Lexmark Exec: Time For Channel To Turn The Page

Amid today&'s already fast-paced printer market, Lexmark aims to launch more products into the channel as part of an effort to unseat Hewlett-Packard. This week, the Lexington, Ky.-based vendor launched five new printer products, some of which include new features for securing the rights to use a particular printer. Bruce Dahlgren, vice president and general manager for North America at Lexmark, said in an interview with Editor In Chief Michael Vizard that the company--a primary printer supplier for Dell--is now driving solution-oriented sales to help boost partner profits.

CRN: What are the major trends in the printer market today?

DAHLGREN: From a technology standpoint, there are probably two main trends. One of those is clearly the device consolidation into multifunction printers. Clearly, device consolidation is a cost savings. But we think people should actually look at the benefits for the work as well in terms of how they speed up the business, take paper out of the business and improve business processes through that device consolidation. The other is color. I think we're finding that more companies, even down into SMB, are starting to see the benefits of color and the affordability of color. The additional resources we put in the channel are paying off for us. We're continuing to see gains. We're continuing to grow market shares. Device consolidation and color are very real trends. I think we're ahead of the game with these applications, and we'd like nothing better than to recruit solution providers to capitalize on that.

CRN: Are consolidation and color changing the way you go about selling printers?

DAHLGREN: Absolutely. What we've done as a company is gone out into six vertical industries and tried to understand all of these workflow output challenges. There are so many opportunities out there to speed up the workflow. The key thing is you&'ve got to get your sales force and your marketing organization equipped with the capabilities to be able to demonstrate that. Clearly, we can help the channel from a volume standpoint with certain programs to make money on this trend. But what we consider to be of more value is to actually help train them and give them these capabilities. Or we work directly with them and with customers to help that customer see the benefit. We've taken a group of solution providers and certified them on these solutions.

CRN: Why is it important for a printer reseller to understand business process workflow?

DAHLGREN: We see companies just kind of naively cutting out devices, and then something happens that we call ‘device creep.&' Three, six or nine months after this consolidation, you'll find the power users starting to go buy their own devices. These things start creeping back into the business and then they actually add much more cost than what was there originally. If you don't go into the business and really help them with this workflow, you will get this device creep.

CRN: Has that focus changed the way Lexmark thinks about solutions?

DAHLGREN: We're finding, especially in the medium-size businesses, that we needed some horizontal platforms that the solution providers can bring to the market. They include security, electronic forms and applications for a specific industry. We make our solutions centers available for a solution provider to come and use. The intent is to try to be more proactive in helping the solution providers with these applications.

CRN: This also seems to imply that you need to change your target customers. Previously, you might have gone after the office manager or purchasing department. But that seems to be more of an IT conversation now. Is that the case?

DAHLGREN: In the past, purchasing primarily only looked at cost. You still need to address that. And clearly, when you consolidate the devices and look at new maintenance contracts and other opportunities--maybe reducing paper--purchasing gets excited. But the IT world is very concerned with the network and their applications and making sure that they're supporting the business. So you need to make sure that you've got some processes that help them get through this transition.

We&'ve talked to lots of hospitals. If I can get that patient through the admissions process faster, if I can electronically pass that information to a nursing station without having to have that input later at night, now the business user is excited. If you look an average document over its life cycle, it transforms itself between paper and electronic eight to 11 times. We're looking for partners all through that document life cycle to assist us. There's no reason the channel can't capitalize on this. We want to embrace the channel and help them benefit from this. It is not our intent to compete with the channel in this area. CRN: In that context, are you trying to help customers print less rather than more?

DAHLGREN: We believe there are about 60 trillion pages that are copied or printed around the world every year, and it is going down. But it's going down on the high end. Where it's not going down is where you distribute that information and print it. It's kind of unique for a printer company to actually say when we go in and see our customers with our solution providers that we want to help you print less. We actually want to help you speed that business up. And it's not just consolidating devices. It's actually understanding the paper flow and taking steps out.

CRN: Do you see some fundamental shifts taking place in the office-automation dealer channel as this trend plays out?

DAHLGREN: They're cannibalizing their copier environment with a distributed fleet of systems. My personal belief is that every business is run through business processes, and most of them are paper-based. There's a tremendous opportunity working with IT to go in and speed up those processes. It's very difficult for the office automation environment to have an understanding of that, whereas this is our sweet spot. It was much easier for me to transform this organization to understand how to create demand and value by going in and speeding up those processes than it was for them to come into the space.

CRN: Clearly, Hewlett-Packard is the dominant force in printers. What's your best advice for your partners trying to compete with HP?

DAHLGREN: I think the secret is to get in front of the RFP [request for proposal] process. If you're waiting for an RFP to come out, there could be an incumbent. There could be some preference by that customer. We actually like to go in and create demand by bringing new ideas and new improvements to that customer.

CRN: Is Lexmark's manufacturing partnership with Dell a major impediment to working with the channel?

DAHLGREN: Clearly, they have certain strengths in industries that they've been successful in. But I think that the Dell relationship has benefited us most on the consumer side. I'm just focused on growing our brand and looking for solution providers to assist us with that.

CRN: Will you create a separate set of products for the channel to sell that Dell doesn&' t have access to?

DAHLGREN: Sure. There are examples of that today, and I think we'll continue to look for that. There are multifunction devices in the color area. You can look at some of our high-end model products. Our focus is on our brand. The channel is incredibly important to us, so we're putting more emphasis on investments in the channel. Not a day goes by that we're not trying to come up with new ideas and ways to leverage the channel.

CRN: As part of that effort, have you changed the way some of the Lexmark direct-sales force gets compensated to make them more pro-channel?

DAHLGREN: Today, we compensate them on what we consider contribution margins. There's a different group of salespeople out there with capabilities to really understand these industries and make this work. They're motivated to work with the channel, and they're motivated to sell these solutions.

CRN: How much pressure is there on pricing these days? It seems color printer pricing is falling rapidly.

DAHLGREN: We've had strong unit growth in the lasers here in the U.S., which means that we're gaining share. I think that will continue. It still was a record quarter for us. But pricing pressure is just another confirmation of why the solution providers and Lexmark need to migrate toward the higher-end solutions.