Margin Makers: Peripherals Stay Up In A Down Economy

Higher-priced MFPs are much more complex to install and maintain than simple plug-and-play single-function printers, allowing VARs to bundle lucrative installation, consumables and maintenance services into MFP price tags that drive up revenues.

The product is not high-margin but usually the installation that goes with it is, said Luigi Giovanetti, owner of CPU Sales & Service Inc., a solution provider based in Waltham, Mass. "When there's a device like that we always add on the extended warranty because when a piece of equipment fails, you're missing a lot."

Hewlett-Packard is throwing its weight behind MFPs with rebates for members of its partner programs, like the Office Printing Channel Partner Program, that can take a 10-point margin on an MFP and turn that into 40 points or more, according to Donna Waida, value channel program and development manager for HP's Imaging and Printing Group.

VARs in CRN's Channel Champions survey this year gave HP, Palo Alto, Calif., top marks for margin on workgroup color printers with an average of 18.92 points.

VARs reported that Brother International Corp., Bridgewater, N.J., had the second-highest average margin on workgroup color printers with 18.44. Brother's flagship product in the workgroup color lineup, the DCP-9045CDN, a digital color printer/copier, sells for $699.

Samsung, Seoul, Korea, which launched its $2,999 network-ready SCX-6345FN MFP earlier this year, also topped the margin chart with VARs, reporting 17.13 points.

Print managed services programs, or cost-per-page programs, like Xerox Corp.'s PagePack program, are also margin makers for VARs, and ones that bring steady revenue streams through multiyear contracts and bundling consumables.

"Managed print services allow you to put in a two- to five-year contract so you know what your revenue is going to be, and so that you can manage efficiencies in product and consumables. You have all the pieces locked in. They don't go buy some third-party crap somewhere that messes up the printer," said Paul Knowles, president, Atlantic Computer Innovations Inc., Tallahassee, Fla."It's a real slick way to get into managed services and figure out whether that's right for your company or not."

UPS And Cooling
With UPS and cooling product sales, solution providers are, as with other peripherals, making most of their money on services and installation.

At UPS vendor Liebert Corp., Columbus, Ohio, part of Emerson Network Power, VARs can sign customers up for five-year service contracts that include on-site maintenance and repair, parts coverage and four-hour response time, provided by the vendor.

This helps VARs keep margins high, said Thomas Karabinos, of partner channels for Liebert. "Most service packages are inherently high-margin, he said. VARs reported average USP margins from Liebert at 18.59 points in CRN's 2008 Channel Champions survey. Meanwhile, cooling hardware is also inherently high-margin at Liebert, providing upwards of 20 points on most products, he said.

Vendors are also unveiling programs to help VARs make sales. Tripp Lite, for example, is rolling out its Power Project Audit program with some of its VARs. Tripp Lite's audit sheds light on a customer's power needs and then the company helps its VARs identify and go after additional sales opportunities the audit exposes. Tripp Lite, Chicago, had the third-highest mean gross margin in the Channel Champions UPS category with 17.51 points.

Customer needs in areas like virtualization, rising densities and green initiatives in the network and in the data center are all helping the category grow and become more profitable, according to Gordon Lord, director of global channel programs at American Power Conversion Corp., West Kingston, R.I. APC launched a revamped channel program this year, and Elite partners can get an additional five-point margin on products.

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