What BTA Dealers Can Learn from VARs and Vice Versa

by Emily Offshack

To deliver an MPS program, you require the knowledge and expertise that both BTA dealers and VARs possess. While BTA dealers struggle to mold their current business processes to MPS, VARs are being slow to move into the MPS space. There is a lot they can learn from each other, and both have the potential to be successful in MPS. As MPS related sales continue to grow, new companies and independent corporate divisions focused solely on MPS are starting to emerge—is this the way of the future?

Nothing can take away the fact that BTA dealers live and breathe all things related to print. The knowledge they have is invaluable to understanding how clients print, and how this relates to the hardware and supplies they require. BTA dealers know they need to offer MPS, but the technology and automation required to execute a managed services program is foreign to them. Fortunately, there are plenty of software tools that have been created specifically for this industry that allow dealers to remotely monitor printing hardware, track and redirect print jobs, and help their clients streamline the storage and retrieval of documents. Despite the wealth of courses, consultants and opinions on how dealers should integrate an MPS offering into their business, maybe this isn't the right approach. Instead of trying to force MPS to integrate into an existing business, maybe MPS should be its own business, or at minimum, it should be MPS that drives the business processes.

VARs have become highly experienced in managing IT infrastructure, often becoming the IT department for smaller companies. They are proof that managed services can thrive as an independent business or business segment. The business model for VARs is highly focused on the customer's needs. VARs don't need to push the placement of computer hardware or software, because they don't need to hold inventory and this is generally not where their revenue comes from. They can get exactly the products they need, when they (their customers) need it, from their partner companies. They get paid to manage the IT infrastructure on a flat-rate or other predictable-rate contract.

The concept is ideal for the customer—they have a partner who can, and wants to:

  • Make their working environment the best it can be at the lowest cost.
  • Be their single contact for acquiring equipment and tools from a variety of vendors.
  • Take complete responsibility for managing an area of their business, and do it better than they could.

VARs do all of this for IT departments and rarely ever have to be at the client location. Shouldn't that be how it is with MPS?

MPS in a VAR Business Model

The imaging industry struggles to define MPS, and with good reason. There are so many possible components and designs for an MPS program, and companies are faced with picking and choosing among them to develop their offering. Often, an MPS program is designed to help further existing business goals: sell more hardware, supplies or service. If you look at MPS from a VAR perspective, MPS is simply what the name states—services that manage print—and what is involved in MPS will inevitably be different for each client. This means there has to be flexibility in the program, but it doesn't mean you have to have access to every product and software tool from every vendor; ideally, you would have enough options and capabilities to provide a variety of services.

The most important thing is that you are managing their print environment for them—taking over that responsibility in a way that is more efficient and cost effective than they would be able to do themselves.

As a VAR, you would determine what the client needs, and then structure an MPS package using products from your vendor partners. Maybe a customer does need new hardware, and supplies and service will be involved, but this is not what drives the sale. The most important thing is that you are managing their print environment for them—taking over that responsibility in a way that is more efficient and cost effective than they would be able to do themselves. It is the management services that drive revenue: the knowledge and expertise that gives the customer the capability to print what, when and how they need to. Providing this will always require one or more software solutions—this too can be sourced from vendor partners.

From this perspective, here is what an MPS business could look like.

Example: The Business of MPS

Although every customer is different, most businesses have common pain points when it comes to printing:

  • No ability to budget for printing.
  • Slow break-fix service and supplies fulfillment.
  • Large supplies inventory.
  • No organization to what hardware they have.
  • No organization to how and what they print.
  • Wasted time dealing with multiple vendors.

From this, we can deduct the basic printing needs of an average customer:

  • Predictable budget for printing.
  • Hardware and supplies that meet their printing requirements.
  • Supply and service fulfillment that minimizes downtime.
  • Organization to how and what they print.
  • Reduction in time spent dealing with vendors.

Let's walk through how an MPS company might fulfill these needs.

Predictable Budget

A simple, flat-rate contract will allow the customer to budget for their printing expenses.

VARs often charge customers a flat monthly rate to remotely monitor and service the servers, desktops, phones and other systems on their network. Imaging devices require a different approach, because consumables are a large part of what is delivered. BTA dealers have used the cost-per-page model for a long time now, which is often flat rate on a per-device basis. CPP makes sense, because consumables are used and parts are worn down with each print. This pricing model is predictable for the customer, but many dealers make it overly complicated by calculating CPP individually for each machine or by taking too many factors into account.

CPP can be simplified by extending the flat-rate priciple beyond a single device, and beyond a single customer, to a similar flat rate for all customers. Many dealers will argue that there is too much variance in the cost of print to use a flat-rate model: this machine’s toner costs more, this customer’s page coverage is higher, this machine has more types of consumables, and so on. While these statements are true, it does not mean that the CPP rate for every device and every customer needs to be different. On a large scale, there will be an average CPP across machines, and across customers, that will be profitable for your business and consistent for your customers.

Calculate Your Flat-rate CPP

BTA dealers have an advantage calculating a flat-rate CPP over VARs, because most have been charging by the page for years. Assuming your CPP includes toner, parts and service, here is how you can easily calculate a flat-rate CPP using numbers from your previous year:

 

Black-and-white Devices Totals for Previous Year
Toner cost $504,000
Parts cost $108,000
Service cost $144,000
Total cost $756,000
Pages billed 72,000,000
Dealer cost per page $0.0105
   
Flate Rate CPP Calculation
Desired gross margin 50%
Flat-rate CPP $0.0210

To avoid fractional cents, in this example, the dealer could use a flat-rate CPP of 2 cents, which would yield a gross margin 47.5 percent. If you wanted to use either whole or half cents, 2.5 cents would yield a gross margin of 58 percent.

Color pages are a bit trickier, because you can also print black-and-white pages on color devices. In this example, by calculating the black-and-white numbers first, it can be assumed that black-and-white pages cost the dealer 1.05 cents each. This figure will be used in the color calculations.

 

Color Devices Totals for Previous Year
Toner cost $720,000
Parts cost $48,000
Service cost $60,000
Total cost $828,000
Black-and-white pages billed
on color devices
6,000,000
Cost of black-and-white pages
(6,000,000 x $0.0105)
$63,000
Cost of color pages
($828,000 – $63,000)
$765,000
Color pages billed 18,000,000
Dealer cost per color page $0.0400
   
Flat Rate CPP Calculation  
Desired gross margin 50%
Flat-rate color CPP $0.0800

 

This is not to say that every dealer should charge 2 cents per page for black-and-white pages and 8 cents per page for color pages. It is meant to suggest that, by looking at your historical costs, you can build a flat-rate pricing model that will eliminate the need for complicated CPP calculations. You may decide to create two or three different flat-rate packages, for example, one offering OEM supplies and one offering remanufactured supplies—even so, this is less of a headache than calculating CPP individually for each customer.

Using the example from the sidebar, an MPS company could charge 2 cents for black-and-white pages and 8 cents for color pages. The customer will receive a simple monthly or quarterly invoice, and they can directly relate the amount they are charged to how much they printed in the period. Meter reads should be captured automatically using remote monitoring software.

Hardware and Supplies

Determining what hardware and supplies are needed for a particular customer may require both an automated and interview-style assessment of the environment.

Software can tell you what hardware currently exists (types, models and age) and how many pages each device prints per month. This information alone can tell you if any devices need to be retired, consolidated or replaced. You need to obtain some information directly from the customer: do they prefer OEM or remanufactured cartridges, are there specific features they want in their hardware, or are there specific locations that require their own devices for convenience?

VARs lack experience with printing hardware, and they haven’t thought about how people print as much as BTA dealers. By offering managed services, however, VARs have forged close relationships with their customers and are experienced in determining their needs. Software tools have made it easier to go into an environment and pick out devices that can be consolidated or retired, using simple figures like the age, duty cycle and life count of each device.

The customer should end up with hardware and supplies that:

  • Meet the quality and feature standards they need.
  • Minimize the quantity of devices while maintaining the convenience that they require.
  • Are compatible with the remote monitoring software that will be installed.

The last point is critical—if you can’t monitor a device, you can't manage it. This could lead to adopting a policy that requires the customer to remove or replace all devices over four or five years old. New hardware could be purchased or leased from the MPS company, who would source it from the partner vendor that best meets the customer’s needs.

Supplies & Service Fulfillment

Supplies and service fulfillment is the core of managing a print environment on a day-to-day basis, and it's where automation using software becomes extremely important.

Software is transforming supplies and service fulfillment from break-fix to proactive, which helps maximize uptime for the customer. In an ideal situation, remote monitoring software allows the MPS company to know when machines are going to require supplies, parts or service, and the customer receives what is needed before the situation becomes critical. The goals of this approach are:

  • Supplies are shipped just-in-time and the customer doesn’t need to carry inventory.
  • Service is deployed proactively, when possible, or immediately when a sudden issue arises.
  • The customer never has to place a supplies order or service call.
  • Uptime is maximized.

BTA dealers have experience delivering supplies and service for imaging devices, which gives them an advantage. VARs have the opportunity to lessen the challenges associated with providing these services, by partnering with supply distributors and service providers that serve their geographical location.

Organized Print

Electronic document storage and retrieval, job tracking, rules-based printing—these are some of the ways, using technology, that an MPS company can bring organization to how and what a customer prints. Much can be said on all these topics, but the point here is that it requires technology (software, scanners, database servers, etc.), people who are capable of developing a print strategy with the customer, and people who can implement one or more technology solutions.

VARs have the advantage of being more experienced with software solutions, but they still need someone who can understand how to develop a print strategy that meets the customer's needs.

VARs have the advantage of being more experienced with software solutions, but they still need someone who can understand how to develop a print strategy that meets the customer's needs. BTA dealers know print, but are still learning the complexities of software, workflow analysis, and how it all fits together.

Reduction in Vendors

It makes sense for a customer to have a single vendor for print. That means that an MPS company has to be flexible in the hardware, supplies and software they can provide. One way to do this is to source from a variety of hardware, supplies, service and software vendors when needed, and on a day-to-day basis, focus efforts on remotely monitoring customer environments.

Not only do the customers get the benefit of having a single vendor, but it's a vendor they rarely have to deal with, because the system is automated.

Paving the Way

There are already companies that focus on managed services and offer MPS. Their success proves that this business model works.

Marco, Inc.

Marco, Inc. was established in 1973 as an office equipment and supply dealer. They started selling copiers in 1975. In 1985, as Marco recognized that offices were becoming increasingly networked, they began offering networked solutions. Today, ranked by VARBusiness as one of the 500 largest solution providers, Marco helps organizations manage their information by applying network expertise to print, data, voice and video solutions.

Marco added MPS to their mix of managed services in 2007 as a revenue growth opportunity and to develop a tighter relationship with their customers. In just a few years, MPS has grown to 7 percent of Marco's overall revenue.

"We currently have over 400 customers set up on our MPS program with over 10,000 printers, and that number continues to grow rapidly," said Trevor Akervik, director of managed services at Marco.

Marco offers Silver, Gold and Platinum levels of printer management and support, which gives customers the flexibility to adjust plans as their needs change and to stay current with changing technology. Their program includes a comprehensive on-site print assessment, complete discovery of HP devices, ongoing management and monitoring, ongoing reporting and anlysis, and proactive printer replacement.

Using Print Tracker and e-automate technology, Marco tracks and manages their customers' device maintenance, toner supplies and usage patterns. In addition to providing automated supplies delivery and proactive service maintenance, the technology allows them to deliver a detailed recurring business review to their clients every six months, which includes their historical supplies orders, service calls, device usage and recommendations for action based on this information.

"Because of Marco's 37 years of experience as a trusted technology advisor, serving the SMB customer segment with both print and IT solutions, customers see us as uniquely qualified to manage their print environments," explained Akervik. "We have many MPS customers that also become managed IT services customers and vice versa. They see many benefits in partnering with one provider to manage their print and IT needs."

SymQuest Group, Inc.

SymQuest began in 1996 with two main focuses: traditional copier sales and network infrastructure projects. In 1997, when the single-function printer hit the market, SymQuest developed their Stellar program, which provided customers with free service if they purchased toner. SymQuest was able to leverage the relationships they had on the copier service side to put 10,000 printers under service. In 1999, they began offering managed services for networks, and in 2001 they added remote monitoring capabilities. SymQuest entered the MPS market early, in 2004, and started actively converting their Stellar clients, other existing clients and prospects.

As a whole, managed services comprises approximately 50 percent of SymQuest's revenue; this breaks down to approximately 35 percent MPS and 15 percent other managed services. To SymQuest, an MPS sale is about management—it's beyond hardware, supplies and even cost savings.

"Our customers are paying us to manage something they either can't or don't want to do," said Joe Noonan, vice president of marketing and sales at SymQuest. "We provide control and management around their print and network environment."

To provide this management, SymQuest requires visibility into the network and access to information, which they obtain using PrintFleet software. After they have information about the environment, they can look at plans for cost savings: reducing the number of printers, implementing a digital filing system or improving workflow. Although SymQuest sells Canon, Kyocera and HP devices, they are able to monitor and manage all types of devices.

All of SymQuest's MPS customers (approximately 25 percent of their total customer base) have 100 percent of their printing devices managed by SymQuest. SymQuest requires this from their MPS customers, because supplies are included in the cost-per-page contract.

"We need to manage 100 percent of their devices, or else it would be difficult to prevent someone from using SymQuest toner in another machine," explained Noonan. "If it's not well controlled, it's a big risk for loss."

SymQuest has recently been recognized as No. 18 on the MSPmentor Top 100 list for world-wide managed service providers. SymQuest considers themselves to be both a VAR and a traditional copier dealer. Their experience in both areas allows them to promote a holistic view of a network.

"We usually recommend that our customers outsource the management of their network and print environment to us, and we tell them to focus on what their core business is."

In addition to MPS-related solutions, SymQuest offers network monitoring and management, network security solutions, wireless and remote access technologies, internet and virus management and more. "SymPowered Office" is the term SymQuest uses to refer to these solutions in action.

"SymQuest can help integrate disparate systems on a network," said Noonan. "We usually recommend that our customers outsource the management of their network and print environment to us, and we tell them to focus on what their core business is."

TotalPrint, LLC

TotalPrint was founded on the principles of MPS. The opportunity for this business was recognized around 2005, when HP's Total Print Management program was having success with large enterprises, such as Bayer and Ford.

"The advantage for our customers is that we did not have an existing business that would be cannibalized by or conflicted with this new model," said Greg Greenwell, president of TotalPrint. "Fortunately, we did not have the same legacy issues faced by hardware-centric or supply-centric dealers as they convert to a managed services model. You typically see a lot of customer churn when a disproportionate amount of your revenue is derived from non-recurring business like hardware or supplies."

This year, TotalPrint will have about 75 percent of their revenue come from managed contracts. The remaining 25 percent are transactional sales, split roughly evenly between hardware, supplies, and service; this side of their business is primarily comprised of small businesses that they took on in their first year to absorb their administrative costs.

Greenwell believes that most MPS dealers, including TotalPrint, are going to market with a standard set of tools, because the software providers for remote monitoring and backoffice ERP have driven dealers into a common process.

"We try to differentiate ourselves with an extraordinary amount of customer intimacy when it comes to service delivery and supplies replenishment," said Greenwell. "We have become a natural extension to the IT service desk, permanently entrenching ourselves into their organization."

TotalPrint's initial assessment, remote monitoring, meter capture, supply replenishment and periodic review components are semi-automated using PrintFleet software. They are currently in the process of evaluating a new version of e-automate that will automate the backoffice, including quote generation, billing, and contract profitability analysis.

Because there are still a high number of copier fleets under lease with other vendors in their existing accounts, TotalPrint currently manages 100 percent of devices in less than 15 percent of their accounts.

"We think we can grow our business three times without adding any new customers," explained Greenwell. "We call it 'share of wallet,' and our sales team constantly focuses on growing it. It's a huge opportunity for us right now."

BTA Dealer Versus VAR

In the end, both BTA dealers and VARs are capable of offering an MPS program, but companies that already have a mix of experience with imaging devices and managed IT services will find it easier to get into the game.

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