Printing/Imaging

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But the ongoing services proposition associated with this technology makes the category well worth it, according to solution providers representing these solutions.

"You can't do an entire solution unless you sell hardware, software [and] services," said Jim Fall, vice president of strategic planning at Cannon IV, an Indianapolis-based printing/imaging reseller. "You have to take a total system approach and [look at both the] service and solution margins," he said.

The golden ticket for service revenue is demonstrated in the printing/ imaging category's average sales ratio of $3 in services to every $1 of product sold—slightly higher than last year's ratio—showing the importance of possessing the skills that will help guarantee successful practices.

A solution provider for 42 years, Thomas Computer focuses on profitable services opportunities associated with printers and imaging equipment, although it doesn't put a lot of weight on its warranty-service revenue.

"It's generally through service [that we see the most revenue] and that tends to primarily be post-warranty service," said Doug Polkosky, COO of the Orlando, Fla.-based solution provider.

Polkosky said that Thomas Computer, a partner of Hewlett-Packard, Lexmark International, Xerox and Fujitsu, among other vendors, does not necessarily have to sell the equipment to reap the services benefit.

"We do a lot of repair business for people that have purchased [the hardware] from a big-box store," Polkosky said.

Next: A look at some printing/imaging profitability stats

Given the focus on service, it's not surprising that printing/imaging vendors require comprehensive training to represent their products and services, which is a consideration for solution providers looking at this space.

On average, the solution providers participating in the 2007 CRN Profitability Study report that it takes 3.4 months to recoup their training investment for printing/imaging products, up slightly from 2006.

"Epson, they're one of the few companies that ask their resellers to go out and complete training—on both the sales side and technical side," said Mary Howell, sales and marketing associate at Minneapolis-based BLM Technology. "[That way, both departments are] trained to answer questions and talk to customers intelligently," she added.

Another promising profitability metric: Printing/imaging was one of four categories where average gross margins grew from 2006 to 2007. Solution providers report average gross margin of 14.7 percent, up from a revised 14.2 percent in 2006. A portion of the increase in margins may be attributed to the influx in leasing, which is creeping into the psyche of companies as they replace older single-function printers with more costly multifunction units, according to solution providers involved with the category.

"We do leasing ... people are looking for tech protection and managing tech flows," said Cannon IV's Fall. "With our MFP business, 50 percent are leased. If you asked us that question three years ago, [it was] less than 5 percent," he added.

Thomas Computer offers leasing on quotes exceeding $2,500 via manufacturers, third-party leasing companies and will also fund its own lease program.

Solution providers also are focusing on building their recurring flow of revenue from managed print services. Most of the major vendors have adopted some sort of strategy for this, some favorable to the channel, some not.

Polkosky touts Xerox's PagePack program as a favorable example, as it wraps the sale of hardware with supplies while providing the end user with a fixed-cost-per-page three-year extended warranty. Consequently, the company's offering provides resellers with an ongoing revenue stream that Polkosky likens to an annuity.

"We see the [program] as an avenue for increasing sales. ... Combining the equipment lease [of 36 months] with the PagePack program is a win-win situation," Polkosky said. "The user benefits by fixed price per page without inflation for the term of the lease and having a single point of contact for hardware issues. It has the possibility of revolutionizing [reseller] services," he said.