Written by: David Cameron, Ph.D.; President and CEO, Cameron Consulting Group

“We couldn’t have done this 10 years ago,” said Kevin Morris, founder and president of OneDOC Managed Print Services LLC, about his unique 2009 mid-year startup. Morris operates a lean sales organization focused on selling managed print services (MPS). This is a low overhead operation supported by a rising class of comprehensive infrastructure providers, such as Supplies Network, Xerox and Synnex, which provide an end-to-end integrated process of tools, support and service capabilities. Together, the lean sales-focused business and its infrastructure partners create a highly competitive and aggressive MPS growth engine.

From experience, Morris learned how he wanted to run an MPS business. Purposefully, he structured an outsourced business model that allowed him to focus on sales and customer service. His team manages the customer relationship from the sales process through print fleet and workflow solutions. Always excelling in sales, this was a natural fit for him.

A single infrastructure partner provides most of the needed tools and support services to fulfill MPS requirements. This includes tools and systems for remote device monitoring and reporting, automatic supplies replenishment, break-fix service, leasing and billing, etc. By leveraging a broad range of capabilities from several partners, Morris offers seamless MPS services to his customers. Ideally, the end-user customer sees this as an integrated network of services that are well executed and meet expectations for responsiveness, performance and consistent quality.

Sales Model

The target customer ideally has fewer than 250 employees (50 -100 print devices). Morris focuses sales on two diverse business centers: Oklahoma City and New York City. He believes that small to medium business (SMB) is the sweet spot for finding new customers using a short sales cycle and yielding strong profitability. Although the focus is on the SMB market, the company also supports large national accounts headquartered in these areas.

With the chief financial officer (CFO) as the main contact, the sales process focuses on defining financial advantages for the customer. Morris’ team leads with a long-term services approach to actively manage and optimize the print fleet. The approach is centered on a custom consolidation strategy that engages the customer in right-sizing the print fleet and replacing local devices with MFDs, where appropriate. Approximately 80 percent of his business is focused on print fleet management and workflow optimization.

There are eight sales professionals in the company, including one customer account manager that supports the sales process. Morris likes to hire experienced professionals that already know how to build deep customer relationships, though not necessarily from the printer industry. The compensation plan is weighted toward recurring services and gross profit incentives.

Print fleet management follows a vendor agnostic approach that preserves the customer’s investment and reduces the cost of adoption. Initially the print fleet is managed in-place with minimal device additions or changes. However, equipment is viewed as a significant, long-term source of revenue and profitability. Morris believes that over the life of a five-year contract part of the print fleet will need to be refreshed to achieve performance and cost objectives. This approach is welcomed by customers, many of whom feel they have been oversold equipment in the past.

Land-Grab Opportunity

Morris’ recent market experience shows that a high percentage of sales activity in his target SMB market segment is uncontested by an MPS competitor. It is a green field of low competition with excellent opportunity for new business growth. This is a near-perfect setting for a lean sales organization to capitalize upon.  Growing customer awareness of MPS benefits and low competition make for an Oklahoma style ‘land-grab’ opportunity in the small business market.

In addition to fast sales growth, the business has been highly profitable. Morris indicates that business profitability exceeds the upper range of the CDIA model, i.e., significantly greater than 40 percent gross profit. These are exceptional results that are fueled by the low-cost services platform, absence of strong competition and an aggressive sales approach. Assuming that services can continue to be delivered efficiently and meet customer expectations, a sales-focused model is a compelling business approach that may challenge established channel competitors.

Risks/Upsides of Outsourced Infrastructure

Morris began the company with the idea of focusing on sales and customer service and outsourcing the rest. His past experience had shown that activities such as break-fix service and inventory management of toner and equipment required careful management. He felt that partners with specialized capabilities in service and logistics could perform these activities better and at a lower cost than he could through a traditional integrated dealership approach. A key objective for Morris was to establish a small cadre of excellent service providers to work closely with while he built a lean, sales machine.

There is a clear division of responsibilities between Morris and his partners, shown in Table 1. His vision focused on developing and maintaining the customer relationship and providing excellent MPS services through strategic partners. Currently, a primary partner provides integrated MPS services for help desk, supplies and service.  These are core MPS services that touch paying customers.  Other partners provide telemarketing, leasing and billing (from one source) and a customer service web-portal. A key to this approach is that the core infrastructure partner can provide a seamless set of integrated services while representing Morris’s company and providing a consistent customer experience.

Business risks of the outsourced strategy include potential issues such as:

1) Complications from the loss of direct control over help-desk, service dispatch, etc.

2) Inconsistent quality of services

3) Impersonal delivery of support that loses the edge of customer sensitivity and understanding

Although the first two control issues should be mitigated by well-managed partner operations, the last issue is more subtle and difficult to affect.

Morris and his company insist that they own the customer relationship, however important customer interactions are in the hands of his partners. Complications caused by slow or impersonal service delivery of partners are difficult to manage and require significant customer management.  True, some of this happens in any large organization, but it is undoubtedly a challenge to maintain consistent services and quickly address unusual situations, particularly, across a partner network.

A critical customer service issue is creating and maintaining customer sensitivity, in large service organizations. Instilling a small-company sense of responsibility and ownership to anticipate customer needs in the ranks of large service providers is a difficult challenge. Morris’ target market, small business, is particularly sensitive to this issue. The catch is that managing the service and help-desk organizations is out of his direct control. This is a shared responsibility that must be a priority to train and encourage by the outsourced partners, as well as closely coordinated.

Another important risk in an outsourced service relationship is alignment of business objectives and goals. For instance, if the sales-focused partner’s strategic objective is to add new business through aggressive pricing and strong service capabilities, this must align with the goals of the infrastructure partner for effective execution.   In the other case, an integrated service organization alone can decide to reduce profitability, if necessary, to increase market share. Achieving alignment with key partners on strategic objectives can be tricky and is a critical to long-term success.

The upside of the outsourced approach is that Morris is empowered to simplify the management of his company and to focus on driving sales and growth. Additionally, outsourced partners enable success by:

1) Establishing a low-cost platform for effective service delivery

2) Coordinating the execution of services across a linked IT platform that includes customer feedback

His ability to leverage a partner’s low-cost capabilities is a key factor in driving sales and profitability. Given the current land-grab situation, the low-cost platform should enable fast and profitable growth. As competition increases, the same platform can enable aggressive price competition, as necessary.

It is important that the core services of helpdesk, device service and supplies replenishment are coordinated by a single partner through an integrated IT system. A critical linkage is how the service activities are tied into the billing system, which is another critical customer touch-point.

Differentiation

Morris’ business is differentiated from the competition based on the unique, low cost services platform and lean business model. The combination of a small, nimble sales-focused business partnered with a larger infrastructure services partners enables Morris to compete aggressively and profitably in the small business market. The large scope and breath of capabilities allows him to offer nationwide service with confidence that the delivery of services will remain consistent.

It is an interesting model because it allows Morris to act as a small business sales partner with his customers while leveraging the cost and efficiency advantages of a much larger player. Although the outsourced model has potential complications, it enables an aggressive go-to market strategy. The impact on local copier dealers and established IT VARs that also offer MPS services remains to be seen.  An slightly exaggerated analogy may be that Morris’ sales team is like a hungry shark hunting for bigger game.

Print Fleet Standardization

Another unique aspect of Morris’ lean business model is the sharp focus on inventory management and print fleet standardization. MPS services are sold under a vendor agnostic approach, so as to leverage the customer’s current print fleet investment. IT and finance groups recognize the value of a standardized approach because of the potential to reduce maintenance, supplies and support costs., which is similar to other IT strategies to manage other infrastructure components like servers and desktops.

The print fleet standardized model includes four printers and four MFDs, as shown in Table 2. Morris typically offers HP and Xerox equipment because the combination covers a wide spectrum of customer needs.

Reducing the number of print device types is an important factor in supporting a low-cost platform. Fewer part numbers results in a higher volume and better discounts. Partners manage most of the inventory and new equipment is typically shipped within one or two days directly from the OEMs. Toner and other supplies are delivered to the end-user within 24 hours and Morris carries minimum inventory (typically less than $100,000).

A key impact of a standardized fleet is to reduce operating costs for both the dealer and customer. This is an excellent sales point and is a common sense approach to IT infrastructure management. Additionally, costs are reduced through the use of high quality, compatible supplies and refurbished equipment.

Summary and Conclusions

Morris, who also consults on sales training, tells classes, “To sell MPS effectively, you need to forget everything you know.“  The point is that it requires an approach that differs from that of a traditional copier dealer or IT VAR. He explains that old habits can get in the way of learning new methods, which slows down the learning process.

This shared wisdom is also relevant to the adoption of a lean, sales-focused business model. It is a different approach that relies on the following key tenets:

  • The cost advantages from outsourcing must be balanced by a seamless customer support system
  • A sales company must own the customer relationship and assure that services delivery consistently meets expectations
  • An infrastructure company must hold up its part of the bargain by maintaining effective and efficient service levels
  • Effective customer service by large service providers must reflect a high degree of customer sensitivity and allow strong relationships to form
  • A standardized print fleet model is an important aspect in creating a low cost, easy to support platform
  • An outsourced partnership must be aligned for success at the highest levels of the organizations, around both operational and strategic goals

Morris’ business is an example of a new cost-efficient business model in the MPS market. The lean, mean sales machine has the potential to disrupt the channel by leveraging the competitive advantages of a small, customer-focused sales organization backed-up by the scale and efficiency of its larger partners. The heart of this model is the outsourced business relationships. Managing these relationships and negotiating competing interests is a more like a tango than a waltz. For the sales company to thrive, the larger infrastructure partner must anticipate its needs and be careful where it steps.

Dr. David Cameron has over 25 years of experience as an executive in the hardcopy industry. He launched Cameron Consulting Group (CCG) in March 2011 to meet a market need for proprietary client advisory services, market research and consulting for the print and imaging industry including managed print services.His background ranges from production line solving product and process issues to leadership roles in business management and product development for Texas Instruments, IBM and Dell. Dr Cameron was part of the early days of outsourced managed services, leading executive sales and business process design for software system integration. Most recently, Dr Cameron has been COO of Photizo Group responsible for guiding research and developing strategic relationships with clients and collaborative partners. He also teaches in the MBA program at Concordia University.