CRN: How important is bundling services together?
Lemmermann: It’s the same thing with IT services [and other types of hardware]. The biggest problem that people have today is that the copier companies have never really marketed before. They sell all this separately and I think that is a big mistake that it's not bundled. A bundle makes it difficult for people to go away because if the printers and toners are unbundled, then they're a commodity. You might make a sale, and it's transactional -- it's not annuity. So the key to me is turning it into annuity, let them use the [MPS] software and they pay you [a] monthly fee.
CRN: What did you see as the benefit of a recurring revenue model back then?
Lemmermann: I started transactionally for a year until I realized the people competing with me were scamming. There was a term called "toner phoner" and they would phone and deliver bad products. So I realized transactional is when you're dealing with a commodity and low barrier to enter a market. A year after, working with HP, I bundled the warranty and repairs and service with consumables.
CRN: What differentiated your company in the way you delivered your services to the customers?
Lemmermann: I believe that you have to look at things holistically: look at all the scanning, copying and printing, and then you have to look beyond that in terms of what the document process flow is, how people take a piece of paper and turn it into a digital document or how they store that, how do they retrieve that. It’s all-encompassing and making things simpler. It's asking what are the needs and the best technology has to offer to make life easier.
I had a client that said he has three kids at home and he only sees them in the morning because when he gets home he is answering emails until 8 p.m. and, by then, his kids are in bed. He said ever since he started with us, he doesn’t get emails for printer problems anymore; he sees his kids before they go to bed, and that's the value of our company. That’s all we're trying to do. We're trying to make it simpler and easier so they can do whatever they need to do.
CRN: How do you engage clients with managed print services?
Lemmermann: We go out and talk to people on sales appointments, we do a consultative sale and ask them what's going on in their environment and look for problems they are having that we might have a solution for. Secondly, we do an assessment; we have a checklist to go through and we talk to their people, their IT people and end users and ask them about their current experience, what’s falling short, and try to identify areas where we can help solve the problem. Our assessment includes getting their cost, what they are paying for certain things. And then we come back with a proposal that would tailor a solution for them, which is our managed print unique offering.
CRN: How hard is it to keep up in the managed print services market today?
Lemmermann: For the copier company wanting to get into managed print, they will be more of a commodity; that's a transaction-based [model] because their profit comes from selling equipment. They don’t make a lot of money on ongoing residuals because the money is up front. With managed print, we don't take all our profit up front; we take it over the term of the contract so we still have profit from that equipment for five years versus day one and that's it. We delay our revenue recognition as opposed to copier companies taking their profit from the get-go. It's a different business model, and they see it as transactional-based. Some have moved beyond that, but very few. Some are not successful because they can't make it to annuity-based contracts.
Relationships are going to generate a whole lot more revenue than a one-time transaction. The managed print services arena is intended to be more of a long-term relationship sale.
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