Getting A Grip On The Printer Channel

In dishing out a cool $1.5 billion to buy mega-VAR Global Imaging this week, Xerox engineered -- in one fell swoop -- a major offensive into the SMB market it has long coveted.

The deal, if approved, also sports significant implications for the channel -- for one, it's the biggest example to date of a major printer vendor buying up either one of its own dealer partners or a competitors' solution provider.

Up to this point, Tampa, Fla.-based Global Imaging hasn't sold Xerox at all. It deals in products from just about every printer and document management vendor in the marketplace today except wares from the company seeking to become its parent. That alone makes this acquisition quite interesting.

But a couple thoughts come to mind; first off, how does Xerox avoid channel conflict between Global's army of sales people and the current stable of Xerox dealers and VARs serving the SMB space? Secondly, how long before Ricoh, Toshiba, Konica Minolta and the rest of Global's printer suppliers decide they don't want to be giving their money away to rival Xerox? (Best guess: when their contracts with Global next come up for renewal.)

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Jim Firestone, president of Xerox North America, tried to address the channel conflict issue this week, acknowledging at the outset that not all channel conflict can be avoided. He outlined Xerox's three-pronged approach to the SMB market, which, he contends, makes room for many. First off there's Xerox's traditional agent program; there there are the IT resellers that predominantly sell printers today but whom Xerox is looking to train on more sophisticated document management solutions; the last leg of the stool is Global Imaging, which will operate as an wholly owned subsidiary of Xerox and continue to carry other vendor brands (for the time being).

The question is this, why buy the company to get into the SMB space instead of getting them to carry your products as a channel ally? Turns out that was the original idea.

"We started talking to Global about a distribution relationship," Firestone explained. "But we realized there was a bigger prospect here. Global's local presence in the document industry is where we can leverage their sales, services and support was easier to evolve with them in-house."

Taking control over your channel is a trend moving across the printer industry today, according to Keith Kmetz, industry analyst at IDC in Framingham, Mass. Kmetz cites recent moves by Toshiba and Sharp to acquire several of their own dealer partners and setting them up as part of their direct sales operations.

"I think we will be seeing a lot more of channel acquisitions by vendors [in the printer space]," Kmetz said. "There's no question that vendors want more control over the channel and better control over distribution."

This could be an ominous sign for channel partners from a competitive standpoint, though some, like Global, welcome the chance to become part of an even larger vendor. Yet there is one potential benefit to solution providers from this particular deal: The chance to take on other printer products.

When Ricoh or Toshiba eventually pull up stakes from Global, they'll most likely be looking to woo new channel partners in the local SMB spaces that Global plays so largely in now. VARs that have steered clear of entering the market where Global has dominated will now have a shot.

From Xerox's perspective, acquiring Global Imaging gives it a huge boost in its attempts to crack the SMB space, where Firestone acknowledges the company is under-represented. The bigger question, perhaps, is what such major vendor/solution provider acquisitions means to the face of the printer channel long term.

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