Vendors: If You're Ignoring Managed Print Services, You're Leaving Cash On The Table

Solution providers are leaving cash on the table if they cling only to product sales and ignore the potential recurring revenue – and margins – that come from selling managed print services (MPS).

With MPS adoption still relatively low in the SMB market – around 30 percent by generous estimates – there is a lot of room for growth said Greg Chavers, vice president of north American sales with Lexmark, Lexington, Ky.

"The upside is that there's great upside. There's a great growth opportunity for partners to pursue managed print services with their particular customer set," Chavers said. "The issue is you're going from transactional business to contractual business."

Not only that, but channel partners who disregard the managed print services opportunity are leaving open a "side door" into their customers for other solution providers to step through, said John Reilly, vice president of U.S. channel sales at Xerox, Norwalk, Conn.

"If you're treating print as a third-tier category still, like it's just a box and a commodity, your competition's going to find that side door, and they're going to offer a value-based service at pretty good margin," Reilly said.

The push to get partners to create that sticky, managed print relationship with their customers was the hot topic of discussion at a Printer Roundtable hosted by CRN at XChange 2018. Channel executives from three of the industry's top print vendors: HP Inc., Lexmark, and Xerox weighed in on why their partners are slow to adopt managed print, and what each company is doing to grow it.

Reilly said managed print services are the best way to capture a customer's repeatable business, like supplies and break-fix, which could otherwise go to a discount supplier. Through a layered services approach, solution providers can create high-margin, value-added engagements, Reilly said.

"Supplies replenishment, has great margin opportunity," he said. "You go to the next level of actually doing design services and consulting services and sustainability services, that's another consulting fee and margin that you can layer on top, and then if you actually start to manage the vertical software, it's another opportunity."

Dan McDonnell, vice president of U.S. Print Channel for Palo Alto, Calif.-based HP, said a lack of education of the sales force is one of the reasons partners are not more aggressively pursuing managed print opportunities, but the danger is that if they don't act now, they will be out of sync with the needs of their customer base.

"There is risk if partners are not investing in the right ways, if they're not educating and training their sales force to go after the managed print business," McDonnell said. "That's where the customer's going. It's not us so much, and it's not the channel. It's the customer."

And while the service opportunity is strong, there's still a good market for product sales, according to NPD's Quarterly Technology Monitor Survey. As of July, 2018, 54-percent of small businesses surveyed said they plan to buy a printer in the next 12 months, which is up two percent from last year, and up nine percent from last quarter. Twelve percent of those businesses planned to purchase through a solution provider, which is up 14 percent from last quarter.

Overall, the inkjet and laser printer market was up 1.2 percent from a unit perspective from January to July versus a year ago, NPD said.

Jeff Bryant, vice president of operations at Dallas-based Cesco, a solution provider and Lexmark partner, said while there is a lack of education about managed print services, the larger issue facing solution providers is how to compensate the sales force in a managed print model.

"I really think it's an education/[compensation] plan issue," he said. "I think a lot of times your sales reps get comped on the box, and maybe a little bit on an extended warranty. Not everybody comps on clicks. Not everybody comps on percentage of pages. It's a tough way to manage a comp plan when you do that. A lot of the sales reps out there, they mainly get comped on the box. That's why they're pushing it."

Lexmark's Chavers said figuring out the compensation model is the critical piece for partners to selling managed print.

"The most important piece is the financial piece," he said. "No matter how you put that together, you've got to structure it so that you're able to still sustain and hopefully improve the margins that are going to support your business as a partner going forward. So that's a crucial point: all of this expertise that you need in order to – if you haven't already invested – get into this business."

Josh Justice, president of Just Tech, a Xerox solution provider in La Plata, Md., said that while many solution providers understand that embracing MPS will drive growth, they are held back by fear of the new and unknown.

"Embracing something new can be seen as scary or costly but from my experience embracing managed print and utilizing tools like Xerox's Partner Print Services, growth can be realized, the return on investment is quick and it is not as complicated as many think."

Justice told CRN he expects his company's managed print services revenue to grow more than 50 percent this year, reaching $2.3 million in total MPS revenue.

"The best thing about this revenue is that it is recurring," Justice said. "It keeps growing every month!"

Reilly said Xerox's solution to easing partners into selling MPS is to let the partner take the workload that is most comfortable for their business, and then have Xerox take the rest.

"Xerox Partner Print Services is that modularized MPS solution that basically says break/fix level one, supplies replenishment, whatever the portion of MPS it is that you'd like to do as a partner, based on your financials, your capabilities, whatever infrastructure you have or want to build, we'll do anything you don't want to, and then allow you to take that sale as a top-line revenue sale," he said.

At Lexmark, Chavers said the goal is to help partners move from being a salesperson with a box, to becoming a trusted advisor.

"You're looking to become a consultant to the customers, a trusted advisor, and you're going to help them impact their business workflow in a positive way," he said. "We're looking for more and more customers that are looking at us to manage their entire output infrastructure. So, it's not just the devices, the supplies, proactive consumables management, services management, but it's also the print servers, it's also the drivers, it's also the output management software. So, it's managing that entire output infrastructure."

HP's McDonnell said partners who fail to adapt risk being left behind.

"The evolution is happening now, and for the partners to differentiate themselves, they are going to have to commit, invest, and step up," he said. "It's moving pretty quick. Customers are asking for it, and I do think there's risk if partners are not willing to invest and go after that business."