As traditional revenue streams dry up and operational costs soar, office technology dealers find themselves in an urgent “margin call” — a critical need to reassess and reinvent their business strategies to maintain profitability. However, the conditions that are forcing dealers to reassess and reinvent their businesses are the same forces that are making it insanely tough to pull off.  

The road forward may look daunting, but it’s navigable. By embracing new technologies and business models, and getting a handle for the “new way of doing things,” you can turn the tide on your shrinking margins.   

Current challenges

Most dealers are struggling to deal with declining print volumes, increasing costs, and fierce competition — not only from other dealers, but also from direct OEM sales operations and other technologies that are eating up IT budgets. These challenges are making it difficult for dealers to make the necessary adjustments to remain relevant, competitive and growth-oriented.   

Declining print volumes. Office print volumes have recovered somewhat since the prime of the pandemic. Analysts at Keypoint Intelligence estimate that as much as 20% of annual print volumes are lost forever. From this new baseline, we can expect volumes to erode slowly at first, but increasingly faster as we approach the end of the decade. According to IDC, we can expect “page volumes to decline modestly” in 2024, followed by “steeper declines … in 2025.” With businesses doubling down on DX and eager to invest in AI solutions, reliance on paper — and thus, print — will decline proportionately. 

Price pressures and rising costs. Competition among dealers is at an all-time high, and it’s having an unsavory impact on the overall value of print. Margins are getting squeezed on two sides. On one side, there is less reliance on print, and its decreasing value limits how much money dealers can expect to take in each year. On the other side, accelerating labor costs and inflationary forces are increasingly driving up the cost of doing business. This uptick is not merely a bump in the road; it’s reshaping the financial landscape for dealers who are struggling to maintain margins while keeping pricing competitive.

Increased competition from other technologies. A dealer’s competition isn’t limited to the other print providers in its area. Over the last few years, as businesses threw their digital transformation initiatives into overdrive, dealers have been facing competition from other technology providers within their existing accounts. It turns out that the businesses that embraced digital transformation actually saw a lot of benefits. Processes are faster. There are fewer mistakes. Employees are happy that the annoying tasks have been automated and that they can work from home a few days a week. 

This is not great news for print. Digital transformation removes paper from the equation in many processes, which means print is less relied upon in your existing accounts. The number of processes that your hardware supports will continue to decrease, which will increase the difficulty of maintaining — let alone increasing — your existing average contract/deal size. 

As businesses see productivity gains, cost savings, and happier employees as a result of digital transformation, purse holders will want to double down on their investments and allocate more funds to digital transformation projects in other business areas. This can displace a significant portion of the budget that is typically allocated to print.   

The software provider that eliminates the paper from a given process is just as much of a threat to your bottom line as another print provider that wins potential new customers and displaces you from existing accounts. 

Don’t just preserve margins, grow them

How can dealers grow margins when the costs of operating a print business are increasing, competition is fiercer than ever, and the value of print is decreasing? The very challenges pushing you to innovate are the same ones making it feel like you’re trying to juggle flaming printers while riding a unicycle.

How do you pull it off? On paper, the answer looks pretty straightforward: transition to a services-led business model, embrace technology to optimize your business, and diversify your portfolio to meet your clients’ needs. It may sound pretty simple, but of course, it is not.

Transition to a services-led model. Print might be in decline, but it’s not going away. IDC predicts that print volumes will remain above 900 billion pages a year by 2027. To maintain profitability while catering to a commodified, crowded marketplace, many dealers are pivoting to a services-led, recurring revenue model. This model provides stable, predictable revenue through long-term service contracts that enhance financial planning and cash flow consistency. It fosters deeper customer relationships, increasing retention rates and expanding the customer lifetime value through continuous service enhancements and opportunities for upselling. By shifting focus from one-time transactions to ongoing service relationships, dealers can better align with customer needs and differentiate themselves from competitors, ensuring a unique position in the market. As background, I wrote about this transition on a more conceptual level, based on flexible consumption models.

A services-led model drives operational efficiency and encourages the adoption of innovative technologies such as automation and data analytics, which can lead to significant cost reductions and service improvements. It aligns with digital transformation trends, integrating digital and print management solutions that cater to evolving business environments. This approach not only helps in maintaining relevance but also paves the way for future innovations, securing a sustainable and profitable business model in an industry disrupted by digital advances.

This shift, while strategic, is not without its challenges. Take the cash flow problem, for instance. When you transition to a monthly recurring revenue business model, you only collect 1/60th of a payment per month. However, most of the work and costs (onboarding, deployment, sales commission, etc.) are incurred by the dealer over the first 18 months or so of a deal. This cash flow squeeze can be paralyzing, especially when you consider the costs of transitioning. Building up a large cash position in preparation for this type of transition can ease the pain so you can endure the slow cash flow as you build your customer base. Of course, that’s not always going to be a viable option. 

Embrace technology. To remain relevant and competitive, keeping an eye on new technologies is critical. Automation, enhanced visualization tools, and artificial intelligence are becoming necessities, both for successfully stewarding a growing business, and to building a portfolio of products that meet your customers’ needs. 

Use technology to increase margins. Technology is not just a cost, it’s also an investment that — if implemented properly — will pay itself off (and then some) through increased revenue and profitability. 

Today’s fleet management and service automation platforms are enabling dealers to save money and do more with less. For example, many of these platforms enable dealers to troubleshoot more problems for customers remotely. This enables dealers to increase their MIF to technician ratio and limits the number of times you need to dispatch technicians (this is an enormous advantage for dealers that operate in large geographic areas or who are having trouble maintaining staffing levels). 

We are also seeing the usage of AI to predict when toner will be depleted or when a part will fail. These predictions enable dealers to proactively ship toner replacements or dispatch techs to solve a small problem before it snowballs into an enormous problem. Other platforms leverage augmented reality to help dealers train technicians or to provide remote support. All of this technology usage adds up to faster, more efficient processes that lower your costs and maximize customer satisfaction. 

AI is also helping businesses up their sales and marketing game. It is being deployed to handle simple administrative tasks, routine client interactions, and forecasting chores. Not only does this free up sales and marketing teams from mundane tasks so they can focus on what’s most important (like cooking up the next big deal or campaign), but it will also increase the speed and accuracy of those tasks.  

If you can’t beat ‘em, join ‘em

A lot of dealers have been so successful because they were able to help their customers be successful. In a paper-driven world, that meant providing reliable, high-quality print with minimal disruptions and the lowest cost possible. But as we move away from a paper driven world to a digital one, print dealers need to look at updating their portfolio of products and services if they want to remain an important ingredient in their customers’ success. It’s time for all dealers to embrace the technology that is slowly eroding the value of print. Whether it’s selling and supporting digital transformation technology, or helping customers manage their overarching IT infrastructure, dealers need to find and solve additional pain points within their customers’ accounts in order to remain relevant. 

In a marketplace increasingly driven by digital transformation and technological integration, print dealers face a critical juncture. The journey toward maintaining and growing profitability, despite the waning traditional print volumes and heightened competition, is full of challenges — but it is far from insurmountable. By transitioning to a services-led model, dealers not only secure stable, recurring revenue through long-term service contracts but also foster robust customer relationships that are pivotal for sustained business growth. This shift ensures dealers remain indispensable by adapting to customer needs and by differentiating themselves in a saturated market.

Embracing and integrating cutting-edge technologies such as automation, AI, and data analytics into their business models allows dealers to streamline operations and ultimately reduce costs. This technological empowerment not only bolsters operational efficiency but also enables dealers to offer innovative solutions that align closely with the ongoing digital shift in business processes. By viewing technology as a strategic investment rather than a mere expense, dealers can enhance their service offerings, increase margins, and pave the way for future innovations. Ultimately, those who are proactive in adapting to change and seizing new opportunities will not only survive but thrive, turning the current “margin call” into a catalyst for growth and innovation. 

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.