Conquering Challenges Amid Growth Opportunities

In this time of post-pandemic transformation, two sentiments sum up the current zeitgeist of the office technology industry: major challenges, but major growth opportunities. On one hand, hiring – and more importantly, retaining – quality talent is the most difficult it’s been in recent memory. On the other hand, hardware sales remain elevated above pre-pandemic levels for many, and segments such as cybersecurity are red hot. 

More competition for limited labor

In a BPO Media pulse survey of office technology providers that asked what their greatest challenge is, the same concern was top of mind over and over.

  • Retaining and hiring employees
  • Hiring sales reps for the next generation of sales
  • Hiring in leadership positions
  • Finding salespeople and technicians

Getting sales teams that have been used to talking about copiers to become more comfortable selling IT services, cyberthreat protection and VoIP services

Hiring the right people

In all, over 60% of respondents said hiring quality people and retaining them is their business’ biggest challenge. This competition is particularly acute for more specialized employees, such as salespeople. There’s also downstream issues such as maintaining morale amid this labor shortage. When it comes to hiring and retention, office technology businesses aren’t just competing harder with each other, but also against businesses in the wider labor market for an increasingly small pool of labor. Work from home comes into play here, too. Businesses aren’t just limited to hiring from those in commuting distance, but their competition isn’t just limited to local businesses anymore either. 

We can point to how the pandemic permanently changed how we work, or temporary economic headwinds such as inflation, but ultimately demographics are key. The percent of working age (ages 15-64) Americans is currently hovering around 62%, down from 2007’s peak of 67.3%. And when it comes to prime age (ages 25-54) labor force participation – the demographic that office technology businesses hire from most – April’s rate of 83.3% exceeded pre-pandemic times (February 2020’s figure was 83%). Businesses having to spend more and work harder to hire and retain the best and brightest isn’t temporary: it’s the foreseeable future, and perhaps even permanent.

Supply chain issues are mostly resolved

This labor shortage is only one of the vises squeezing profit margins in the office technology business. Supply chain issues are mostly resolved, but they remain a nagging problem with some OEMs. One dealer, for example, told me that they’re having difficulty upgrading some of their A3 and A4 accounts. Even without supply chain delays or shortages, increased labor and material costs often mean MFPs cost more at a time when declining print volumes leave many businesses trying to spend less on printing services. 

The office technology industry isn’t powerless against the tide of demographics. Tools like AI will allow employees to offload more tedious tasks and ultimately be more productive. As I predicted at the start of this year, “sales teams are going to start using OpenAI ChatGPT to do everything from creating the perfect sales script for every occasion to providing higher levels of help and support on demand.” OpenAI released the newest iteration of ChatGPT in March, with another update arriving in fall 2023. Improved chatbots could also improve the customer experience. 

The cost of the unknown

Navigating transforming workplaces isn’t a new theme, but the office technology industry is in the midst of particularly existential changes. The pivot to monthly recurring revenue and managed services has exposed a revenue/work mismatch for some office tech providers. As one survey respondent put it, “It’s one-sixtieth of a payment per month but most of the work and costs come in the first 18 months.” Labor shortages and tight margins don’t make getting past this initial hump any easier. 

Selling something you haven’t sold before also brings its own learning curve. Office tech providers don’t need only break/fix technicians, they also need employees to staff the IT support desk. These IT employees may also need additional training to stay up to date with the latest business technology needs, and processes will need to be streamlined as dealers expand thier portfolios. And when it comes to pricing for relatively novel products and services, dealers are still fine tuning pricing. Too high and customers won’t bite, but too low, and a dealer – and their competitors – may find themselves leaving money on the table while they’re stuck with a five-year managed services contract that doesn’t justify the squeeze. 

Putting a price on cybersecurity

Make no mistake: these changes bring with them more revenue opportunities than ever. Software sales remain high, with more and more interest in security, whether traditional options like business surveillance or newer needs in cybersecurity. In a recent PwC survey on cybersecurity, 38% of CEOs expect more serious attacks via the cloud this year, with 45% of security and IT executives forecasting a rise in ransomware attacks. This heightened need for cybersecurity also applies to office technology providers. As they increasingly offer more software services, they in turn become bigger targets for bad actors. Investing in their own cybersecurity even as they offer more cybersecurity options to their customers is critical.

Opportunity abounds

These new revenue streams are major growth vectors for office technology as workplaces increasingly look to the cloud. Businesses of all sizes are looking to transition to cloud-based printing or print management services, with IDC predicting cloud infrastructure spending will reach $144.3 billion by 2027. The vast majority (87%) of employees believe digital transformation is more important than ever, according to Microsoft’s February 2023 survey on business trends. The top three requests? Making businesses more agile (84%), making information more shareable and accessible (86%), and automating tasks (86%). The survey also revealed a major edge for office technology businesses, as 59% of employees felt that their tools aren’t integrated enough and make collaboration difficult. There’s a clear need to break down internal silos with bundled services and products from one provider, and many office tech dealers are well positioned to fulfill that need as they diversify their products and services.

Office technology dealers know they can’t afford to ignore those needs, and they’re shifting to capitalize on these new revenue streams.  When asked what new technologies they’re considering bringing on, only a small percentage said “nothing.” The vast majority are all in on bringing on new technologies to sell to customers: 

  • 23% cybersecurity solutions
  • 15% production print
  • 12% EV charging
  • 8%  VoIP
  • 8%  security cameras

This diversification is critical in future-proofing the office technology industry against new curveballs.

The industry isn’t just responding, it’s proactively looking ahead. Asked what they were looking forward to, the responses from office technology providers were varied: 

  • Net new business/growth opportunities
  • Acquisition possibilities
  • The cybersecurity opportunity
  • Team culture
  • Production print
  • Finally receiving inventory

The specter of consolidation can’t be ignored. For some office technology businesses, it may make more sense to flesh out their services rapidly through acquisitions instead of organic growth. But this must be balanced against the need for compatibility in company cultures. 

Zooming out, the zeitgeist of the office technology industry could be best summed up as optimistic. Common descriptions of the current state of their business from leaders included “bullish,” “unstoppable,” or even “the best is yet to come.”  (And yes, some described the current situation as “challenging.”) Overall, office technology leaders are reacting exactly as I would expect them to — excited not scared, focused on the opportunities and navigating challenges.  

Patricia Ames is president and senior analyst for BPO Media, which publishes The Imaging Channel and Workflow magazines. As a market analyst and industry consultant, Ames has worked for prominent consulting firms including KPMG and has more than 15 years experience in the imaging industry covering technology and business sectors. Ames has lived and worked in the United States, Southeast Asia and Europe and enjoys being a part of a global industry and community.