OPI: MPS has been around for a while so it’s already proven its staying power. But is it something that the OP channel really needs to engage with?
Steven Swift: Be in no doubt, MPS is not just a temporary phenomenon, but represents a fundamental shift in the way organisations buy and manage print. As you say, MPS has been around for over ten years now, and is fast approaching a point where it will become the standard business model for print. You can see this from forecasts made by all the major market research and
Photizo Group, for example, shows that MPS will account for over a quarter of the office printing market in EMEA by 2017. As this is for the whole of EMEA, which includes less developed markets, the MPS share will be higher in the more advanced markets of Western Europe.
OPI: What is the likely impact of this on revenues and margins?
SS: It is not just that transactional print revenues will decline, the other important point is that the mix of revenue in an MPS contract is different, with services and solutions growing fastest and also attracting the highest margins.
Over the past five years, IDeAs estimates that MPS services and solutions have almost doubled as a share of the growing MPS revenue and now account for over 20% of the total.
Think of it this way: the sales pitch for an MPS contract is about the customer achieving savings, typically in the range of 25-30%, by rationalising and managing the print fleet more efficiently. The savings quoted refer to hard costs, ie hardware, consumables and break-fix. If large numbers of customers are reducing their expenditures by 25-30%, it follows that the market must decline by a commensurate amount.
OPI: But do I really need MPS if my target audience is the SME sector?
SS: It is certainly true that when MPS first got going, it was mainly for large corporate customers and it stayed more or less that way for several years. However, within the last 2-3 years, there has been a growing mass of evidence of SMEs also becoming aware of, and understanding, MPS. The Quocirca chart below illustrates this point.
OPI: So how should an OP dealer get started to be ultimately successful?
SS: The first piece of advice must be not to start unless you are serious and totally committed. MPS involves a significant change of business model, with major implications for all parts of the business, including people, processes, infrastructure and software tools. That said, OP dealers have some advantages over other MPS providers, through their intimate knowledge of their customer base and their logistics capabilities.
OPI: Is there any harm in waiting a year or two longer, to see how things develop, before deciding whether to really commit to MPS?
SS: A good question, but in this case I believe that being overcautious may represent the greatest risk to future business prospects.
The most straightforward MPS sale is to a customer who is a first-time MPS buyer – the fleet is typically unmanaged and presents large and fairly obvious opportunities for rationalisation, with potential for significant savings to be delivered relatively easily. However, as the market matures, there will be fewer first-time buyers left. Already in the UK market there are indications that we are close to a crossover point, where the majority of sales opportunities will be to existing MPS users.
The point here is that a sale to an existing MPS user can be much tougher. The obvious rationalisation gains have already been made, and to persuade the customer to shift, the new provider has to work much harder to make a significant differentiation.
Market research also shows that rates for renewal of MPS contracts with the same provider are currently running at well over 90%. Customers, as well as providers, invest a lot of time and effort in setting up an MPS contract and they are reluctant to go through the whole process again unless they see a very good reason to change provider.
The implication is clear. OP dealers need to seize as many as they can of the first-time buyer opportunities while they still exist and turn them into long-term loyal customers. Otherwise, they will be left scrapping with other new entrants, to persuade existing MPS users to switch provider. This is a land grab.