Prioritizing IT expertise has been a key growth driver.
Above: CDS Office Technologies was founded in 1971 and has been a powerful presence in the Springfield market ever since.
Credit CDS Office Technologies founder Jay Watson for recognizing the importance of managed services well before many of his dealer peers, and well before “managed services” entered the office technology industry lexicon. The dealership started in this space in the mid-1990s, and today, managed services represent 65% of the dealership’s overall revenues. The other 35% is, you guessed it, copy/print.
Above, left to right, Mark and Jay Watson.
The dealership opened its doors in Springfield, Illinois, in 1971 as Copier Duplicator Specialists. By 1994, it had changed its name to CDS Office Technologies to better reflect its array of product and services offerings. Today, the company is led by Jay’s son Mark who joined the company as a sales rep after graduating from the University of Illinois in 1987. “I’d been trained a lot leading up to that,” said Mark, who had worked on and off again in the business since high school. “That didn’t mean I didn’t make all the same mistakes everybody does.”
Mistakes aside, Mark oversees a successful dealership with over 140 employees and nine locations, most of which were added organically. Lately, there’s been a method to Mark’s and CDS Office Systems’ managed services madness. For example, CDS’s two most recent branches only sold managed services for the first two years before Mark allowed them to sell copiers or printers. “I wanted to establish ourselves as an IT company before we went down the copier road, and that’s worked out well,” he said.
Managed services have also been a boon to the dealerships reoccurring revenue, which is double what it was ten years ago. That’s the benefit of being an early adopter in the managed services segment. Mark recalls the era when Global Imaging Systems was on a buying frenzy and courting dealers like CDS. However, Global was more interested in acquiring copier dealerships than those offering managed services. Today, Mark maintains that dealerships with managed services’ recurring revenue are more important for many acquirers than dealerships with only recurring revenue around clicks.
CDS Office Technologies’ IT Roots
CDS Office Technologies’ managed services roots stretch back to 1994. CDS was one of the largest resellers of Panasonic electronic typewriters in the U.S. during the 1980s. When the PC was introduced in the late 1980s, CDS, intent on maintaining a footprint in the word processing business, started selling PCs and Peachtree Software. Then, in 1994, it began servicing Novell networks.
“My dad had a great vision that these things would connect someday,” recalled Mark. “And to his credit, that’s exactly what happened. When managed services came along, we were already deep into it. Don’t get me wrong, we sell a lot of copiers and it’s still an important part of what we do here, but we’re now a $50 million company doing 65% IT.”
The dealership offers an array of IT services, including workstations, laptops, and tablets, servers, and storage, networking equipment, web development and search-engine optimization (SEO), on-premises and cloud backup, business continuity and disaster recovery, unified communications, and ransomware protection and remediation.
Today, managed IT represents a significant portion of the dealership’s business.
The latter service might make some dealers nervous, but not Mark. CDS protects more than 200 managed services customers, including county governments and commercial businesses. It has invested in software tools to protect those customers and has trained its staff to offer customers the highest levels of protection.
“We’re not the cheapest on managed services,” acknowledged Mark. “And from my experience, rarely does the low person win in that field. The copier business is a little different animal where often, that’s what wins. You don’t want to be low price anyway. When I look at the tools we use, the software, and our people, there’s a reason why we have to charge what we charge. As you get deeper with your customer, your stickiness becomes even greater. You really have to mess up to lose them.”
One secret to CDS Office Technologies’ success in managed services is its buying power for computers, software, and computer-related products. “We’ve been doing business with the three big distributors, but certainly others as well, for a long, long time,” said Mark. “When the copier business started moving to distributors, that was a very easy transition for us. I don’t prefer it, but it was an easy transition.”
Even though CDS is a legacy copier dealer, sales reps are trained to lead with IT. Mark recalls the talk track of more than two decades ago when networked devices were being introduced and the word was, if you can control the network, you can control the customer, or as Mark put it, “the peripheral devices.”
“Fast-forward to today, that’s finally come true,” observed Mark. “Part of it is customers had to get comfortable with it.” The other part is that more companies are comfortable outsourcing their IT.
Hiring & Retention
CDS Office Technologies’ IT team assists the dealership’s sales reps on IT calls. They have the knowledge and expertise to explain the offering without getting too technical. Mark doesn’t want to call them pre-sales engineers, emphasizing that they are far more experienced and gifted than someone who just sells IT. But that experience costs. “We pay these guys well because they’re integral,” emphasized Mark. “I tell my closest dealer friends that it’s paramount to find those people, but they are hard to find.”
The challenge many dealers have with IT personnel is retention, and Mark has a unique fix to help retain his IT talent. The company uses Northwestern Mutual for life insurance policies for himself, key executives, and key IT staff. “The insurance guys use the term golden handcuffs,” explained Mark. “It’s an annuity that builds, but it requires them to be here. If they were to depart, they’d lose that. There are other parameters, too, that give these people a reason to be with us long term.”
Konica Minolta is CDS Office Technologies’ primary hardware partner. It also sells Sharp, Lexmark, and HP. The relationship with Konica Minolta stretches back to the earliest days of the business when Minolta was its primary hardware partner. “Minolta launched us into the copier business,” said Mark. “We had a lot of success with Minolta. They did a great job with their dealers.”
When HP launched its dealer program, CDS Office Technologies took the plunge. “In the last ten years, if you didn’t sell HP, you weren’t in the game with print for many of your customers,” acknowledged Mark.
One of the challenges of partnering with HP is its size “We’ve dealt with them on the IT side for a long, long time as well,” explained Mark. “They’re just a really, really big company. When we look at big companies in the copier industry, they’re nothing compared to the size of HP. So for us little guys, we don’t get the ear with an HP like I would if I had to call [Konica Minolta President and CEO] Sam Errigo. Right now, he’d take my call. As dealers, we’re used to that relationship with our copier vendors. As you get into that IT space, the vendors are much bigger than on the copier side, so you rarely have that kind of relationship.”
What’s Next for CDS Office Technologies?
When I spoke with Mark in March, CDS Office Technologies was in the third quarter of its latest fiscal year. “We’re going to have a very good year,” he revealed. “We’ve got millions of dollars of orders in hand that we still haven’t been able to place—copiers, but way more on the IT hardware side. All the things we sell are pretty much foreign-made and require chips. Those sales will spill over into our next fiscal year. So, we will have a good end to this year, and I’m looking at a great start to next year.”
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