by Charles Brewer, Actionable Intelligence

Industry watchers recognize printer and copier manufacturers have been gaining solid ground in the enterprise space for the past few years by marketing more services, including managed print and document management solutions. OEMs are constantly crowing to their stakeholders that they are generating more and more revenue marketing services to larger customers, and each month brings news of new contracts. While vendors may have successfully wooed enterprise clients, their penetration of small and medium-size businesses (SMBs) has been more limited. Going forward, however, I expect that will change and OEMs will reap more cash from smaller companies, thanks in part to certain initiatives announced in 2011.

Hardware manufacturers invested tens of millions of dollars last year in order to grow their services portfolios for SMBs, especially in the area of managed print services. Many of the industry’s leading names, including Brother, Hewlett-Packard, Konica Minolta and Xerox, made important acquisitions in the services space during 2011. Other firms, including Canon, OKI, Ricoh and Toshiba, also announced they are expanding and enhancing their service offerings along with their channel support so dealers can grab more of the SMB market.

M&A activity

The year began with news that for an undisclosed amount, Konica Minolta Business Solutions U.S.A. (Konica Minolta) would acquire the Redwood City, Calif.-based firm All Covered, which provides assorted managed IT services to SMBs. The deal was not related strictly to MPS, but representatives from Konica Minolta acknowledged that its managed print business could benefit from the deal in the future. All Covered provides server and desktop management services to smaller companies as well as on-site network support, consulting and a range of cloud-based services such as backup and disaster recovery. I expect that Konica Minolta will leverage All Covered’s relationships and its infrastructure to expand its MPS program.

The All Covered acquisition fits nicely with Konica Minolta’s plan to expand its services business, especially in the SMB space. In an early January 2011 post on CRN.com, which features news and information related to channel and solution providers, CRN reported that Konica Minolta aims to grow its services business by 100 percent over the next year or so. All Covered should be a great vehicle to propel such growth. CRN says the company had completed 16 buyouts in three years, and in 2010 it had revenue in the neighborhood of $60 million. The firm has offices in more than 20 cities across the U.S., and it continued to snap up firms in 2011. All Covered announced the acquisition of five more small IT service providers after its tie-up with Konica Minolta.

Brother also acquired a company from outside the hard-copy space to improve its offerings for small businesses. At the close of the year, Brother announced it had acquired Nefsis Corporation, a San Diego-based company that markets remote collaboration and conferencing software. Brother said it was investing to expand its support of SMBs. Although Brother was close-lipped about its future plans for the firm, it is likely the OEM will leverage Nefsis’ technology to build out its remote-management infrastructure. Nefsis offers cloud-based communications solutions under its own name as well as under the ePop and WiredRed brands.

In May, we learned that HP and Xerox made acquisitions to further their penetration of the SMB market with MPS products. With HP’s $14 billion acquisition of EDS and Xerox’s $6.4 billion purchase of Affiliated Computer Services, both companies have significantly expanded their services to enterprise clients. Now it appears that both firms are squaring off in the SMB arena and investing in companies that provide more services to smaller clients.

On May 25, HP announced that its Imaging and Printing Group (IPG) was acquiring the Salt Lake City, Utah, MPS provider Printelligent. The recently acquired firm operates in 39 states in the U.S. and says it can provide services to 728 cities. Representatives from IPG said it will use its Printelligent assets to deliver more services and solutions to channel partners that cater to SMBs. It appears that IPG is also looking at the MPS markets outside of the U.S. A representative for the firm said marketing products to midsize companies offers the “greatest opportunity for MPS worldwide.” Quoting numbers from IDC, HP reported that the MPS market for firms with between 100 and 999 employees is projected to grow at a compound annual growth rate of 14 to 23 percent over the next five years.

I expect we will be hearing a lot from the OEMs this year regarding accomplishments they have had pursuing SMBs.

Just as we received word that HP would purchase Printelligent, Xerox announced it had acquired NewField IT, a print consultancy and software solution provider based in Twickenham in the U.K. The newly acquired firm, which also has offices in Philadelphia, markets technology to help customers quickly and efficiently implement managed print programs. Through its purchase of NewField IT, Xerox can better support its channel partners with a more comprehensive set of MPS tools. During a conference call in November to discuss third-quarter 2011 financial results, Xerox CEO Ursula Burns told analysts that Xerox is gaining share thanks to its MPS activities. In addition to the NewField IT buyout, Xerox purchased a number of other small service and distribution firms last year to better service the SMB space. For example, in July, its Global Imaging Systems company purchased Xerographic Solutions, a Rochester, N.Y.-based Xerox dealer that provides managed print and other services to SMBs in New York and Eastern Pennsylvania.

Other key initiatives

We learned early in 2011 that Ricoh plans to invest $300 million over the next three years to expand its managed document services (MDS) business. The firm said on January 20, 2011, that it aims to generate $3.3 billion annually from MDS by fiscal 2013. Ricoh is looking to draw at least 28 percent of its total revenue from the sales of services by that time. The OEM hopes to achieve this growth largely by attracting more midsize companies to its MDS offerings. Ricoh said that it would add more employees to support its managed services business in the United States as well as invest in its MDS infrastructure.

It is unclear what the current status is of Ricoh’s investment plan, but it appears to be on track. In May, the firm said it would reduce its workforce by 10,000, and some of those cuts were made in the U.S. Many wondered if Ricoh would table its investment strategy until it got its financial house in order. In November, however, the company released Ricoh Managed Document Services (Ricoh MDS) 2.0. Ricoh indicated that the launch was the first fruit of its new “services-led business model” and restated its ongoing three-year commitment to enhance its global MPS business.

Last year, OKI Data Americas improved its Total Managed Print (TMP) Portal, a cloud-based suite of proprietary tools for dealer support. In June, the firm said its TMP Portal was expanded to provide nine brand-agnostic services that can be tailored to meet the needs of individual MPS models. The company says the tools in its TMP Portal are modular and dealers can use all nine modules or just those that meet their specific needs. OKI offers the Portal free of charge to its channel partners so they can assess, monitor and optimize a print management program for businesses and organizations regardless of size.

In August, Toshiba America Business Solutions (TABS) announced it was partnering with Lexmark to offer the Lexington, Ky.-based printer manufacturer’s MPS tools to the copier-maker’s channel. TABS incorporated Lexmark Fleet Manager 2.0 software into its Encompass fleet management program. The Lexmark software allows channel partners to analyze customer printing trends and service needs so they can profitably sell MPS to a range of different sized companies. Lexmark and Toshiba have been partners for a number of years, and the printer company supplies print engines to its Japanese client, which are sold under the Toshiba brand. Certain Toshiba dealers also sell Lexmark-branded hardware to augment their copier offerings with desktop printers in MFPs.

Canon U.S.A. also expanded support services for its dealers so they can successfully market MPS to smaller companies. In September, the company announced new professional services to assist its channel partners when negotiating MPS contracts and manage them once the deal is concluded. The services are designed to help sales teams in various phases of an MPS contract, including customer assessment and design, deployment and transition, support and management, and evaluation and review. Canon also launched its new Partner Transformation Program to help dealers transition from traditional hardware vendors to document service providers.

All this OEM investment will begin to bear fruit soon. I expect we will be hearing a lot from the OEMs this year regarding accomplishments they have had pursuing SMBs. I also expect that all the cash printer and copier companies have lavished on the SMB market will continue in 2012, along with more M&A activity. In fact, I think it will be quite an exciting year. Stand by!

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