Printing Market Red Hot, Distributors Say

The best offense is a good defense.

That's the business proposition broadline distributors are pitching to solution providers that have shied away from actively selling print solutions.

Both Tech Data and Synnex are building new printing solution practices and are recruiting VARs that in the past have been turned off by single-digit printer hardware margins. But the fast-growing multifunction printer (MFP) and color laser markets have put solution providers on a collision course with traditional copier vendors such as Canon, Konica Minolta, Ricoh and Sharp Document Solutions Company of America.

Not only will a robust printing practice help VARs fend off the incursion by copier vendors seeking a bigger slice of the IT spend, but distributors want to convince solution providers that printing solutions can yield healthy double-digit margins.

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"VARs want to expand their relationships with their customers and at the same time control the customer," said Bill Sheldon, senior vice president of document management and printing solutions at Synnex, Fremont, Calif. "When you move [the entire printing solution] into a lease model, you can go from low single-digit margins to high double-digit margins," he said, noting that margins can be as high as 40 points when the entire process is bundled into a cost-per-page lease model.

In July, Synnex launched its PrintSolv document management solution that combines business processes and software tools to help solution providers capture not only printer hardware sales but also supplies, installation and management of printers.

"The VAR used to sell the printers and then walk away," he said. "Now if you go back and capture the service and supplies, you can develop an annuity stream."

Tech Data, too, is poised to enter the fray with a new printing solutions unit slated to launch Feb. 1. The unit, announced earlier this year at Tech Data's Business Partners Summit, is driven by the convergence of color printing, copying and multifunction printers, the distributor said. Clearwater, Fla.-based Tech Data formed the unit to go beyond printing supplies to a more solution-based approach, adding more resources around services, hardware and software for VAR partners.

"[Document management] is a very profitable space. This year, we continue to expand and grow that particular space by adding ISV software packages that really help us offer the total solution, so that we're not just offering the hardware side of the business," said Jennifer Burke, marketing manager for digital imaging product marketing for peripherals at Tech Data.

Fueling the rush to print solutions is the convergence of the copier business and the IT market. No longer are copiers just copiers. And no longer are they stand-alone devices. MFPs residing on IT networks have changed the printing and imaging landscape dramatically.

NEXT: MFPs reshape the market.

Hewlett-Packard, Lexmark and other printer vendors fired the first volley with low-cost MFP devices that resided on the IT network and usurped the value of stand-alone copiers. Now those devices are at the vanguard of printing solutions and ultimately at the flash point between copier vendors and IT solution providers. For its fourth quarter ended Oct. 31, for example, market leader HP said MFP unit shipments jumped 160 percent over the year-earlier quarter.

But the copier vendors aren't standing still. They are quickly moving beyond the copier space and mounting an aggressive incursion into solution providers' IT turf.

In November, for example, Sharp said that it had established a direct regional sales operation through its new division, Sharp Business Systems, after acquiring Phoenix-based solution provider Davidson Imaging Systems to launch Sharp Business Systems in Arizona and New Mexico. The company said it plans to establish more than 20 local Sharp Business Systems branches during the next few years.

Synnex, however, said PrintSolv gives VARs an advantage over copier companies coming into the market with print solutions because it takes a multi- vendor approach. Sheldon noted that HP, Xerox, Lexmark and Oki Data are all partners in PrintSolv and the distributor is talking with other MFP and copier manufacturers. Sheldon said Synnex is on target to sign 400 solution providers throughout North America within a year.

Bob Degliuomini, manager of print services and workflow solutions at Westwood Computer, a solution provider in Springfield, N.J., is currently implementing PrintSolv for his clients. "This will help us manage our customers' print fleets better," he said.

He noted that PrintSolv is not vendor-specific and allows him to view and manage any brand of printer, copier or fax machine on a network from a desktop. When ink or toner levels are low, for example, he can automatically order supplies and ship them to the customer, drastically reducing his SG&A expenses because he doesn't have to manually monitor each device. He's unsure, however, how much his margins will go up as a result of the printing solution from Synnex.

"We'll start slow and see how it works. We'll see what happens in the next six months," he said.

Tech Data, meanwhile, said its printing solutions unit will be modeled after its 10-year-old document management unit, providing VARs with trained resources in the field as well as inside sales and field-sales support.

Tech Data will offer a tool that identifies recommended add-on supplies when a VAR looks up a particular printer or part on the distributor's Web site, Burke said, adding that the company also aims to build relationships with software vendors in the printing space.

"Today, where we have a supplies business unit focused on selling print supplies, we're going to take those resources and that team and build upon that, and we're really going to be focused on selling printing solutions," she added.

NEXT: Assessing print managed services.

Jeff Gladney, president of Digitek Networks in Louisville, Ky., is partnering with both Synnex and Tech Data. While Synnex's move into print managed services wasn't on his radar screen, Tech Data's new division is of interest even though Digitek had previously avoided the market.

"We've never found anybody that's been able to help us grab a hold of that side of the business. We've kind of steered clear of it. ... There's not enough markup, not enough margin. We have to make a decision on certain things to do and we let that one slide, even though that was one of my technician's expertise for a long time," said Gladney.

Tech Data has changed his mind. "Any time Tech Data launches anything or pushes hard on something moving forward, we made a decision that if they want to invest their time and money in it, we have found that there is something of value there and we should look at it," he said.

Larry Levy, managing member of LevyNet, a full-service IT consulting firm in Jacksonville, Fla., said the cost-per-page model isn't a fit, although other companies in his area have offered similar services.

"There are a lot of copier companies ... that are taking that approach, so instead of selling a $4,000 copier/ printer/scanner, they're dropping the device into the customer and they're charging them a per-copy cost with a guaranteed minimum. ... I don't know that they're still doing it. I think it was a model that they're trying and it didn't work," said Levy.

"I don't really use that approach personally," he said. "I'd be more interested in the Tech Data approach where I can get better educated on the printers and the toners and then go off and sell them. ... Having the knowledge for both the product and sales tools and to go out and let me do the sale and the face-to-face just seems like a much more comfortable model for me, because it seems like I would be more in control of the sales process."

Synnex's Sheldon agreed that controlling the customer as well as the sales process is key to the success of PrintSolv. Synnex offers a USB key sales tool to PrintSolv solution providers that lets VARs plug the key into a customer's network and within 30 minutes catalog all printers and copiers that reside on that network.

"Typically that process was done manually and it could take months," he said. "You'd have to walk the floor, open up the device and record the serial number," he said. "With PrintSolv you can do that within half an hour."

Once solution providers capture the printer inventory they can start slowly by gaining a toehold in the supplies business. From there, he said, it's easy to move up to capturing the maintenance business and ultimately the entire printer and document management business using a cost-per- page model.

"The key is to take a high SG&A model and by automating it, drive it down so solution providers can profitably sell high-end color and MFPs," he said.