CRN Printer Week: Vendors Double Down On Channel Push To Win Managed Print Services Deals With SMBs

For many solution providers, the old transactional revenue model of simply selling a printer and repairing it when necessary has been eclipsed by managed print services. The recurring revenue model that MPS generates is leading the way in the market.

But which segment of the market? Over the past few years, revenue from managing print operations in the U.S. enterprise space has been falling, industry sources tell CRN, leading printer vendors to roll out new MPS-focused programs and new technologies with an eye toward the small- and midsize-business market.

"The enterprise space is pressured, especially where revenue is concerned," said Ken Stewart, an analyst for Photizo Group, based in Midway, Ky., but the SMB space continues "to provide strong opportunities’ for printer vendors.

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"Page volumes are generally under pressure and print manufacturers continue to look for [new] opportunities, and so they are now looking to grow their footprint in the SMB space," Stewart said.

As vendors look to the SMB space, they have realized that the best way to break into new opportunities is through partners, according to solution providers and analysts.

"A lot of opportunities have opened up," said Guy Baroan, owner of Baroan Technologies, an IT consultancy and Xerox partner based in Elmwood Park, N.J.

"The recurring revenue stream [around printers] was historically one of the areas that we didn’t touch," he said, adding that margins on them after they were shipped were too tight. But Xerox’s managed print services program has led to a 5 percent increase in business, Baroan said.

On toner, customers have saved, by Baroan’s estimates, 10 percent to 15 percent annually over the alternative: purchasing it from elsewhere. And, they get service from Baroan too.

"It costs less for toner; they don’t have to keep anyone staffed to look at [toner levels] because the software [inside the printer] does that, and there is a service included with their printers," which Baroan is managing, he said.

The global print market, according to Bob Palmer, an analyst for research firm IDC, is growing in specific geographies. But overall, he said, specifically in developed countries, "the enterprise [market] has peaked and is either flat or in decline -- certainly, there has been an ongoing transition" to lower printing costs in the enterprise.

Over the past 10 years, Palmer explained, printer manufacturers have been steering most of their enterprise-market sales toward MPS to more effectively manage those environments and gain revenue by charging per page for all printers.

Initially, he said, vendors used MPS as a strategy to take over a client's entire print network, including competitors' printers within those networks.

However, Palmer added, MPS promotes print reduction through device consolidation, rules-based printing and stricter printing controls, and that reduction, combined with new paperless document technology and green campaigns, has led enterprise clients to print less, shrinking the market and making it harder to find growth.

Many enterprise clients, Palmer said, have been in the managed print space long enough to have renewed contracts as many as five times, creating a strong, repeatable revenue source for vendors, but making future growth difficult, especially if customers print fewer pages, which could result in lower revenue, he added.

"[Engaging the SMB market] has been a low-hanging fruit for the last four or five years," Palmer said. "But it is still an emerging market."

And many vendors are only just beginning to figure out how to engage partners, he added.

What the vendors have begun to understand, Palmer said, is the way they need to speak to partners, and how they need to sell MPS to them. He said the SMB space is different from the enterprise level and vendors need to understand how to sell to their new target.

Palmer said enterprise companies, which have complicated print fleets and many devices, were driven to MPS to help reduce print costs by tightening control over page output.

However, he added, printing is such a small cost for many SMBs that they don’t place a high value on print savings. But print is valuable to them, and more are considering moving it in-house -- rather than outsourcing it -- to simplify business processes and bring color printing to their customers more quickly.

Palmer said that by changing the way they’re marketing themselves to the SMB market and providing partners with more resources to sell MPS, vendors will more effectively engage that market.

Manufacturers are doing this with new hardware releases, new software and business process software for their connected devices and new channel programs to incentivize partners to add MPS.

Some companies, like Epson and HP Inc., are rolling out new printing technology targeting the SMB market.

Epson has introduced a new line of inkjet printers, built for the business market, with a replaceable InkPack system aimed at businesses looking for a less expensive alternative to toner.

The new technology, said Tom Kettel, Long Beach, Calif.-based Epson America's director of commercial channel sales, will allow partners to find new SMB customers that are looking at low-cost color printing and that can still profit because Epson has set up its new products with "a very high reseller margin."

HP, meanwhile, recently unveiled its PageWide Inkjet printer that the company says can cut a business' printing costs by up to half, making margins on managed print services much larger for a channel partner.

"We have a lot of activities designed around helping channel partners move into a contractual opportunity," said Thomas Jensen, vice president of worldwide channel sales for Palo Alto, Calif.-based HP. "For us, the blend of [the] copier and printer business has already happened in the enterprise space. We are seeing that trend move down-market now. … In fact, all of the growth in managed print is in the SMB space."

Another printer manufacturer is banking on a fresh marketing message to supplement new products.

Bridgewater, N.J.-based Brother International, which traditionally has targeted the home-office space, recently made a push into the midsize market with a "right-size your environment" initiative to boost sales -- through channel partners -- of its generally smaller, legal-size paper or A4 printers.

Businesses are saying that they no longer need the older and larger tabloid-size, or A3, printers, according to Steve Feldstein, Brother's product marketing director, who said most midsize businesses have said they aren’t utilizing the additional capabilities -- such as binding, hole punching and stapling -- and don’t need them.

Meanwhile, Darren Cassidy, president of Norwalk, Conn.-based Xerox's U.S. channels group, said the company’s new ConnectKey software allows end users to use their printers as fully functional workstations that can populate online forms and save data straight to the cloud.

Managed print services opens new doors for hardware resellers and service-centric solution providers, Cassidy said. Those that have traditionally been in the business of reselling hardware can expand by adding managed print and other services, while solution providers and MSPs can also broaden their offerings by adding printers to the endpoint devices they manage, he added.

"Partners are coming to us from all different places," Cassidy said, "and they are looking to add an extra layer of services and value to their clients."

With Xerox's ConnectKey, Canon's Uniflow software platform and HP's JetAdvantage solutions, among others, partners will be able to add that value.

"We recognized that there is a huge amount of opportunity and business that is being generated by partners around the world, and they are serving a client base that, historically, Xerox has not been able to reach, and was never going to get to with a direct route to market," Cassidy said.

Joshua Justice, owner of Xerox partner Southern Solutions, in La Plata, Md., said there's a lot of recurring revenue that can be made from managed print services.

"My goal, after adding Xerox MPS six years ago, was to completely cover our operating costs with recurring revenue, and we did that this [past] September," he said.

"It’s nice to be able to focus on how I can grow my business instead of how I can keep it running."