Sink or swim
By Heike Dieckmann
Do or die, that’s the message when it comes to managed print services. MPS has become the OP must-have of late. In this first of a series of MPS articles, OPI explores why it’s so important and what dealers in particular can gain from jumping on the MPS bandwagon
Not a week goes by without another study out on managed print services (MPS), hailing its scope, scale and the opportunities that it offers. In its Global 2010 Market Shares & Forecast Study, MPS marketing intelligence firm Photizo Group predicts that the global MPS market will grow to a phenomenal $70 billion by 2014, up from a 2010 figure of $32 million.
And while the US is currently by far the biggest market for MPS (see ‘Total MPS Revenue by Region’, page 63), this will not remain so, with Europe predicted to overtake the US by 2013, accounting for 44% of the total market by then, versus 43% for North America and a rapidly growing, but still relatively small, 10% for Asia Pacific (and 3% for Latin America).
Having said all that, these high levels of growth in the next 3-4 years will likely be followed by market saturation, with the growth of new business development expected to slow down after 2014.
The message is loud and clear – now is the time to jump on board and become a player in the MPS game.
MPS has always been somewhat linked to the office products industry, but for a long time – well over a decade now – it’s been the realm of the global hardware OEMs. Predominantly through direct relationships with large international corporations, OEMs like Hewlett-Packard (HP) created what was ultimately termed MPS, programmes that, in a nutshell, helped customers manage their print environments more efficiently.
By doing that, the OEMs started a new, more expansive relationship with their customers, away from a purely transactional, product-orientated arrangement to a service-based proposition, often building brand loyalty in the process.
The premise of any MPS solution today lies in the proactive support and continuous improvement of a company’s print environment, including printers, copiers, scanners, fax machines (and increasingly MFDs) plus all their parts, supplies and maintenance. In its basic format, the end-result should, if done successfully, enable firms to:
• monitor multiple printers from a desktop
• manage service calls
• receive alerts when supply levels are low
• reduce total print network costs by as much as 30%.
Photizo’s CEO Ed Crowley says: "In a non-managed environment, companies would typically have four to eight vendors represented within their fleet. We also found that companies often have one imaging device for every two employees. So if you’re a company of 500 people, you’d have 250 imaging devices scattered around. It’s chaos."
As organisations sought to optimise their fleet of printing devices, they began to realise that MPS would not only establish longer-term cost savings, but also bring their print environment up to date and manage it better.
The scope of MPS is broad-based and, at the top end, can be extremely technically demanding and labour intensive. From a basic fleet analysis and assessment over simple cost-per-page contracts to automated toner replenishment, service monitoring and document life cycle management – with the right programme in place customers can pick and choose the elements most important to them (for more details on the programmes available, see the forthcoming March issue of OPI).
Photizo devised what’s widely known as its Expanded Customer Adoption Model (see right). In this model, MPS is defined as going through three stages. According to the firm’s tracking study of more than 1,500 MPS engagements, over 67% of these engagements today are in stage one or two of the overall process – optimising infrastructure, right-sizing the fleet and making sure that it’s managed well.
Stage three, adds Crowley, is still primarily driven by the vendors, rather than the reseller channel. "We’ve just completed a channel MPS selection study in North America. It looks at the capabilities of dealers, IT resellers, OP resellers, etc. What’s interesting is some of those channels actually have the ability to deliver stage three, but most aren’t. They just aren’t marketing or pushing it very well."
In addition to their direct approach, many OEMs – HP included – are now actively seeking partner programmes with resellers as well as wholesalers to push the concept of MPS into the SME arena. Market research firm InfoTrends in fact believes that medium-sized businesses constitute the huge untapped market in MPS terms, certainly the segment with the highest area of growth over the next few years.
And this is where the real opportunities lie for independent OP dealers. Who better to provide an added service like MPS than the channel whose sweet spot has traditionally been exactly this customer segment? Precisely those SMEs are already buying products – office supplies as well as consumables – from dealers through SYNNEX, Supplies Network, United Stationers and SP Richards. What’s to stop them from taking it one step further and offering MPS as well?
Creating a comprehensive print service programme from scratch is undoubtedly a complicated and costly undertaking, but with the help of the aforementioned wholesalers – all four of which already have programmes in place that end-users can use and adapt through their dealer partners – it’s become a feasible option.
As the MPS movement gathers momentum, there’s a real danger of being left behind. Many so-called hybrid dealers have already made it their core business to provide MPS solutions to companies large and small. Canada-based LaserNetworks is one such company. Having introduced its trademarked MPS Cost-per-Page programme to the market in 1996, today it is one of the largest independent MPS companies in North America.
The demand on the customer side is clearly there, but not all dealers realise that it’s a real opportunity for them. SP Richards’ PrintSmart Specialist Jennifer Huckeba says: "For many dealers, interest in an MPS solution is initially driven by a desire to defend their existing business, but once engaged they soon see it as a means of capturing new business. Our biggest challenge is helping dealers realise the sense of urgency behind MPS. Dealers that aren’t currently up against competitive MPS programmes in the marketplace simply don’t have the same sense of urgency as those that are already facing it and fighting for business. We often have dealers tell us that they they’re in jeopardy of losing a large customer to one of their competitors’ MPS solutions. If we could give one piece of advice to our dealers it would be ‘don’t wait’!"
Associate VP of Document Solutions at SYNNEX, James Luquire, believes it’s often a question of attitude: "Going down the MPS route takes dealers from a transactional to a contractual selling motion and requires commitment throughout the organisation. But if they continue to sell merely transactionally, margins will certainly continue to erode. If, on the other hand, they adopt the contractual selling model it can protect their margins, protect their installation base, build a lucrative annuity stream of both loyalty and revenue, and protect products that are their core. For those that are not in MPS, their printer, ink and toner businesses are somewhat at risk and it’s only going to get more aggressive."
Colorado, Denver-based Source Office Products has embraced MPS with enthusiasm over the past five years (for more details, wait for the April issue of OPI). But rather than enjoying its pioneer MPS status as a competitive advantage, Baer DeMaio, Director of its MPS division OneSource, urges fellow independent dealers to not miss the boat. "Our biggest fear is that the tidal wave of MPS is coming," he says. "It’s not here yet, but it’s coming, and if independent dealers in this industry are not aggressively pursuing MPS fast enough, it is going to emerge as a product and service offering of the copier or IT sector and the OP industry will have missed the wave.
"Yes, we have an advantage at the moment, because nobody else is doing this in our industry. Right now, it’s us against the copier guys and we’re winning because they don’t have the relationships that we have inside the accounts. We see those people every day, with our toner, our trucks, our drivers. But the copier people now start training their sales teams to be in there every day too to manage that toner business and that’s a real concern."
Most importantly perhaps, it also makes financial sense. Says Photizo’s Crowley: "In every case, committed and hybrid dealers are more profitable than traditional dealers by a significant portion. In fact, they typically generate margins in excess of 35% and 40%. And not only do they typically drive more revenue, but their traditional businesses – for example dealers that have both an MPS business and a copier dealer business or even IT business – actually start to be more profitable. It’s a result of better operational efficiency across the company."