We recently had the opportunity to sit down with Mike Feldman, corporate executive vice president and president of North America Operations at Xerox, during the Executive Connection Summit hosted by MWA Intelligence and Technology United. Feldman is a seasoned executive with broad experience within two giants of the channel – HP and currently Xerox. The war for market share is on — join me in the SpeakEasy and learn how the battlefield is taking shape.
What are you the most excited about right now?
I think I am the most excited about Xerox’s opportunity in the SMB sector. We view the SMB market as a $14 billion opportunity in the U.S. for the imaging channel. We estimate that we have about 20 percent of that market share, or almost $3 billion of revenue from this sector, making us a big player. We know that we have the right products and solutions that are priced competitively to win because we have a multibillion dollar business in this sector already.
Through which distribution channel is that $3 billion achieved?
About $2 billion comes from Global Imaging Systems (GIS). We acquired GIS in 2007 and at that time it was getting about a billion dollars in SMB revenue. Now it reaches about $2 billion, so they’ve grown very nicely. Then we have more than a billion dollars that comes from our mono-branded agent channel as well as from other resellers.
Additional revenue comes from multibranded channel partners. The multibranded channel partners are the smallest part of our pie, but they are a huge part of the marketplace serving SMB customers, so we see enormous growth potential here.
You recently had the largest product launch in Xerox’s history. Tell us a little more about that.
We’ve rolled out two families of “workplace assistants” products — VersaLink and AltaLink, for a total of 29 products with one user experience. The way you scan a document or fax a document or make a copy or mobile print is now the same on all 29 products.
We’re the A3 marketshare leader from an equipment sale revenue standpoint — not by a big margin, but we’re No. 1. But in A4, we only have roughly 8 percent market share. That’s a big market growth opportunity. And, up until now, we’ve had a number of different products, and each had their own controllers. It wasn’t a consistent experience. It was hard for our partners to write apps or solutions for our products because they all used different controllers.
With this launch, now there are only two controllers – one for VersaLink and the other for AltaLink. And there is one user experience. We have the right security and the right mobility solutions; we have the right scanning solutions on the entire fleet of products. So now we have a huge opportunity in A4.
Even in A3 over the past few years, Xerox has not had the most competitive product for the entry level of A3, which represents lots of units. We now have a new entry-level A3, both mono and color, that we think is going to resonate very well with the marketplace. That’s very exciting. We have a new focus on the SMB, we have these new products and we have our MPS — our managed print services. We’re by far the market share leader in MPS. It is not even close — in fact, just to put it in perspective, our marketshare for managed print services in the U.S. is more than our second and third competitor combined. We’re the 800-pound gorilla when it comes to managed print services.
Now we have managed print services with the right A3 and A4 products and they are tuned to dealers who want to go after the SMB market. So am I excited? You can hear it in my voice! These are huge market opportunities for us. MPS is growing, A4 is growing, A4 color is growing especially, and SMB is growing. Those are growth opportunities.
Hasn’t your focus personally been on large enterprise?
I started my career at HP in the channel. I was a channel rep, calling on multibranded channel partners. So I have a deep respect for channel partners and what they do, especially in the SMB market. They play a critical role because the OEMs don’t have enough people to call on a lot of the SMB customers — we need channel partners. When we can make it a win-win for us and the channel partner, and then make it a win for the end customer — that SMB customer — that’s very exciting.
Every year at Xerox, we convene a three-year strategy planning session — it’s a big process. Last year was the year we decided that we’re really going to go after the multibranded channel partner community. Until now, we’ve had GIS selling Xerox and we have our mono-branded agents that are selling Xerox. We had not gone to the multibranded partners earlier because we felt that, firstly, we didn’t have the focus and investment dollars to really put into the channel to properly support multibranded partners. At that time we were a different, bigger Xerox. We were focusing a lot on business process outsourcing. Secondly, we didn’t feel like we had the full family of products, both A4 and A3, with a really well-oiled managed print service for the channel. We had it for the large enterprise but we didn’t have it for the channel. We’ve now put that investment and focus in place, and we’ve decided this is our time.
Yes, I am enterprise guy, you are right about that. But I am business first and foremost, and I can see the billions of dollars of market opportunity and the growth with the SMB. I love the channel — I really do. I had two roles at Xerox when I joined four years ago. I was in charge of large enterprise and I was also in charge of our global document outsourcing business group. That group is managed print services, not only for large enterprise groups but also for channel partners. So I’ve been with channel partners quite a bit.
We know what it takes to be successful in the channel. You have to put your arms around your channel partners. You have to train them. You have to give them programs. They have to understand how your solutions can make them money. You have to support them when they need technical support or they need toner cartridges. You’ve got to be there for them. You can’t let them down in front of their customers — that exposes them in a way that they don’t want to be exposed. So we know what it takes, and I think we are really ready for this opportunity.
We’ve signed up a lot of new partners this year so far. We’re having lots of conversations. We are also still buying dealers. We are actively acquiring.
BPO Media & Research tracks M&A activity in the channel and we have seen a lot of competition for buying independent dealers. Dealers are buying other dealers. Venture capitalists and private equity are pouring money into the channel. And then, of course, the OEMs are buying dealers, although we have seen OEM acquisitions scale back a little recently.
We haven’t dropped off on our acquisition activities. The GIS model is a great model. Tom Salierno, the CEO of GIS, won’t overpay. We let deals go that we feel are overpriced. We find the dealerships that have a good cultural fit. We look for dealerships where the owner of that dealership wants to stay with Xerox. We are not looking to replace the management team — that’s not what we are about. Tom’s formula works — he’s bought more than 40 dealerships at this point.
These business cases always outperform the average business case in revenue and profit — it’s all upside for us. If we can buy someone who is selling Canon or Ricoh or another OEM and we switch them to Xerox, it’s all upside — it’s all additional incremental revenue.
What do you see as the biggest challenge right now in the channel?
I think that the biggest challenge for dealers is how to move up the value chain and get proficient at workflow automation and content management, and expand from just facilitating putting marks on paper. Mastering workflow and content management and developing apps around these processes creates a very “sticky” environment. I think that’s what is going to be really important — moving up the value chain and developing the solutions.
So you think workflow is going to be really important?
I think workflow is going to be extremely important to the imaging channel. We call our solutions “workflow automation” and we’ve had triple-digit percentage growth in workflow automation solutions. We’re selling workflow solutions to the largest Fortune 100 companies and to SMBs through our channel partners. Everybody wants to automate these processes and make them faster and easier to integrate into their systems.
For enterprise customers there’s a tremendous amount of integration and professional services that have to go with workflow solutions because they all have proprietary systems. Most SMB customers, however, are moving quickly to the cloud. The cloud makes everything so much easier. These solutions don’t require the on-premise capabilities and a lot of the workflow apps are cloud enabled.
On the enterprise level, are you also seeing a shift toward the cloud? Or at least a shift to a hybrid cloud environment?
Yes. Absolutely. It might be a private cloud versus a public cloud, but for sure. Even within Xerox internally, our CIO is very much about the cloud. We currently have on-premise solutions that are very expensive and of course we’ve customized them so when the vendor comes out with revisions, we can’t catch up. It’s a mess. It’s also very expensive to maintain.
I think most IT departments, large and small, would say they spend 70 to 80 percent on sustaining their environment and only 20 percent on innovating, and that’s not a good place to be. You want to even that out to a 50-50 range if you can. I think both large enterprises and small and medium-sized businesses are moving more aggressively to the cloud. The cloud is getting more secure.
Security has been a very hot topic lately. How important do you feel it is for the channel?
It’s huge. We have a holistic approach to security that protects both the device and the network as well as the communication between them. MacAfee whitelisting, which constantly monitors and automatically protects against malware attacks, comes embedded in all AltaLink products. In VersaLink, we offer security set-up wizards for non-technical users. We protect all devices with authentication and encryption options. Security is incredibly important to Xerox and our customers. We’ve chosen to partner with best-of-breed companies like McAfee instead of building our own capabilities. We believe benchmarking with the industry standard is the best approach. Almost all of our customers already use McAfee, so they like that their solutions are embedded in our platform.
What are you investing the most in within the company this year?
This year and next year our big investments are in sales capability. We are adding sales headcount — feet on the street — for our direct sales organization. We are also signing up channel partners and spending to support the channel partners. All of this spending is to get more people on the ground that are selling Xerox.
We are also spending on marketing our 29 new products. It’s a big investment in getting the word out. Now that the products are here, we have to get the units placed, and quite frankly, A4 is a big investment. When you sell the box, you lose money on the box. We can make money back on the toner but it takes time — that’s a big investment area for us.
Workflow automation is a big investment for us as well. You’ll see us be quite acquisitive in this area. We are also partnering with Hyland. We’re one of their biggest partners — we’ve had a tremendous amount of success with them. We like the company a lot. Thoma Bravo owns Hyland, and they also now own Kofax and Perceptive.
It’s great for us on the Perceptive side because that takes one competitor out and we already have a great relationship with Hyland. And since Kofax is no longer owned by Lexmark, we can go back to partnering with them as well.
What would you consider your greatest work achievement?
I would say developing Xerox’s next generation managed print services strategy. I came to Xerox a little over four years ago and I was with HP for 24 years and working in the MPS market, so I knew the market very well. When I joined Xerox, I was joining the market leader in MPS and the first thing I wanted to understand was how Xerox was communicating that. I went to 10 different people and asked them for their presentation decks and got 10 totally different sets of material. So I got a group of people together and locked us in a room for three full days — I had just really met them two months earlier, but now they were all reporting to me. I said, “guys, we are the market leader, but we don’t have a clear message that is consistent around the world to our customers about what we stand for in MPS and where we want to take MPS.”
We created the new program. We came up with the next generation managed print services. It’s a three-stage approach. The first stage is “assess and optimize.” It’s all about doing the right assessment for your customer, understanding where they are, and then optimizing the environment for them. Fewer devices, more consistent, most likely one vendor, maybe four models. Take cost out. Make the client more sustainable.
The second stage is called “secure and integrate.” It’s all about security solutions and mobility solutions. Everyone is walking around with smartphones and tablets. How do you connect to these devices in a secure way? We created that set of solutions. There are exciting things happening in security, not only securing the device and the network, but also around content security. This is something that I think is untapped, but customers have a huge demand for it and we’re developing solutions for that.
Once you have assessed and optimized the customers, you’ve taken cost out and you’ve gotten them to be secure and you’ve integrated into their IT environment, then the third stage is called “automate and simplify.” It’s all about workflow automation. Automate the paper-based processes so they are no longer paper-based. Help the customer not only print for less, but print less.
We had to roll this new program out to everyone in Xerox and also everyone in Fuji Xerox, which is a company we own 25 percent of. I thought we’d be in for a very big battle with certain stakeholders because I’m telling people “assess and optimize,” “secure and integrate” and “automate and simplify.” Those are six words, and we weren’t allowing the opportunity to change any of them. This is our brand. It’s like the red in the Xerox logo. Employees across the board will have to comply to this because we need to be consistent and tell a story to our customers. But, to my surprise, it was extremely well received.
We do those six words better than any of our competitors and we have the tools wrapped around the program to give our customers the analytics that are predictive and proactive. The fact that I was able to get 20,000 people all on the same page was definitely one of my greatest work achievements. Today, everywhere you go on Xerox.com, you’ll see those three stages. And it’s really who we are and how we communicate our value to the customers.
Would you describe yourself then as a marketing guy? Is that who are you?
No. I would say I’m a sales guy. I would say I am extremely competitive, wanting to win at everything I do. I just go for it. I dive into whatever I’m doing. I give it my all. I’m extremely passionate about the business and about what I’m doing. I want to succeed. I want to be the very best I can be in whatever I am doing. I love customers. I love sales. I love marketing, but I am not the most creative person in the world. I am more of a people person. There are great marketing minds out there, but I love connecting with people. I love connecting with customers and partners and convincing them that we’re the horse you should be riding. And I love going for that sale and winning that deal. I just love that.
What I do is root myself in what customers are asking for. I know, for example, that customers care about taking costs out. There are five things that customers want: cost savings, sustainability and being more green, security, mobility, and automating their paper-based workflows. Those are the five things. We’re going to build a roadmap for customers based on these five imperatives that people want. And that’s how we built the three stages program.
If your employees could describe you in three words what would those three words be?
Passionate. Great communicator. And I would say very relatable.
This article originally appeared in the July 2017 issue of The Imaging Channel.
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.