MPS & MSP
The Converging Worlds of Print and Managed Services
Managed print services and managed services are two different offerings; however, more and more companies who provide MPS are broadening their offerings to include more managed services, while MSP are offering MPS. In both cases, these companies are facing challenges, but they are also seeing revenue increases and more client interest.
- By Raegen Pietrucha
- 10/01/2011
“The best laid plans of mice and men …” — well, you know how it goes. Or do you? No matter how deeply a business speculates about future obstacles and attempts to prepare for what it thinks can be expected, the unanticipated appears, throwing a stick in the spokes.
Take the printing industry, for instance. Even after recent mergers and acquisitions, it’s composed of a large number of somewhat specialized players who’ve been at it for years. There are OEMs who invent and patent equipment. There are dealers who sell boxes. There are supplies vendors. There are technicians who service devices. These players and more interact with each other to various extents — partnering or competing — and in general, they have prescribed roles to play within the space (e.g., providing equipment or supplies) that paint the overall landscape with distinct definition, outlining who will compete or partner with whom and in which ways. In other words, everyone knows what to expect from each other in this industry.
Or, more accurately, they used to know. Such is not the case today — and this probably stems from the game-changer known as managed print services. Whether you believe the technology that made devices “smarter,” the economy that caused companies to re-evaluate their budgets (including money for printing), or some other reason is ultimately responsible for the evolution of the space, MPS has allowed previously rigid business borders to be crossed, at times turning former partners into opponents and heightening the degree of competition already present between old adversaries. “It’s probably been most challenging to the copier dealer because it’s brought in other industry services providers that used to not really be competition, and it’s lowered the price that they could conceivably (get) for business in their traditional business model,” said Darrell Leven, VP of sales and marketing for FMAudit. “If a national or local total solution print, copy or MSP provider comes in and locks in that business revenue, it affects … other entities for years to come.”
And while the marketplace used to at the very least be the exclusive domain of these entities (despite the fact that their relationships with each other were changing), MPS also brought with it an entirely new set of competitors the industry had never seen before: managed services providers (MSPs). “(MPS is) a natural fit for service providers … who are looking to sort of penetrate their customers more, get more revenue out of their current customer base,” said Corey Simpson, CompTIA’s Member Communities director. Mythos Technology is an MSP in Temecula, Calif., that began offering MPS in May for this very reason, instead of leaving print profits on the table another year. “As an MSP, if we understood MPS a little better, we could’ve made a whole lot more money over the past few years,” said James Laszko, chief technology officer at Mythos.
Similarly, however — and maybe just as unexpected — those with roots in MPS have a prime opportunity to claim formerly uncharted but lucrative territory now, with lessons gleaned from MPS providing the springboard into a larger pool of managed services. “Managed print gave us some perspective that we wouldn’t have had had we not been in the managed print space to see the opportunity that we have to bring solutions to customers that don’t have them in place today,” said Jeff Dotzler, director of professional services at the Gordon Flesch Company, an MPS and office equipment provider in Madison, Wis., that announced its new IT services offering on August 4.
As the marketplace and the technology in it continues evolving, more doors will undoubtedly open that enable both MPS providers and MSPs previously confined to their original specialties to offer similar — and competing — solutions with greater ease. Leven pointed out the opportunity that very much exists today for MPS dealers because of the fading boundaries: “A lot of dealers have grown their business exponentially because they’ve been able to lock in and capture incremental services revenue that they hadn’t before. … It’s a complicated industry to some; it’s the best thing that’s ever happened to others.” Crossovers are the new black when it comes to services in general, though — including movement both from MPS into managed services and managed services into MPS. “You’re seeing a push right now on both sides to expand into the other’s offering,” Simpson said. “It’s a natural fit for either one or the other to grow out.”
What impetuses inspire MSPs to tread on new turf, and vice versa? What difficulties are encountered during these evolutions? And perhaps most importantly, what are the implications of such crossovers with respect to the future of both industries?
Mythos’ move into MPS
Technological changes in printing devices have caught the attention of many MSPs looking to seize new business opportunities, and Mythos was no exception. “Copiers and printers up until the last few years have been non-networked, nonsecure devices. They’ve been something that just sits on someone’s desk and spits out paper with ink on it. Now we can actually plug it into the network, and we can do more fun things with it,” Laszko said. “You’re able to touch (devices) without being there, and I think that’s a real big key.”
Since monitoring print devices remotely is now possible, Mythos decided to seriously consider entering the MPS arena — securing this new profit stream. “That whole idea of recurring revenue is pretty cool to me,” Laszko said, “so I’ve always looked at managed print as something that, if it didn’t hurt too bad, would be a really neat thing to put in our bag of tricks.” Plus, he recognized that if Mythos wasn’t seizing the financial opportunity MPS presents, there would most likely be someone else close behind waiting to grab it … and then some. “Not only were we leaving the potential revenue on the table, but we were also inviting a potential competitor in (from) that traditional printer or copier business trying to get into being a technology (provider),” he said.
At an Autotask conference in Miami, Laszko spoke with OKI Data, whom Mythos later contracted with as its MPS partner. OKI’s Total Managed Print Program is modular and customizable, complementing Mythos’ business model and goals for future growth, Laszko said, and since MSPs are used to getting bolt-ons to their businesses from third-party vendors, he felt the company hadn’t really faced any difficulties in adding MPS to its mix from an implementation standpoint. That’s not to say there were no challenges associated with the new venture, though. “We need(ed) to wrap our minds around the fact that managed print is nothing more than managed services for imaging devices,” Laszko said. “Quite honestly, the biggest thing that was stuck in my mind with managed print was, if we get involved, we’re going to have to go touch the printers, and we’re going to have to change the toner.” How would Mythos address these issues?
As is true for many MSPs, Mythos simply didn’t have the workforce to service devices. On top of this, like anyone interested in entering an asset-management industry for the first time, Mythos knew — and feared — the possible money it could lose on service calls regardless of who responded to them. “There is a sort of … association made with printers that these devices require a lot of servicing, and so there’s fear that … that additional service component takes away from … potential profit and margin,” said Bob Palmer, director of managed document practice at Lyra Research. “I could see where there could be some hesitation there, especially if you’ve never serviced them.” In the end, Mythos’ solution to this problem was to utilize its partner’s service module and just perform monitoring and maintenance functions with respect to printing that it also handled remotely to manage its other services offerings via the same systems it had been using all along. “(OKI’s) doing all the heavy lifting,” Laszko said. “What we’re doing is just linking the stuff together.”
In a few short months, Mythos has experienced MPS success with both pre-existing and brand-new clients. Previous customers have responded well to the incorporation of MPS into current managed services being delivered to them and want to buy from Mythos in particular because the company has already established itself as a trusted technology partner with these clients, Laszko said. With new customers, MPS has been a fantastic way for Mythos to get a foot in the door with its original specialty because once clients see the benefits of MPS, they’re willing to let the company manage additional services.
Mythos has witnessed a month-to-month revenue increase of approximately 10 percent since it began offering MPS. Laszko disclosed that MPS margins have been two to six times greater than those typically seen in the IT world. “We’re getting an extremely high rate of return for the amount of effort we’re putting into the program,” he said, “and as other people in the industry start to see that, I think they’re going to embrace it and really start building it as a more included feature in their offerings.”
Simpson agrees, but he noted that for some MSPs, there might be less complicated opportunities to secure first — such as those that leverage the same systems, procedures and staff that an MSP has used before — before pursuing MPS because of the efficiencies associated with this choice. “But eventually, you’re going to get to a point where managed print is sort of the next big opportunity for you to jump in,” he acknowledged. “I don’t think it’s ever a poor investment. The question is, is it the next best investment for your company?”
The Gordon Flesch Company’s move into IT services
Advances in technology have also played a role in helping MPS providers begin to offer more managed services. The ability to monitor several devices remotely (illustrated in the MPS world by data-collection software, for example) as well as new solutions enabling proactive support (exemplified by such things as toner replenishment alerts) prepared the Gordon Flesch Company for delivering a broader managed services offering — what the company refers to as its IT Services. “I don’t see that we’ve had to necessarily make a transition from MPS to managed IT as much as it’s an ongoing evolution that we continue to develop into more of a services organization, and managed print and managed IT are really two components of that,” Dotzler said.
Customer demand for more comprehensive solutions was one catalyst that inspired the Gordon Flesch Company to branch out from MPS into additional managed services, and the company took the task on gladly. “We really saw … an opportunity to provide more solutions to our existing customers to help them achieve their goals, help them be more productive, and to build deeper relationships,” Dotzler said. This move into IT services was also fueled in part, however, by the discovery staff made at industry seminars that new opponents — MSPs — had come onto the printing scene. “We recognized that what we’ve always thought of as our competitors were still going to continue to be in that space, but a whole new group of people were going to be entering what we traditionally felt was our core space and offering more solutions to our customers than we had been,” Dotzler said. Instead of trying to beat them, the Gordon Flesch Company decided to join their ranks by providing its own IT services offering, so what might have been an obstacle has subsequently become a multifaceted opportunity for the company.
The Gordon Flesch Company recognizes that the shift that has taken place in client mindset over the last few years enables the company to bring its expanded set of managed services to the market more easily than ever before. Dotzler thinks that the Great Recession forced organizations to seriously reconsider the delegation of business processes they’d grown comfortable conducting themselves. Reassessing what truly needed to be done in-house and what could potentially be performed by an outside vendor to achieve maximum efficiency, he feels, led customers to be open to an entirely new, more interdependent type of relationship with providers they’d formerly kept confined to certain realms. “I think it’s less of the technology that allows us to deliver these services and more of the customer perception of what they can gain from a trusted partnership with their vendors. The perception change has allowed customers to see that the Gordon Flesch Company can be more of that trusted advisor in this space,” he said.
Just because its involvement in MPS provided it with valuable perspective and helped it establish a trusted-advisor status with clients, though, didn’t mean that the Gordon Flesch Company wouldn’t have hard work ahead of it when it came to developing the broader managed services offering it intended to eventually sell to current customers — and this is typical, Lyra’s Palmer indicated. “(MPS providers) have their foundation in print, but that doesn’t necessarily mean that they can quickly transition to managing other network services,” he said. “It’s a challenge both ways.” The Gordon Flesch Company approached building its new offering by hiring a sales team specifically dedicated to IT services that possessed the expertise needed to succeed in the arena; it took significant training and administrative time to get the new division off the ground.
The company is optimistic about its new service, which it anticipates will be in full gear within the next six to 12 months. “It’s the right investment at the right time because organizations are not only looking for the service, but they’re looking for the service from the right kind of partner,” Dotzler said. He views the Gordon Flesch Company’s future business opportunities much the same way Laszko does, but from the other side of the coin. He believes IT services will appeal to the Gordon Flesch Company’s MPS customers, with whom the company has already forged a trusting relationship, if it’s right for them. Conversely, he thinks clients initially contracting with the Gordon Flesch Company for IT services will be more inclined to engage in a discussion about MPS once that advisor status has been established with them. While either of the Gordon Flesch Company’s solutions can work independently, Dotzler noted that the offerings leveraged in concert with each other also create a terrific overall solution.
Although having more services to offer a client is certainly to any provider’s benefit, it’s again important that a company properly assess whether or not it really has what it’ll take to support multiple managed services. “Thankfully, we work for an organization that has the scope and the commitment to invest in not only the resources in terms of people, but the resources in terms of technology,” Dotzler said. Not every company has this, however, which is why Simpson emphasizes the importance of self-assessment before attempting to broaden business horizons. “It’s a very different person who goes in and works on a printer than somebody who goes in and works on, say, a server or some other general IT service that’s out there,” he said. “You have to have somebody who has the mindset of either A) they want to expand their current knowledge, so they’re willing to take training and do extra classes around whichever of the two fields that they’re not currently in so that they can learn about that, or B) you have to be large enough so that you have specialized individuals who can just focus on print or just focus on the other opportunities.” He suggests a simple gap analysis — detailing what you’re already good at and what bases you’d need to cover to expand your business without going under — to determine if your company is really ready to dive into offering more managed services, whether it be through building new resources in-house (as the Gordon Flesch Company did) or partnering (as Mythos did).
What might the future look like?
In spite of the fact that printing’s been declining, MPS — and the competition within it — is clearly on the rise. “I don’t think there’s any question that competition will not slow down on the managed print side,” Dotzler said. “I think there’s plenty of organizations that have been standing on the sidelines thinking, ‘Do I really want to get into this?’” This includes those traditionally in the print industry as well as MSPs.
But Palmer indicated that, even though this is the case, not all MSPs are actually in the position to get involved in MPS. For instance, it’s possible to be a strong MSP but not have the requisite service infrastructure for providing MPS, he said. The areas any given MSP can specialize in are many — network management, Internet hosting, application management, communications services, systems management, etc. — and consequently, not every MSP is equally qualified to provide MPS. “There’s a ton of companies out there that are positioned as MSPs, and if you think, ‘What percentage of all those companies are now taking on managed print?’ the percentage is really low,” Palmer said. “But I would also add that managed print as an offering is growing rapidly, … mostly among those who have either the service infrastructure in place or the outsourcing relationships in place to manage and service those assets as well as some sort of … supplies (or) distribution fulfillment arm.”
While it may be easier for particular types of MSPs to move into MPS, the transition will still require a sizable investment in education and training — which might be a turn-off for even those MSPs otherwise capable of taking on the task. “It’ll be interesting to see how many managed service providers jump into this space and realize if it’s something that they want to stay involved in,” Dotzler said, “just because it’s a whole new animal with logistics and partnerships and training and all the things that they haven’t been used to — no different than the new area that we’re venturing into ourselves.” With the same hurdle of training and education presenting itself to MPS providers interested in moving into the MSP world, Palmer feels partnering and consolidations are inevitable. “There (are) lots of opportunities for partnering. There (are) also opportunities for acquisition and consolidation,” he said. “I think in our industry, no one can ever go wrong in saying, ‘We’re going to see consolidation.’ There is no question that’s going to happen.”
As partnering and consolidation take place, however, how might the various channels be reshaped by such activities and crossovers? Will MPS still exist on its own 10 years from now? Depends on the person you ask. “There will probably always be a place for individual offerings,” Dotzler believes. “It … becomes a little bit more of a challenging value proposition than an organization that can offer multiple options, but at the end of the day, you have to do them well, and if you don’t do them well, you’re probably prone to any kind of competition.” Despite the truth of the latter part of that statement, Palmer doesn’t hold out much hope for independent offerings. “I don’t think that MPS exists forever as a stand-alone program,” he said. “While managed print today is kind of viewed as a change mechanism, … (it’s) really just a stepping stone for what people need to evolve to more managed IT services, managed business process outsourcing, document workflow — all of that.”
If what Palmer believes ends up being the way these industries shake out, does this imply that partners or those specializing in the less inclusive offering, MPS, will be pillaged? “The only way that I see that being an issue is if the manufacturer tries to capture the market from dealers and from independent people so that they can cut out that middleman,” Laszko said, referencing Compaq’s decision to do just that in the ‘90s as an example of such a fear becoming reality. But he’s fairly sure that this sort of move won’t be successful, even if it’s attempted. “The problem is, in any regional or localized market, it’s a relationship business. … By having these customers in these different managed service offerings and having all these different feeders in the pipe, so to speak, the customer’s extremely sticky.”
Simpson agrees. “What it really comes down to in the end is, there’s one person that owns the relationship with those end users, and that’s the solution provider, and those are the people that have the trusted consulting sort of relationship with them,” he said. “If I sign up an accounting firm, and we get 50 people on Google Apps, and then all of a sudden, the e-mail goes down, is the accounting firm going to call Google, … or are they going to call me? … And the answer is obviously the solution provider; that’s who they’re going to call. You own that relationship. Google literally doesn’t have somebody in-house that’s going to manage a 50-person shop who has e-mail go down, … and they don’t want to; it’s not scalable for them.”
Deanna Estes, director of marketing at the Gordon Flesch Company, similarly feels scalability plays a big role in maintaining a secure hold on clientele. “Scalability is really important,” she said. “That’s a real benefit of working with an organization that is privately held and is really focused on delivering a full solution for the customers. I think with your larger manufacturers, they’re just not going to be that invested. They’re not going to be able to deliver at that level, especially with small organizations.”
Once again, ensuring long-term business success boils down to scalability and strong relationship foundations — regardless of whether a company started off in MPS or as an MSP. “Rather than solution providers winning out over managed print or vice versa, you’re going to see people who own the relationship win out,” Simpson said. “So whoever is that most trusted advisor at a customer that is either right now doing managed print or right now doing general IT — those are the people that are going to win out when it comes around to what offerings or who they serve go with in the future.”
This article originally appeared in the October 2011 issue of The Imaging Channel.