Ream Of Opportunity

In doing so, these copier vendors are taking a page from the playbook of printer vendors. Lexmark International, Hewlett-Packard and Oki Data have all rolled out varying levels of consulting services with solution providers.

John Linton, vice president of Lexington, Ky.-based Lexmark's solution provider channel, says it's time for copier vendors to develop new skill sets. "Copier companies need to develop new competencies to participate in an IT-driven business environment where all multifunction devices are shared by many users on the Net," he said. "Situations like this force both manufacturers and channels to develop new skills if they want to participate in the market."

Printer behemoth HP, Palo Alto, Calif., meanwhile, has maintained its 47 percent commanding share in the worldwide printer market. And it's done that almost exclusively via the channel. "If you look, 93 percent of our business is [through] channel partners," said Vyomesh Joshi, executive vice president of HP's Imaging and Printing group. "With our channel partners, we have a very unique value proposition—providing that customer touch is very unique."

According to a July report from research firm Gartner, the total market for printers, copiers, faxes and multifunction devices in the United States will grow 2 percent a year to 37 million units by 2008. Yet during that same time, the market will spend 2 percent less per year on the hardware.

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To address this, hardware companies are shifting their strategies to reflect a growing emphasis on consulting, services and devices with more high-end functionality. "The [technology] convergence is probably coming to the point of completion," said Ed McGlaughlin, president of the Mahwah, N.J.-based Sharp Document Solutions unit. "It's been taking a long time. It's come full circle to the point where you can't buy an analog device anymore."

As a result, Sharp is working to boost the skill sets of partners, which, he said, it previously considered merely "office product dealers," as well as attract value-added IT solution providers. The technology is making that shift a requirement: Today, an MFP is a network-connected device, he said. "It's a knowledge portal into the network."

Sharp is just one of several legacy copier vendors that have begun seeking out partnerships with traditional IT solution providers, launching new channel programs or engaging solution providers as never before.

West Caldwell, N.J.-based Ricoh, for its part, has rolled out a reseller program over the past year that provides IT-like 10 percent back-end rebates, spif programs and bid pricing capabilities it didn't offer dealers several years ago. "That is key to us—to try to minimize channel conflict, particularly when we are growing into the IT channel and we still want to keep our core channels as key demand generators," said Ann Moser, vice president of Ricoh's Printing Solutions Division.

Unlike other vendors, she said, Ricoh has stayed out of the retail space—a strategic decision aimed in large part at keeping the core copying channel and the IT solution channel free of one more avenue of conflict. At the same time, Ricoh is working to leverage its strengths in scanning and document imaging into a broader line of commercial accounts and solutions. That plays well to its legacy copy channel, which is developing competencies in security, management and workflow outside the box, and to its value-added solution provider channel, she said.

"I think Ricoh and our competitors certainly realize that's going to be the difference maker," Moser said.

Canon, Lake Success, N.Y., has also begun relying more on traditional IT solution providers. "We're looking for our copier dealers to make investments in personnel and knowledge in this type of business, to take a more consultative approach to their customer," said Dennis Amorasano, director and general manager of integrated solutions at Canon USA.

Canon's largest U.S. dealer, Ikon Office Solutions, has made those very investments. The transformation at Ikon is key to its success, say company executives: Ikon recently surpassed $1 billion in annual Canon sales for its most recent fiscal year, in large part by providing value-added technology and services along with the hardware.

"There is customer demand for performance, productivity and document return on investment," said Dan Murphy, vice president for products and services at Ikon, Valley Forge, Pa. "These are all colliding. They are requiring companies to take commodity-based hardware, marry that with unique software, and bring those together in an integrated approach and then implement it."

Ikon's revenue increased 5 percent year over year for its fiscal year just ended. Executives believe that growth is in part a testament to its use of new technology for a changing market. A $4.6 billion company, Ikon reports that more than half of its sales now comes from services.

Key to Ikon's strategy is its ability to drive home a return-on-investment message to potential clients and to spell out business-process changes in document management that could save 5 percent to 15 percent in costs. Much of that is based on document hardware consolidation.

"If I can get my guys in front of a CIO or CFO and say, 'This is what a company will typically spend on documents, and I can show you ways to increase productivity and lower costs' the value proposition is very strong," said Michael Kohlsdorf, Ikon's vice president of professional services. "We are spending millions of dollars in travel alone to train our organization in these solutions.

"What I think was inevitable was the emergence of MFPs—print, copy, fax and scan devices," Kohlsdorf said. "It's now one device instead of three. With an all-in-one device, you have a reduced footprint. MFPs are now viewed as part of a company's business process."

Not surprisingly, business process is an area where value-added solution providers are finding increased opportunity. Miami Office Systems has been a Sharp dealer for the past 19 years. Luis Gonzalez, owner and president, said that of late the Miami-based company has had more than just a reseller relationship with Sharp. Gonzalez launched a new company, netCompass, which developed a document-routing solution dubbed ImageRouter for Sharp systems. The solution combines software and hardware and sits atop a standard copier or MFP.

"Cradle-to-grave document solutions is the business we have to be in," Gonzalez said. "When we started in the business, the big things were duplex [technology] and automatic feeders. Now, if our salespeople talk about that, we shoot 'em," Gonzalez said. "If they call it a copier, we shoot 'em."

Throughout Gonzalez's transition from hardware dealer to solution provider, he said, Sharp has provided support. While the vendor doesn't require exclusivity, Gonzalez suggests the solution-oriented relationship is a big reason why he partners with no other document systems vendor.

Gonzalez believes the market will offer his company and others the potential for strong growth, as ever-more-complex workflows and new hardware functionality take hold.

Other vendors are having a more difficult time coordinating their channel strategies. Xerox, for example, could be viewed as the poster boy for channel conflict. Maintaining a vast array of product lines—from Phaser printers and MFPs to high-end industrial copiers and printers—the Stamford, Conn.-based company has not yet fully streamlined its channel structure. The result: In some cases, Xerox-exclusive agents have found themselves pitted against Xerox resellers in customer turf wars.

When Integrated Document Technologies, a Little Falls, N.J.-based solution provider, decided to drop out of Xerox's agent program but still handle Xerox products, the company became embroiled in a battle over customers, according to Liz Perillo, president of Integrated Document Technologies. Soon after leaving the agent program, she said, a competing agent began sending letters to her customers telling them Integrated Document Technologies was no longer authorized to sell Xerox products. But while Perillo was no longer an agent, she was still an authorized reseller. She said Xerox did not act to help resolve the problem, opting instead to stay out of the dispute.

Rob Stewart, vice president of marketing for Xerox's Office Group, acknowledged the company's complex structure of multiple channel segments, but said the long road ahead will be tailored more to solution providers such as Perillo's company that focus on building a solution focus.

"The agency program is not a program where significant enhancements or investments are planned," Stewart said. What is planned, though, are additional investments in training and education for solution providers—not just on hardware and marketing areas such as Xerox's DocuShare workflow software solutions.

A key thrust will be in marrying the traditional office products channel with network-focused solution providers—each of which bring different expertise to the market and Xerox's vast portfolio, he added.

"It's not so much what we could offer for sale to the channel, but a lot of the learning [we need to provide], particularly for those who have been IT- or solution- centric in the past. They have some learning to go through to take a look at a product such as a multifunction machine," Stewart said. "How they go to market is sometimes different than how the IT solution provider has packaged his product."

But while companies including Mt. Laurel, N.J.-based Oki Data, Irvine, Calif.-based Samsung and others have re-engaged the IT solution provider channel over the past two years with single, streamlined, channel-only sales organizations for printers and MFPs, Stewart could not indicate if there was any possibility Xerox would follow suit.

Perillo said she simply couldn't wait for Xerox to figure out its channel strategy. Her company has gone ahead and made the complete transition from agent to full-blown solution provider on its own, and it's now in a much stronger position.

"We do it all," she said.