Recurring Revenue Riches: How One Solution Provider Got Ahead Of The Managed Print Services Market

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For Walter Lemmermann, managed print services was his area of focus before it even became a term.

Advantage Enterprises, a managed print services company based in San Francisco, has seen its MPS business thrive in recent years. A big reason for that success is because as CEO, Lemmermann made the shift to managed services and recurring revenue streams in the late 1980s -- long before most other solution providers. In an interview with CRN, he talks about his MPS business, how he shifted to a recurring revenue model, and what makes his business so prosperous. Here are excerpts from the conversation.

CRN: How did you get into the managed print services market?

Lemmermann: In 1987, I looked into the idea of refilling toner cartridges, and I investigated it for a friend of mine getting into that side of the printing business. I thought it was interesting because toner was expensive. We always had problems at the bank where I was working [at the time] because we didn't know which toners or which printers to buy. We had an office supply guy who would take our order on paper and pencil, and the service was great. But the refilled toners we bought were just garbage; they would leak and not work.

But there was a guy who refilled toners in his apartment at home, and there was nothing wrong with them. I thought if I can take the customer service with the quality of this other guy's toner refilling, I thought it could be a service to deliver to corporate America. I went out to the all these public accounting firms I know in the Bay Area and I asked them how many toners they used once a month and they didn't know. So I asked to buy the empty toners from them because I thought that if I did that then they would save them. So I bought them for a year and people were going through them like crazy. That's how I did my market analysis to determine how much of a market there was for [managed print services]. So that's why I got into the business -- refilling toners.

CRN: How did you go from refilling toner to managed print services?

Lemmermann: I had a business partner at this company and he knew David Packard so he made an appointment with him to see if we could become an HP reseller. It was difficult for me to go to market with my concept because if you buy refilled product, it would void their warranty. So I called HP and asked to become an authorized reseller, and they said, 'Are you kidding me, you're selling resold product and we don’t believe in that.'

I was 30 years old; Packard was 85 years old. I explained to Packard what I wanted to do; I said I want to give people who buy HP products and printers an easy way to use the products because I was thinking of the guy who easily delivered refilled toners. I wanted to deliver a good experience and I also wanted to guarantee the revenue stream. When you are selling a printer, you need to sell toner, and I wanted to create a program to push product as much as you need so it is a recurring revenue stream. So I became the first authorized service center in the world to refill toners for HP, and that was in 1988.

HP started to understand how important the services were. I had contracts with law firms already for a monthly fee that covered everything that had to do with maintenance and consumables with printers. And then HP started getting interested in looking into that. Going from there, I would do service and repairs bundled with the toner refills. But going to market with managed print services was my way of basically analyzing what people currently had and what their operating costs were. That's when I realized my value in the marketplace is to educate people so they can take complex things and understand simple things. The idea of the cost of toner is complex, so I wanted to make that simple.

NEXT: How Important Is Bundling Services Together?

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