Xerox Channel Chief Peterson On The 'Huge' Push For SMBs, Apps And New Partners

The high-stakes drama at Xerox earlier this year hasn't slowed down the company's efforts at boosting innovation and expanding into new business segments with a broader set of reseller partners.

That was one takeaway from our visit this week with Xerox executives in New York, including Pete Peterson, president of Xerox Channels.

[Related: Xerox Launches New Printer Apps For Salesforce, QuickBooks, Concur]

The company said Wednesday that its line of ConnectKey-enabled devices will now include access to key business apps such as Salesforce, QuickBooks Online and Concur. In addition, partners can now sell and resell apps from the newly "e-commerce-enabled" Xerox App Gallery.

This week, Peterson sat down with CRN to talk about those moves as well as Xerox’s success so far at moving into small and midsize businesses with the help of a portfolio of A4 devices and an increasing number of solution provider partners.

“This isn't the old Xerox,” Peterson said. “We're a nimble company, and we're a high-tech company in a really hot space right now.”

What follows is an edited portion of the conversation with Peterson.

Should partners be leading with apps? How seriously should partners be looking into apps if they aren't already?

We're excited, from a channel perspective. This is exciting times to be at Xerox, with the major focus on apps. I do believe it's a differentiator in the marketplace. For sales professionals, any time you can differentiate your offering from a product perspective or a solutions perspective, it gives you a leg up. So I think our partners have embraced it. One early adopter [Just-Tech president Josh Justice] has literally built his business around apps. Not only to differentiate in the marketplace that he sells into, but it's also a revenue and profit stream for Josh and his company. His business model has changed significantly in the last 18 to 24 months, and it's really been because of apps.

We've had about 400 partners that have gone through this whole training, whether they decide to build their own apps, or acquire, or sell. So we're excited. When you look at other manufacturers in our space, I don't see these offerings.

How do apps fit with your efforts to recruit more partners?

In the last 18 to 24 months, we've had a major focus on attracting what we call ‘multi-branded partners.’ Xerox has a fairly unique partner ecosystem. We have our agents, which are mono-branded—we have a contractual agreement where they only sell Xerox. That model was built probably 25 to 30 years ago. And that's been very successful for us. But for us to get at a bigger piece of the market-share opportunity, it's with those multi-branded partners.

They come in two flavors. The first one is DTPs, or document technology partners. In the U.S. there are probably 2,100 to 2,200 of them. They're very print-centric, and in most cases not a lot of them are leading with Xerox. So we have signed up just shy of 10 percent of them—so just under 200—in the last 18 to 24 months. That business is growing for us. If they've got another manufacturer on their line card, and our products and solutions are a little bit more robust, it makes a difference.

Then the second route to market in that multi-brand space is the IT resellers. There are roughly 60,000 or 70,000 IT VARs in the U.S., and over 10,000 of them buy something that we sell. And we're only selling to maybe 20 percent [of the 10,000] today. That's a huge opportunity for us to expand our products and solutions into the marketplace. And again, apps is a great way to do that.

Are apps on multifunction devices starting to move beyond the early adopter phase?

Yes. I believe there are somewhere in the neighborhood of 70 apps that are now available. About 20 are geared toward the end user, and 50 are geared toward the partner. That's a significant difference from when I joined 18 months ago. We had maybe 20 apps. So we've grown by about 50. The second is, with our new App Gallery, that thing is unbelievable. It's taking the complexity out of the process of buying and even selling apps. … The recent launch of that App Gallery is going to have a huge impact on the growth of this business.

So you are seeing more partners making a significant business out of apps?

Absolutely. And I think part of it is, we couldn't see some of it before. If Josh [Justice] sold his app to someone else, that was a transaction that took place outside of our purview. We just didn't have visibility into it. Whereas now we have this central repository—that makes it easier for them, it gives them reach that they couldn't get to on their own. Now they have a platform to do commerce on, which should give them a much bigger aperture to sell their products and solutions. And then obviously it gives us a lot bigger, broad visibility into that activity as well.

How has adding A4 helped with your push into SMB?

It's been huge. When we launched our new ConnectKey products in March of 2017, the expansion into A4 gave us a huge footprint. We've had great success so far. It's like any new product—the first three to six months you're working out some of the supply chain [issues] and the market opportunities. But we've seen pretty significant growth. We track it pretty consistently, through a bunch of services, whether IDC or NPD. And we think our devices are making a difference as we've seen our market penetration expand pretty significantly. I think it's the product expansion, and the solutions expansion through our apps.

Xerox historically has always been viewed as a high-end, enterprise-type solution. And when you start throwing around the words ‘high-end’ and ‘enterprise,’ the first thing that comes to mind is complexity. We're on a maniacal [mission] to make sure we're driving simplification across our business. Whether that's our delivery, whether that's our supply chain, however we interact with our customers and clients—how can we drive a simpler approach to that? This isn't the old Xerox. We're a nimble company, and we're a high-tech company in a really hot space right now.

Do you think your competitors are vulnerable because they don't have these same app capabilities?

I can't speak for them, but I'm glad I'm on this side of the line. Because it is a differentiator. For example, the education app [allows] schools to become smarter and more integrated. Better productivity. I was also impressed with the app where you're able to scan a document and turn it into an MP3. Those are game- changers, in my opinion.

What are you doing to help bring more managed print services into SMB?

If you look inside of Xerox, our SMB MPS offering is the fastest-growing piece of our MPS business. The early adopters [for MPS] were the enterprise, which makes sense. But in the last year to 18 months, we've seen a significant adoption rate for SMB. We just recently rolled out our XPPS [Xerox Partner Print Services] offerings. I think we've enabled somewhere close to 100 partners in this fiscal year—we've got them certified and enabled so they can better understand the solutions and offerings. We see that as a great growth engine for us in the future. Xerox has been the forefather of MPS. We are the market leader from an MPS perspective, and we see that now transcending into the SMB as well.

The best way to reach the SMB community is through our IT VARs. That's who they sell to—80 percent plus of their revenue is coming from SMB. That's attractive to us. Xerox could never get there on our own. In my [IT VAR] business, 75 percent plus of that business is A4. A3 represents 25 percent. We're focused on driving that A4 platform through that IT VAR community.

How are you minimizing overlap between your mono-branded and multi-branded partners?

When we're signing up partners, we have a pretty structured process—we call it "heat maps." We have this intelligence tool where we're taking our data, taking market intelligence data, to where literally we have about 400 different regions in the U.S. And we go in and say, we know exactly what our market share is there. If we're in a market where our market share is sub-20 percent, we want to expand. If we're in a market where we have what I would call adequate coverage—25 [percent] or 30 percent—I'm not interested so much in signing on new partners. But if I'm in a market where I'm at 5 [percent] or 10 percent, I want to sign as many as I possibly can. It's very tactical. Even if we have a mono-branded dealer [in a region], but we're sitting at 5 [percent] or 10 percent market share, I want market share. So I'm going to co-invest with [mono-branded partners] to do more for us, but if that's not enough, then of course that's when you start looking at the multi-brand opportunities.

How have the leadership changes in recent months impacted your channel investments?

The investment piece hasn't changed and hasn't wavered. That was the piece that was attractive to me when I joined Xerox 18 months ago. And you're right, we've had a lot of changes in the last six months, starting with the new CEO, John Visentin. [He] has a strong channels background—he worked for IBM for probably two-thirds of his career, worked at HP in a channel environment. Mary McHugh, who he brought in next, is our chief delivery officer. Very similar—strong IBM background, also worked at Oracle and HP. Very channel-centric. Then, [President and COO] Steve Bandrowczak, who worked for Lenovo and worked for Avnet. So, channel background. Then most recent is [Chief Commercial Officer] Joanne Collins Smee—IBM again.

So you look at the common denominator—they understand services, they understand channels and the value of channels. And so for folks like myself, we're saying, ‘This is a great opportunity. You can't really go and expand this business until you fix the foundation.’