upstream, a wholly owned subsidiary of Fuji Xerox Australia.
“If you’re going to be a quality MPS provider are you still going to sell product the way you used to?
“MPS salespeople need to be genuinely interested in helping customer solve problems rather than being that foot-in-the-door ‘vacuum cleaner’ salesman. MPS is not a side line – it is a business.”
Tilley also advises that MPS providers have a clear idea about the sort of company they would be most able to serve. “Identify the size of customer and industry verticals. Providing MPS for a company with 50 staff is quite a different proposition to managing a company with 300 staff.
“The mistake a lot of SMB providers make is to say ‘yep, we’ll do it all’.”
According to CSG’s Davies, one of the more common oversights in the deployment of managed print solutions is that not enough attention is given to the importance of managing change, both for the customer and the supplier.
Davies says that for most resellers looking to enter the MPS space, they need to fundamentally change the way they do business; how they market, sell, deploy and support. At the same time they need to guide their clients through the process of changing how they think about printing and document management.
“A lot of people underestimate the changes involved in rolling out an MPS solution,” Davies says.
“When you change the way that people print you change the way they do business.”
The big opportunity for resellers, especially those just starting out in MPS, is to differentiate themselves from established print suppliers, many of whom have long become accustomed to customers simply paying their invoices, and for whom the new paradigm in business printing may be difficult for them to embrace.
Jason Ganis, co-founder and managing director of Smart Print Fleet Management, says that bad printing practices and bad worker habits are rife in the SMB market in Australia.
He notes, for instance, the tendency for staff to go ahead and order new printers without consulting management or the IT department.
“It’s not unusual for companies to suddenly find they have hundreds of ink jet printers,” Ganis says. And usually this sort of carelessness spills over into alarming page costs.
“Smart Print has uncovered this following internal audits, sometimes finding machines costing 12 cents a page instead of 1. “We’ve even found ink jet printers costing around 25c per page.”
Managed print rises on down economy
Undoubtedly one of the key drivers for the MPS market was the global financial crisis (GFC).
“What the GFC did was put cost saving on the agenda and MPS was one of the few ways you could deliver savings immediately,” Bailey says.
But the question being asked in certain quarters is now that the worst of the financial crisis is behind us, will demand for MPS continue to grow or will companies start slipping back into complacency?
“But we are going beyond just cost,” Bailey says. “Now there is much more discussion about environmental impacts such as reducing energy and general sustainability.”
While cost will always be an important factor guiding decisions about MPS, the market is definitely moving away from a transaction- based approach to a service and solutions model, which in turn is presenting opportunities for resellers to develop more tailored offerings, in turn generating more attractive annuity streams.
“Over the next five years suppliers will simply just ask, ‘How many pages do you want?’ And that is what they will deliver,” says Michael Rebiffe, sales and marketing manager with established printer distie Distribution One.
“It’s turning all the way towards solutions.” He adds that many of the channel companies servicing the printing market are merely selling consumables.
“If they don’t figure out a way to lock the client in for a few years then someone else will do it for them.”
Another important services opportunity for resellers eyeing the MPS market is security. CBS in the US recently conducted an investigation of the second-hand printer market and found alarming examples of organisations from police to health insurers having sold machines without cleaning the hard drives.
The situation in Australia is reportedly just as bad if not worse. A recent survey conducted by Smart Print found 60 percent of workers aren’t aware that many printers, copies and scanners have hard drives which can store documents, in some cases numbering in the hundreds of thousands.
Brands lose their lustre
One of the consequences of the transition to services- based MPS is that the actual brand names are increasingly less of a factor in the decision-making process.
“Twenty years ago brand was everything,” says Upstream’s Tilley. “But in today’s world customers don’t care about brand.”
And it would seem the vendors are perhaps a little less concerned about their own brands these days, with a number of big players selling each other’s wares in certain markets. For instance, HP signed an agreement in 2009 allowing it to market and distribute Canon’s range of imageRUNNER office MFDs and its imagePRESS production systems in several key markets including Asia Pacific. In the same year Toshiba entered into an agreement to sell HP’s entire line of laser jet printers in the US.
The average medium-sized organisation could very likely be using printers, copiers and fax machines from several different vendors. In many cases resellers with multiple vendor relationships will be better placed to deliver this level of support than individual vendors which, no matter what they claim, are looking for ways to push their own technology.
But this is much easier said than done.
Ultimately it comes down to who has the smartest software, with a number of larger vendors making significant investments in companies with strong document management suites over the past few years.
Unlike most software suites provided by printer/copier companies, Canon’s Uniflow now boasts a universal driver which allows companies to manage contracts and technical monitoring of a range of different brands.
A year ago Lexmark bought US ECM specialists Perceptive Software for $US280 million. The main reason for the buyout was Perceptive’s ImageNow enterprise document management suite.
HP Open Extensibility Platform (HP OXP) is an enterprise software development platform providing a device layer, management layer and workflow layer. HP OXP was bolstered two years ago when the company bought Exstream Software solution from American Capital Strategies.
Gartner notes that it will be some years before MPS software matures enough to deliver the sort of integration and management that most organisations demand. Meanwhile, interest is increasing in so-called open- platform, or “smart” MFPs, which are essentially devices which sit between an organisation’s paper and digital work processes.
“As MFPs become more accepted by IT organisations, clients will demand more applications and more seamless integration with their other corporate systems and workflows,” according to Gartner.
Meanwhile, the print industry locally and internationally continues to see more and
more consolidation as companies seek faster routes to market while growing their
customer bases.
There has been a fair amount of consolidation in the local and international printing market over the
past few years, with more to come. The most prolific acquirer, CSG, last year bought up Xerox dealerships in its home town of Darwin as well as in Brisbane. Last year it bought the subcontracting
rights to around 10,000 Canon machines in Australia in an unprecedented deal worth around $31 million.
In 2008 it bought Canberra-based MPS veterans ATI, and last year bought Konica Minolta New Zealand. Also in the local market, Fuji Xerox Australia last year bought Upstream, one of Australia’s largest independent MPS specialists.
Several major vendors have also made significant strategic investments over the past few years in a bid to augment their technology portfolios and extend their customer bases. One of the biggest plays was Ricoh’s $US1.6 billion acquisition of US print distributor Ikon in 2008.
However the MPS landscape evolves over coming years, one certainty is that it will be very different to how it looks today.
“Our industry is in significant state of change,” notes Upstream’s Tilley. “And it will continue to evolve faster in the next couple of years than it has in the last 20.”
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