Are Managed Print Services the future?

“At Kyocera, maximising channel partner growth is critically important to our success. We see no reason why resellers cannot succeed with larger organisations in this space, when driven by a sound strategic approach,” explained Marsh.

Late last year, Lexmark launched TotalCare, a channel offering for Managed Print Services targeting small and medium Australian businesses. TotalCare bundles the printer hardware, toner supplies, maintenance and warranty services and charges it as a flat monthly fee. Lexmark takes care of the rest. It facilitates the finance and handles all the phone support, break fix and toner fulfilment. Like other programs, the deal trades-off a lower, fixed price for the customer that helps the vendor by stopping consumable sales leaking to grey or compatible products.

It also helps to ensure the relationship between customer and supplier remains close to reduce the chances of vendor churn when the life of the current printer ends. Rather than focus on an ongoing annuity for the reseller, the TotalCare program puts the margin straight into the hands of the reseller when the deal is first signed.

It seems all programs are different though. The go-to-market strategy at Fuji Xerox is based more on the pay-per-print structure familiar in the photocopier market. Lewis said the program, called PagePack, is “entry level” and designed to be suitable for end-user accounts with between 10 and 50 printers.

Once you get up around 100 printers or more in the enterprise space, he said, the requirements and deals naturally get more complex and so more skill is required on the part of the reseller. With PagePack there’s some skill required, but not much, explained Lewis.

PagePack is designed specifically to reduce the barriers to entry for resellers and customers. Think of it as a white label Print Management Service offering. Fuji Xerox monitors the printers, carries the consumable inventory, handles delivery, takes the coverage risk, provides break/fix servicing and then leaves the reseller to set the price to the customer.

Unlike the Lexmark offering which is a set price for the term of the contract, the Fuji Xerox service is a private labelled price-per-print solution. Fuji Xerox charges the reseller a wholesale price and then the reseller is free to invoice the customer at whatever margin they choose.

“You basically install the PagePack software and the meter reads are sent back automatically to us. There’s no manual process for the reseller or end-user. We then give the reseller an itemised summary of all the customer contracts they have sold and charge them a wholesale cost. They recharge the customer,” said Lewis.

The idea is to take the risk and most of the hassle out of the service provision. Delivering a managed print service yourself means carrying out an audit and taking the risk on the variable costs associated with page coverage. The industry standard is about five percent coverage on a page, but this is just a rule of thumb, when it comes down to individual customers this could vary considerably so entering into a print contract without an adequate audit could end you in hot water.

The Lexmark TotalCare contracts tackle this by bundling only a fixed amount of consumables into the deal. If the customer goes over their limit they will have to start paying again, but with PagePack, Fuji Xerox is taking on the risk itself.

“The supplies are paid for up front. We take on the cost of the infrastructure, the cost of holding consumables, the cost of fulfilment and the risk on page coverage. The software can then be reseller branded, they control all the communication with the actual customer and they control the margin. There’s a lot of value-add for the reseller,” said Lewis.

The contracts are only available with new printers and it doesn’t include the printer itself. “It is only a warrantee and pages contract, they can bundle it with the hardware or de-bundle it,” said Lewis. So the customer can pay for the hardware up-front or the printer can be purchased under finance and charged back to the customer at a monthly interval along with the page costs.

There’s a potential sting in the tail here though as Ghai points out. It seems likely the attractiveness of these sorts of deals will hold only short-term appeal for resellers. Ultimately the channel value will be eroded just as any other margin erodes.

While vendors are initially making these entry-level print solutions available to a select group of authorised resellers, ultimately it seems inevitable they will become more widely available which will re-introduce margin compression back into the sale.

“The danger is that making it so broad based it will become analogous to the hardware,” warned Ghai. “If those packages are floated in the market, as they will eventually be, the competition starts and the margins will deteriorate,” he said, adding that you can imagine reseller organisations selling vendor-fulfilled Managed Print Services straight over the Internet on a wholesale price plus basis.

It’s something the vendors have obviously already predicted. Lewis emphasised that Fuji Xerox is vetting the resellers who can access the PagePack deal to ensure they are able to add value to the partnership, but it seems inevitable that once vendors are comfortable with these services as product packages, then more resellers will be encouraged to take them on.

For this reason, Ghai recommended resellers who are interested in making print services a strategic business direction should seek to partner with vendors who are able to offer training and opportunities to participate in more complex management solutions. If vendors want to go through the channel, they will have to offer some intermediate service solutions and then some more complex services.

Overall I think the channel has the ability to do more than it does, said Ghai, but if their core focus is selling they might not want to move away from that to take on service provision. However, if the vendors explain it to them properly, if there is adequate training available and if vendors make it worthwhile, resellers will respond.

Those who see Managed Print Services as an opportunity should try to work with a partner that will help them raise their skill levels and introduce them into accounts where they can focus on more complex modes of engagement rather than white labelling a solution from the vendor.

There are a number of vendor options in the printer landscape, so resellers should shop around before committing. If the vendor partner can meet the reseller half way as suggested then it will mean profits for the vendor and healthy margins for the reseller, who can also supply other goods on top of the printer sales, such as PCs and a wide range of peripherals.

Those reseller organisations who treat Managed Print Services as a more strategic direction may even choose to not partner with a vendor at all and avoid the pre-packed programs so they can offer unique services independently of a single vendor to avoid potential channel conflicts.