Managed Print Services: the Theory, the Tools, and the Targets (Part 3 of 3)

We continue our three part series on Managed Print Services: the Theory, the Tools, and the Targets. Today we will finish our series focusing upon the targets, or opportunities, which dealers predominantly focus.

As we turn towards the analysis of opportunities, it is important to note the MPS space contains a variety of strategies. The players in the space are coming from many different angels, but the underlying principal is that of “selling pages”. Overall, the theory is that a potential customer is spending money on output solutions; by managing those solutions and consolidating logistics the customer can pay less money while the MPS partner can maintain a healthy margin through economies of scale – a proverbial ”win-win” situation 

That is about as basic as it gets. From there, creativity is king and usually the market and/or situation will determine many of the variables of each engagement.

In conducting research for my company, I have recognized three general models that are present:

1. The consumables-based approach
2. The equipment-based approach
3. The hybrid approach

The consumables-based approach:

The name says most of it, but the goal here is to seed in transactional business with the eventual goal of reaping the benefit of hardware up-fits. Let’s say you are sourcing equipment and consumables (toner, ink, etc.). Partner A proposes they be allowed to help consolidate and lower costs. The methods are:

1. consolidate your approved vendor list
2. reduce the accounting headaches
3. reduce costs due to volume of business
4. no change to end-users habits (no additional training costs)
5. offer upgrade path for all hardware
6. maintain less on-hand inventory by ordering when you need.
7. possibly offer maintenance agreements on equipment.

This can be a positive improvement over unmanaged fleets of output devices and generally there are no capital expenditures required in the beginning. This allows the savings to be realized immediately.

However, there is generally no right-sizing ordevice-to-need analysis done outside of general recommendations to get rid of desktop inkjet printers in businesses. Additionally, the traditional MFP (copier) fleets are not rolled into these agreements, so there are still cost center silos.

Account management is generally compensated on transactional business, not the initial “take-down”.

The equipment-based approach:

Keep in mind we are not talking about just “slinging-boxes” here. This approach typically offsets the negatives of the consumable-based variation by offering right-sizing and/or device-to-need analysis. Additionally, service models are generally included withe Total Cost of Ownership (TCO) analysis to help offset some of the potentially negative aspects of offering only an equipment-based approach.

Additional benefits can be a standardized cost structure for both MFP (copier) and printer fleets, if the MPS Partner is worth their salt.

A very real negative to an equipment-based approach is generally the assertion that a customer’s equipment need to be replaced in order to gain a lower the advantages of a lower TCO model. At times this is not entirely bad, especially on aged output fleets. However, many customers have capitalized a good portion of the equipment they own and are stuck trying to depreciate it. By replacing everything outright they stand to take a fairly sizable hit to their balance sheet, in many situations.

This negative can be offset through financial tools like leasing, which allows the customer to gain the advantages of owning the equipment while sparing the up front hit to the balance sheet and maintain cash flow. Also, this helps to build in a technology refreshment program and allows mechanical break fix to be outsourced solely to the MPS Partner who was awarded the contract.

Some forethought is given to right-sizing, but additional equipment purchases are generally encouraged so there is a bit of a conflict of interest here to some degree.

Account management is generally compensated on the gross profit in the equipment sales, but does not share in the consumables revenue.

The hybrid approach:

This is where the true consultancy begins. The hybrid model always leads with assessment based activity in order to best understand the customer’s environment and workflows. This has all of the benefits of both the consumables- and the equipment-based approaches, as well as allowing the negatives to be almost completely offset in the hands of a skilled account manager or MPS Partner.

Imagine being able to replace those devices in need of up-fit and placing all devices under a centralized, outsourced servicing model all based upon actual usage, not projected averages. In other words, almost a pay as you go proposition.

The equipment being replaced can be immediately funded, and the lengthy business discussions regarding budget cycles and additional approvals for unscheduled equipment replacements can be avoided. Everyone can get back to their core business and not hassle with the details because the MPS partner is paid to focus on that which is core to their business – managing output devices.

Account management can be a mix of varying compensation plans. The focus here is to pay based upon generating long-term profit for the dealership and maintaining long-term, client-based relationships. These individuals or teams are not box-slingers or toner-junkies – they should be paid to manage the account.

Additionally,  you may find the development of separate teams to be worthwile, but integration between the ‘farmers’ and ‘hunters’ can be challenging.

The opportunity:

Before MPS became a well known trend, many dealers were focused on selling hardware and offering differing types of insurance plans, or simply selling residual consumables as a transactional component of the business; these strategies typically yielded limited levels of penetration into the customer account.

Equipment-based approaches were typically less penetrating because everyone needed a copier but they were a dime-a-dozen; Consumables-based approaches often missed the true value of being a consultant to the businesses they served.

The true opportunity of managed print services is staggering. With an estimated 4.6 trillion pages printed in U.S. businesses last year alone, estimates show only 3% of output fleets under any type of on-going management plan.

Customers do not want to manage output devices, but they are a necessary part of each and every business today. Everyone just wants the page to emerge, fresh and crisp, when they hit the print button. Those MPS partners that understand this core concept and respond with a comprehensive plan of action to help their clients re-focus upon their core business will realize healthy profits and a sustainable business is within reach. 

Update: Read the entire series.