Lexmark CEO: We Are Looking To Build A Software Channel

Paul Rooke became Lexmark's president and CEO last year following the retirement of longtime leader Paul Curlander, and it's Rooke who's charged with growing Lexmark and its legacy printing and imaging businesses in a customer environment transformed by cloud computing and a greater appetite for business process and enterprise content management solutions.

Rooke, who has been with Lexmark since its formation in 1991, joined CRN Senior Editor Chad Berndtson this week in New York for a discussion of Lexmark's channel investment, its value proposition compared to bigger competitors like Xerox and HP, and how its acquisitions of Perceptive Software last year and Pallas Athena this fall align with its growth strategy. Here are excerpts from the conversation:

What we're seeing among Lexmark and your competitors is this move away from the legacy hardware-oriented printing and imaging-type definition of the business and more toward variations on business process management, outsourcing, managed services and other things that help you offer more customer value. Where is Lexmark on that journey?

I would not characterize it as moving away from hardware; I would characterize it as "adding-to." We're continuing to invest in our core imaging business, both mono and color, but what you're seeing us doing, particularly with the strength of our smart MFP, is adding design intelligence. What people have overlooked with the business of imaging hardware and the maintenance of those fleets is that if they look at it just as a fleet of copiers, they lose the value of looking at imaging infrastructure the way they would server infrastructure or PC infrastructure. You put in the right device and it opens up the other part of the iceberg, which is business process improvement. We're trying to make hardware more intelligent to facilitate an easier connection between the paper world and the digital world.

Your major competitors have made the leap in different ways; for example, Xerox is focusing on business process outsourcing with its ACS acquisition. Can you lay out Lexmark's value proposition to customers against competitors like Xerox and HP?

They have and they haven't. And unlike Xerox and HP and others in the hardware business, we own our technologies, as opposed to source our technologies. We can control things within the hardware in terms of instrumenting it or making it more intelligent, which gives us a big advantage. We do see them moving into more outsourcing and services, not necessarily business process technology. The way to think about it is we're adding to our toolbucket of technologies, as you've seen with business process management and enterprise content management, to help customers become more efficient. We're not in there asking them to outsource their business to us. We think we can add far more value by being the provider for them of combinations of solutions, as opposed to just outsourcing.

Many legacy printing and imaging resellers are trying to evolve their own businesses now. What are their biggest opportunities behind Lexmark?

At Lexmark, we move the vast majority of our products through the channel. The channel is very important to us -- it has been, is, and will continue to be. As we're evolving, we're looking to add to our channel partner set. Historically, it's been a lot of hardware partners, but with these more sophisticated solutions, we are looking to build a software channel with folks that can integrate and put them in. If they're out there, come see us. We're looking for folks who can help us. The channel is very much an important part of our future.

NEXT: Lexmark's Acquisitions, Channel Investment

Are you gaining new types of partners thanks to your Perceptive and Pallas Athena acquisitions?

We are bringing on software partners that we wouldn't have had exposure to before. There is good cross-pollination between bringing software opportunities to our partners, and vice-versa. There's a whole range of what I would say are consultative types of partners, some involved in very large deals, that we've engaged with in both software and hardware. Absolutely it's expanded our universe.

So the idea is to integrate those channels under Lexmark?

With the software channel, it's very different product content than selling a hardware product, so you have to have the skills; but absolutely [yes]. As we integrate Perceptive and now Pallas, we're working hard to make sure we've got single focal points with these partners.

Are there more acquisitions on Lexmark's horizon?

We'll see. We've talked about our capital allocation direction, and part of that is about setting aside capital for acquisitions if it makes sense for the company and our investors. What you've seen with Perceptive and now Pallas are adjacencies -- not something that is foreign to us, but is actually a very natural adjacency we've heard from our dialogue with our customers. You'll see more of that kind of thing as opposed to something out of left field. It's about building our capabilities and depth with customers, so stay tuned.

Buying Perceptive brought you into a software arena that wasn't in Lexmark's heritage. What then brought you to Pallas Athena?

Perceptive Software has a workflow component, and we started looking at how to strengthen that element with more sophisticated software, so that led us to Pallas Athena. Who knows where the path will always lead you. But the point, to us, is that these imaging technologies, if we do our job right and make them easy to use, they will be very powerful solutions for our customers.

Earlier in the presentation you mentioned the idea of "print less, save more" for customers, which as you pointed out, to a company that has its legacy in the printing business, is a little scary. Obviously the industry is moving in that direction, but what is the appetite for hardware-based printing these days? If I'm a printer dealer and I want to understand the customer opportunity for those traditional sales, how should I be thinking about it?

Printing is still part of our core, so don't misunderstand that we're walking away from it. We're not. It's still a very important part of what we do, we just thought rather than having a dialogue about "you have more content, so please print it" or "please print more and we'll give you a better price," we didn't want to be at odds with our customers. You're going to be printing, so let us help you print smarter, and we can also help you with some of these software solutions, perhaps. We feel best if we're on the same side of the table as our customers. We find we win more often that way, as opposed to beating our heads against trends that may not be trends.

Will the level of investment by Lexmark in channel programs increase this coming year?

Absolutely. As we grow our business, the channel is a very important part of our future.