Our panel shares their thoughts on trends, acquisitions, top concerns, and more.
(Above clockwise: Eric Auman, Phil Buysse, Patrick Flesch, Josh Lane, Mike Marusic, Wes McArtor.)
This year, we are shaking things up with our virtual panel series to keep things fresh and more interesting. Rather than feature executives from the same four segments of the imaging and office technology industry (Dealers, OEMs, Leasing Companies, and Software Companies) on the panels as we have done in the past, we are mixing it up throughout the year to include executives from other segments of the industry that haven’t previously been represented in our virtual panels such as parts companies, supplies vendors, and managed services providers, for example. By having a diverse mix of panel participants from a broader range of industry segments, we believe this will make for a livelier discussion and less similarities in the responses.
In our first installment, our panel, comprising individuals representing the parts, leasing, dealer, software, and OEM segments of our industry, offer their perspectives on acquisitions, trends, concerns, the future of the industry, and how their organization may change over the next three years to better serve their customers.
Participants include: Eric Auman, president, Hytec Dealer Services; Phil Buysse, senior vice president, general manager, office equipment vendor services, U.S. Bank; Patrick Flesch, president, Gordon Flesch Company; Josh Lane, president, ACDI; Mike Marusic, president and CEO, Sharp; and Wes McArtor, president, NEXERA, a BEI Services Company.
CR: Acquisitions continue to impact the industry at a fast and furious pace. Are you concerned by the shrinking number of independent dealers?
Auman: Hytec “Dealer Services” began operations in 1985 completely dedicated to supporting independent imaging dealerships with quality repair services and complementary service products. In our early years, we experienced all the acquisitions made by Alco Standard (IKON), Danka, and Global Imaging; and then the subsequent roll up when the manufacturers purchased these organizations. Hytec successfully adapted to these changes and supports the entire industry’s needs regardless of the service provider. When consolidation occurs, sometimes it brings more efficiency to those organizations, where they can leverage less inventory to support their service operations. The result can be a reduction in business to Hytec. On the other hand, sometimes it is more efficient for Hytec to conduct business with one entity (i.e. IKON or a single manufacturer) than a lot of smaller dealerships. Today about half of Hytec’s business is from independent dealers, and half from all the OEM direct organizations. Hytec’s infrastructure is geared to supporting the needs of the independent imaging dealer, and this remains Hytec’s greatest strength.
Buysse: We don’t see this as concerning, but simply as a natural cycle that is playing itself out as the market evolves. We are fortunate to work with the majority of the market players. We expect to continue to provide value, and many new businesses to be an established partner as services and methods of delivery also evolve.
Flesch: No. Our focus is on ourselves, and our company is growing. Fewer dealers actually means fewer competitors in our markets, and we feel strongly about our competitive advantage against our current competition. This trend also presents additional future acquisition opportunities for us. Many smaller dealers are lacking succession plans so they are looking for ways to exit.
Lane: Yes and no. On one hand there’s opportunity for ACDI to scale as our partners scale and achieve success, and on the other hand, consolidation can introduce competitive options. The opportunity and risk due to consolidation has always existed. In some instances, dealer consolidation can create opportunities to strengthen our levels of delivery and support through a more centralized approach. We strive to build relationships through what we like to call an ever-changing and forever-evolving means of value-delivery. That value applies to workplace-centric hardware and software solutions, consultative services, and professional services, as well as data-driven, vertical-specific needs such as cost savings, IT assurances, workplace efficiencies, delivery models, competitive pricing, and training—all while building a strong sense of community.
Marusic: Yes, it is a concern for Sharp and should be for the channel as a whole. On the Sharp side, our dealers represent a huge portion of our business and their success is closely tied to our success. Fortunately, the larger dealers who are doing a lot of the acquiring are our fastest-growing revenue segment, so we are well-positioned in that regard. However, I don’t think it is a positive for the industry. Some of the best innovation and support come from the independent dealers. They are the most nimble and opportunistic when it comes to new businesses. If that dynamic influence were to be minimized in the industry, that would not be good for anyone. However, these trends ebb and flow, and this industry has been through it before. A vacuum of smaller independent dealers will create new opportunities for the next generation of entrepreneurs.
McArtor: Customers should be concerned. As we’ve seen in the past, consolidators often make financial decisions that impact the customer. Cutting costs often leaves the customer with poorer responses to their needs. In addition, cost-cutting moves decisions further and further away from the customer, and larger companies tend to have more layers of controls, so getting answers just isn’t as easy. I’ve seen this happen so many times over the years, and I’m astounded that the cycle doesn’t seem to change, which simply highlights our industry’s tendency to not change the status quo.
CR: We’ve heard comments that the industry can’t continue to support the current number of OEMs. Should consolidation occur at the OEM level, would that have a negative effect on your business?
Auman: We’ve heard the same comments, and this is a bit beyond our expertise, however, we do see each OEM looking for more savings opportunities and can see the increased level of competition in the industry between the OEMs. Hytec is aligned and has close partnerships with most imaging OEMs, so a consolidation amongst OEMs would have an impact on our business. As before it could result in less opportunities but could also provide some efficiencies to our organization as well as additional opportunities.
Buysse: While there may be some contraction, we’ve seen a number of OEMs morph into their own specialty niches such as scanning, inkjet, production print, and other product extensions that provide enhanced opportunities for manufacturers. The OEM management teams that I’ve spoken with are strong and optimistic about future growth.
Flesch: I think it has really become a race among what we call the “Big 4.” It appears to us that Canon, Xerox, Ricoh, and Konica Minolta are the main players and that the other manufacturers are playing catch-up. We feel very confident about our alignment with both Canon and Ricoh on the A3 side.
Lane: I believe the number of OEMs can be sustained by our existing marketplace. Each OEM brand is beginning to specialize in a specific product or product group, thus becoming experts in their niche. This is why we are seeing more white-labeling and OEM partnerships (Lexmark, Sharp, Toshiba). Additionally, there are very committed, intelligent people in these companies, whom I believe will help drive and shape the industry and technology as we move forward together. It’s the strategic decisions that are made by each of them around the economics, speed-to-market, scalability, and a whole host of other factors that determines their sustainability. Should consolidation occur, we view it as an opportunity to increase economies of scale and alignment across all functions through our partnerships.
Marusic: I work for an OEM, so of course, this is a major concern. I am sure everyone will answer this in the same way, but we all feel we will be the survivor. There are many ways to look at it. One could argue being overly invested in the document business could mean that you will do anything to survive and that could be true. But we all understand that the overall revenue stream and margins in that business is slipping. Not having other technologies available limits what you can do to offset the investments needed. You literally are required to “invest” money to get into a new area. That, then, can provide you with the investments needed to expand and secure the document business.
I like Sharp’s position in which we have several of the other technologies for the office that competitive OEMs are only talking about. We are already in the major office areas. We can provide printers, conference displays, desktop displays, and laptops and have access to a wide variety of other areas via our major shareholder Foxconn. So, we don’t need to spend money to access all the other technologies in the office. We can invest in making them work better together. By being in those businesses already, we have the institutional knowledge to make it work, and the high-level partner contacts to put it together. But in the end, success will depend on our execution.
McArtor: I would agree, in a contracting deliverable, there are currently too many companies, many selling each other’s products. While it won’t likely effect NEXERA, it will at some point impact dealers as there will have to be a shuffle in markets where competing dealers are now sharing the same product lines. Remember when GM went through its reorganization? Many dealerships were closed, while others where “chosen” to survive. GM also opted to eliminate entire brands to cut cost. I would expect this possibility exists in our industry as well.
CR: Aside from acquisitions, what trends do you think will have the greatest impact on your business in the coming year?
Auman: Hytec sees improved quality across all manufacturers. We have expanded our coverage throughout the industry but see less repair needs per individual OEM line. We are cognitive of this trend and continue to work to ensure we are looking for additional opportunities within the imaging industry and beyond.
Buysse: We will continue to see “as-a-service” and flat-rate programs, in spite of the fact that most have not picked up significant utilization. We will continually build technology and interfaces that simplify the financing process and provide a greater amount of information to our dealer clients.
Flesch: Production print. It is not necessarily a trend, but it is an area of focus that we need to grow in and will have a strong financial impact on our company. Everyone is looking to capture more clicks and production customers move the needle in that space.
Lane: Lead generation and sales enablement strategies. Our focus is specialized. We help independents and OEMs regain focus and market share when it comes to print management strategies.
We are also seeing a shift in professional and IT services, whereby fewer organizations are investing internally and more are outsourcing the desired skillsets via third parties. This bodes well for ACDI and our channel strategy to enable OEMs and independent dealers greater market and margin expansion. Our Professional Services Division is pivoting toward more-structured enterprise deployments, complemented by the addition of on-demand services. We are nothing if we are not dealer-centric so we can be flexible for their customers. And our partners are asking for more responsiveness and flexibility within our implementation services, and we have a plan to deliver. From a sales value proposition, we specialize in lead generation and sales enablement and are a driving force in independents and OEMs gaining market share and regaining focus when it comes to print management strategies. Part of this focus and market share comes from our data-driven society. As we continue to see a trend for more business intelligence and analytics and as we continue to invest in these areas, I expect to see a big impact in our business and partners’ businesses.
Marusic: Various versions of a smart office and subscription services will become the biggest trend. It is a logical next step for the industry. I think the biggest challenge will be getting the dealers to make those adjustments to their business model. However, our dealers always seem to know how to adapt to changing market needs, so I am confident we will get there. I love the response we received from dealers during our 2019 National Dealer Meeting when we outlined our strategy to compete in this new world. That gives me a lot of encouragement going forward.
McArtor: NEXERA is well positioned to help dealers address the coming changes. There are still great opportunities to make money in this business, but very few dealers are actually doing what’s necessary to leverage those opportunities. Most are still doing business pretty much as usual. Print is declining, diversification is a must, but many dealers are not responding to this reality. We see iDaaS or no-meter billing as a huge opportunity for dealers to increase revenue and cut costs. Dealers need to be leveraging data, both theirs and NEXERA’s to spot trends and focus on areas of opportunity.
CR: What is currently your biggest concern as an executive in this industry?
Auman: Our largest concern is the maturing industry and working to ensure Hytec adapts to the changes and diversifies further into additional vertical markets. We are committed to remaining the leading service provider for our industry, providing quality services and programs at great cost savings. We see incremental opportunities within the imaging channel but are also working to grow new vertical markets. The more we can diversify our business, the greater ability Hytec will have to remain strong and relevant.
Buysse: Across U.S. Bank, we are very focused on staying close to the needs of our customers and providing them with valuable and relevant solutions. We rely on insights from our clients to help support mutual growth by providing effective solutions for our end-user customers.
Flesch: Finding talented employees. It is becoming harder and harder to recruit strong sales talent and the next generation of skilled workers aren’t excited about becoming “copier technicians.” With our rapid growth, this will continue to be an obstacle.
Lane: My biggest concern is making sure our team, solutions portfolio, and delivery model align with the needs of our partners. There’s a philosophy at ACDI that we’re not selling technology, we’re selling solutions to problems, or a path to a better way. And we have to deliver value early and often. Our people and product roadmap are two things we look at closely, making sure we meet our partners “where they are,” and those two components will be no exception going into the new year. Therefore, an emphasis on a customer success strategy, on-demand services, fleet management, and IT support, combined with predictive analytics, will be highlighted in our value proposition in 2020. But, as we started out in print management with PaperCut MF, we will start small and build momentum based on collaboration and communication with our channel partners.
Marusic: Negativity. I hear too many negative vibes about the future of the industry. A lot of people are writing its obituary already, but it is still a great industry and will be for a long time; it will just change a bit. Paper is not going away, and sure, things will change, but the services model in this space is what makes it special. As we talk about the smart office and transforming how people work, it takes support and resources from the provider to make it happen. And our industry is the best at providing that support. But I do think that negativity is becoming part of the reason dealers are selling and other OEMs are investing away from document businesses.
McArtor: Coming from a service background, a huge challenge will be finding the talent needed to support high-service devices. Our industry’s technicians are aging and finding their replacements is going to be a huge and costly challenge. Many service organizations are struggling to find individuals that thrive on troubleshooting and repairing things. HVAC, plumbing, and electricians are just some of the examples of this trend. As a result, we need to be looking at diversifying to products that don’t require the service we deliver today. On almost that same level of importance is the need to change our sales processes. As print declines and the customers’ needs change, our compensation models will have to change. We can’t continue to oversell and ignore the reality that customers simply don’t value print the way they once did.
CR: What has you optimistic about the future of your organization?
Auman: I am very optimistic that even with the changes, the imaging industry will remain strong and relevant. It is a great industry providing incredible technology and services. Hytec is committed to adapting to the changes and driving value on greater programs to dealers and OEMs. I am optimistic with some of the great new talent coming into our organization, and feel this will allow us to successfully move forward.
Buysse: We are an incredibly strong and stable organization with a very long-term commitment to this market. We will continue to invest heavily in both people and systems to be the best possible provider and a most trusted choice to our clients.
Flesch: The fact that “print” is not dying like the experts think. The imaging industry is still booming and is still very profitable.
Lane: We’ve spent 25 years building a community of OEM and dealer partners that service end-customers within the print industry. I’m optimistic that we’ll continue to maintain a high level of service, along with value-added solutions that help expand their businesses and strengthen our community. It goes back to our three pillars: people, products, and processes. From the sales team to our professional services team, and everyone in-between, I’m proud of who we have assembled to serve our partners and I’m excited about where they can take us. It’s our people that fuel confidence within our vendor partners to continue developing innovative solutions. It’s our people that attract new vendor partners that could benefit from our trusted network within the channel. Lastly, it’s our people that engage in the marketplace and have built many relationships through value-delivery. We accept the responsibility that the burden is on us to make our partners successful and believe we can achieve much greater results in the upcoming years through the addition of other products and more sophisticated processes.
Marusic: I love the excitement at Sharp, the desire to make a difference and make some change. We have a broad spectrum of people now engaged in our business and looking to contribute. When you have that type of engagement, good things happen. I think our dealers sense that too. We are having a lot of fun, and it is showing up in innovative ideas and a great attitude of support. That, to me, is the best part right now.
McArtor: There will always be a need for print for the foreseeable future. While that need is declining, NEXERA is there to be a resource for dealers to help them with the changes needed to stay viable as these changes occur. I’m confident we have the solutions dealers and manufacturers will need to successfully navigate the next era of imaging. There are still healthy margin opportunities in our business model; we simply have to be willing to apply business disciplines and controls to keep them healthy. NEXERA’s broad base of expertise can be a real asset to almost every dealer, from sales, ERP, financial, service, CRM, and admin experts to a variety of relevant dashboards. Our team of over 20 industry powerhouses can assist dealers in virtually every aspect of their company’s performance.
CR: If you could gaze into your crystal ball three years into the future, how will your organization have changed to better serve your customers?
Auman: We will continually reinvest into our infrastructure to help provide better services to our independent dealer customers. We are finalizing a complete rewrite of our real-time website dedicated to our dealer customers. We are also working on an app that will make it easier to do business with Hytec and are continually looking to add complimentary products and form strategic partnerships that help drive value and savings to the dealer network. It is a large investment to continue moving our business forward, but it is a necessity to continue to grow and remain relevant.
Buysse: We will bring our partners even more tools to satisfy their customer’s needs. Systems will be more fully integrated and there will be more billing options and greater payment flexibility. The pace of documenting a transaction will speed up dramatically and the dealer-client will have access to account information at their fingertips 24/7.
Flesch: Remote support with tools like our Client Portal and Service App that we are working to develop.
Lane: I read somewhere that thinking always ahead, thinking always of trying to do more, brings a state-of-mind in which nothing is impossible. And I like that way of thinking. Our team consists of many servant-leaders who are planning for new ways to deliver, charge for, implement, and support best-of-breed solutions like a fully hosted version of PaperCut and a one-of-a-kind fleet management tool like KPAX. In addition, we plan to complement our existing portfolio with a broader offering for complete workplace streamlining and value design. Is it too lofty a goal to eliminate friction from the entire customer lifecycle? It may be lofty, but we believe it is possible. Therefore, we’ll continue to invest in the best people, products, and processes. And by doing so, we’ll better serve our “customers.”
Marusic: For Sharp, it will be providing end-to-end information sharing and collaboration. We have said it a lot in the road shows and at our dealer meeting. Collaboration is the future and to do that, you need to share information in a mobile way. We believe that we can provide customers with a simple and easy way to share information, move around their work environment seamlessly, and have their information move with them. Be it paper or digital, having the ability to have access to information and then share it will be crucial. In the near future, our team won’t be “document people.” We will be “collaboration people.” That gives us a broader reach into the office. We love how we are positioned for it.
McArtor: We will continue to develop solutions that our customers need and want. NEXERA listens closely to our customers and using our exclusive database, we will focus our considerable American-based resources to provide our customers with answers and solutions that help them effectively meet the needs of their customers. As dealers diversify, they will need objective evaluations of their operations and NEXERA can be that and so much more. The fact that our competitors are simply copying our solutions tells me we’re doing something right!
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