The cloud, IoT, and flat-rate and seat-based billing represent the next wave.
The COVID-19 pandemic changed many things over the past 13 months. Nowhere were those changes more pronounced than in print. Printing may not have expired, but it was on life support.
As more people return to the workplace even on an occasional basis, it would be delusional to think that the number of prints will return to pre-pandemic levels. Print was already declining, the pandemic just accelerated it.
West McDonald, president of the Managed Print Services Association (MPSA), begins the conversation about the future of MPS in his own colorful way. He references a dealership that has seen its customer’s print volumes drop 3% to 5% per year.
“I’m a simple guy, so when I see a number like that and hear people say, well, it’s pretty slow, I think of the boiling frog scenario where if a frog is in a pot and you turn the water up one degree at a time, the frog boils to death because it doesn’t feel the temperature changes over a long period of time. We are experiencing that with print,” warned McDonald. “In five years at a 5% slow burn, you will lose 25% of your business in that existing account. If you were to say to somebody, what would happen if you lost 25% of business, they’d probably have a heart attack. Then, COVID hit and dealers learned what it was like to lose 70%. That’s when the frog finally knew it was boiling.”
Indeed, the past year was a wake-up call to many dealers who leapt from the pot and took measures to modernize their businesses. That modernization has led to an increase in converged services, which relied less on managed print services (MPS) and more on managed IT, telephony, and document management, for instance. Yes, many dealers were heading in this direction before the pandemic, but events caused more to pay closer attention to these segments of their business.
That’s not to say that customers are less interested in having dealers manage their print.
“Coming out of the pandemic, companies remain laser-focused on their core business and are looking for ways to bring unique value without worrying about the IT burden of print,” observed Phil Carter, director, managed print and IoT services at Lexmark. “As a result, we see the demand for MPS growing, especially in the lower levels of SMB, which have not reached the levels of MPS program saturation as large enterprise.”
Pandemic or not, many dealers will continue to bank on MPS for as long as they sell devices that print. Earlier this year, we spoke with Ray Belanger of Bay Copy in Rockland, Massachusetts. For Bay Copy, MPS has become a way to win more business beyond the up-and-down-the-street accounts.
“We’re trying to find accounts with large volumes and wrap them in a blanket with everything bundled in—imaging, printing, copying, and faxing,” observed Belanger. “That’s the goal.”
Further south in Winston-Salem, North Carolina, at Kelly Office Solutions, MPS is still a revenue generator. The trick to making its MPS programs click more profitability is including printers and A4 MFPs with low acquisition costs in those MPS contracts. OKI Data had been Kelly Office Solutions’ go-to low-cost solution, but now that OKI has exited the U.S. market, that distinction belongs to Brother. Since adding Brother two years ago, Kelly Office Solutions’ co-owner Tim Renegar reports the dealership has been placing 20 to 25 Brother devices a month.
Even further south in Pompano Beach, Florida, you’ll find QualPath, a dealership with a strong MPS foundation. QualPath’s President and CEO Kevin DeYoung is starting to see business slowly come back, although he only expects about 80% of what he lost to return.
“I think the worst is over,” observed DeYoung, who worries about the worldwide economy and potential increases in the cost of goods.
“From a cost basis, I’m very, very concerned,” stated DeYoung. “This is an industry that is not used to increasing its pricing. No matter how much you want to say, we sell solutions, this is a pencil-sell business. Customers love the additional features as long as it doesn’t cost more.”
DeYoung expects the accelerated downward spiral of print volumes will impact MPS contracts as they come up for renewal.
“You could see a recasting of your agreements downward,” he said. “MPS contracts that are cast at a particular volume, customers are going to say, whatever my volume is now, minus 10%. People are going to think long and hard, contractually, relative to their MPS contracts, about the renewal clauses.”
MPS Trends
It’s impossible to consider the future of MPS without looking at the impact of remote work. Lexmark is hearing from many customers that their work environments for the future will be some sort of hybrid model.
“While business leaders are eager to return to the corporate centralized work model, it is clear that a mixed approach will be more common than it was before the pandemic,” said Carter. “For Lexmark and our partners, it means understanding that this shift is permanent.”
To accommodate this change, Carter noted that tools like Lexmark Cloud Fleet Management will become more critical for enabling partners to monitor devices remotely, manage settings and configurations, and take proactive action as needed—whether those devices are in the office or connected in the home.
“OEMs and partners are also going to have to be transparent with their customers on the additional cost that a printer in every worker’s home could bring and help them determine the optimal balance between infrastructure costs and productivity,” said Carter. “Additionally, we see this opening up the opportunity for more flat-rate pricing and as-a-service models that can help insulate partners from potentially lower usage that should be expected in most work from home situations.”
Supplies Network’s MPS program is a useful gauge of MPS trends. Like everyone else, its business took a huge hit in April of 2020 when many businesses shut down, but shortly after that, the company saw printing pick up again although nowhere near pre-pandemic levels.
“What’s interesting is the number of devices that we were managing didn’t drop,” reported Sarah Custer, vice president of services and solutions at Supplies Network. “In fact, we have customers locking down new environments, going through their existing environments, and finding new devices to add, and things to refresh and move around.”
Custer expects a hybrid work model to continue beyond the pandemic with employees splitting their work week between the home and the office. This situation poses a few challenges.
“Unfortunately, folks don’t have the data collection agent installed in their homes, so they’re off the network,” acknowledged Custer.
“It’s very, very difficult to capture those prints on those home office devices,” concurred QualPath’s DeYoung.
This is where Supplies Network’s mobile device management capability factors in, because it can manage devices that aren’t on the network. It allows users to manually request a supply, and resellers to monitor page usage to determine if the customer actually needs that supply. Supplies Network is also working with its manufacturer partners to monitor the hybrid work model, including what devices companies will provide to employees working from home.
Work from home or not, MPSA’s McDonald doesn’t expect dealers who pivoted and provided devices to people working from home will see a significant return on investment from home office printing.
“The question now becomes what other services can I sell those users?” asked McDonald. “What do they need in a home office? One thing they need is improved security for that printer and their network.”
Another emerging trend that will impact MPS is the cloud, which Carter deems more important than any MPS buzzword. He sees cloud connectivity and IoT sensing becoming increasingly prominent in the MPS space, especially as Lexmark adds new features to its Cloud Services platform.
“It is a real productivity enabler and important to customers who want to minimize their physical premise infrastructure,” he said. “Data analytics is a key trend, with customers seeking rich insights in their print environment, and the business processes connected to it. These technologies will enable our partners to provide advanced value-added services to their end customers and the opportunity to become more efficient internally and therefore harvest cost savings. As we look to the future, we believe IoT and cloud will be key to helping companies connect and unlock the value of their data, which will deliver long-term business transformation.”
Take a Seat
An obligatory discussion point around MPS and its future are the merits of flat-rate and seat-based billing. Should it be done by the page, cartridge, device, or seat? Under Supplies Network’s mpsSELECT program, for example, billing is by the image/page. That’s fairly common in the industry.
McDonald reported that flat-rate billing models are all the rage with his customers in Europe and Australia. But what is the best way, by device or user? McDonald references Konica Minolta’s One Rate program, a device-based model that has been embraced by growing numbers of Konica Minolta dealers. However, in his opinion, all roads lead to a seat-based model, a model rooted in the IT world.
“Managed IT has been successful billing by the seat and as dealers add additional services, they should consider the same kind of billing platform,” observed McDonald.
The problem, however, is that many dealers are more comfortable billing by device because that’s how sales reps have historically been compensated.
“Either way, as long as they’re moving towards some kind of flat-rate model, that’s progress,” opined McDonald.
He’s still adamant that everything should be billed by user even though it is a more complex billing model. For example, if a customer has employees working remotely, it’s easy for the dealer to identify which devices are under contract, albeit more difficult to understand the number of users unless a mobile print management solution is installed.
“The danger of a device-based model is this race to the bottom we’ve had with pages is just as dangerous with device-based billing,” added McDonald. “The only thing they’re doing under a device-based contract is offering a flat rate per month.”
In this scenario, he contends it’s not difficult for a competitor to swoop in and steal the business by asking the customer how much they are paying for that device each month. Say the figure is $125, the competitor could then offer a flat rate of $99 per device. Whereas under a seat-based model, it’s more difficult to convince the customer to switch.
“It’s the end of the discussion when they find out that the customer has unlimited print and [the contract] also includes document management and perhaps telephony,” said McDonald. “All of a sudden, you start getting these layers of complexity in that seat, which are hard to unpack. Is it easier to do it by device? Yes. Is it the most long-term vision of taking the business in a new direction? No.”
Supplies Network’s Custer and Kelly Office Solutions’ Renegar also see the merits of seat-based billing.
“If you talk to IT staff who are in charge of print, and are used to buying software licenses and paying for computers by the seat, it makes a whole lot of sense to wrap that in,” said Custer. “I don’t know if customers are necessarily demanding it, but there is interest. While we don’t offer a wholesale seat in our program, we’ve helped partners who want to do a seat-based model control their costs through our MPS program.”
“We look at seat-based as kind of the future of how to go with this,” said Renegar.
McDonald predicts that 70% of dealers will eventually transition to a flat-rate model.
“When you lose 70% of your pages and consequently 70% of your revenue, you’re going to look for a new way to make money,” he said. “We have very smart business owners in the channel and they’re going to look for ways that will have more resilience if this nightmare should ever happen again.”
DeYoung has been slow to embrace seat-based billing, but he seemed to be coming around.
“It might end up being the next great idea, given the layoffs and the level of attrition and volatility in employment,” he said. “I never bought into it before, but West [McDonald] might be onto something, given the change that’s occurred in this economic environment.”
The Last Word
The best answer to what’s next for MPS may be the most honest one, according to DeYoung, which is, “I don’t know.”
“How do you really know what’s going to happen, because there is no playbook?” he concluded.
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