January 2010 Office Technology

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CONTENTS Volume 16 No. 7 G

FEATURE ARTICLES 10

Making the Leap Expand offerings by moving into network technology

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Security Solutions Helping to safeguard information confidentiality

by Susan Muth Strategic Business Solutions Inc.

As the impact of industry changes affect office technology dealerships, dealers may want to look to broaden their suite of current product and service offerings and expand their customer bases in order to stay profitable.

by Brent Hoskins Office Technology Magazine

While many end users still remain unconcerned or unaware of the information security risks associated with MFPs, today there are a growing number of product features that help to safeguard the confidentiality of electronic documents and data in the workplace.

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2010’s Opportunities Dealers share expectations & advice for the new year

COURTS & CAPITOLS A Model for Success Tips to help you create a long-term strategy

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by Robert C. Goldberg BTA General Counsel

Compiled by Brent Hoskins Office Technology Magazine

In last month’s column, I began a discussion of ways in which a dealership owner can strengthen his (or her) business for the long term. One strategy to accomplish this lies in customer selection and detailed pre-qualification.

In 2010, what do you believe will be the greatest areas of opportunity for dealers in the office technology industry? Office Technology asked this question of its readers via an e-mail survey. Here are many of the responses.

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Sales Force Effectiveness Is your dealership ready for success in 2010?

MPS STRATEGIES The Wake-Up Call Transition your dealership to a service-led model

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by Wayne Outlaw Outlaw Group

by Tom Callinan Strategy Development

Many have been through some very challenging economic times in recent months, but now we all have the opportunity to reflect back on 2009 and learn. Does your dealership have the ability to capture the opportunities available next year and beyond?

In the past two years, copier/MFP unit placements in the United States have decreased by almost 30 percent. Is it time to bail out of the industry?

Possibly, if you do not think you can execute a plan to transition your company to a service model.

PRINCIPAL ISSUES 23

JBMIA New Year’s Message Association president reports on main areas of focus

by Katsuhiko Machida JBMIA

Expressing his best wishes to members of BTA in the new year, Katsuhiko Machida, president of the Japan Business Machine and Information System Industries Association (JBMIA), discusses the association’s current areas of focus.

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DEPARTMENTS Business Technology Association

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BTA Highlights

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Executive Director’s Page

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BTA President’s Message

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Advertiser Index

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EXECUTIVE DIRECTOR’S PAGE

The Best Strategies for Success in 2010 he arrival of the new year always brings with it a renewed sense of hope and expectation. After all, it provides a new beginning — a clean slate and a fresh outlook. In business, the new year’s arrival often provides the perfect timing to implement new business strategies. At the very least, it provides a good opportunity to evaluate current strategies, with a focus on their impact on sales and profitability.

Of course, to make the new year a better year takes effort. That includes a focus on reaping the rewards of the opportunities the market presents. In 2010, what do you believe will be the greatest areas of opportunity for the office technology industry? What do you believe will be the best strategies for success in pursuing those opportunities?

I recently asked these two questions of Office Technology dealer readers via an email sur vey. Below are some of the responses. Others appear on pages 16 and 18 in this issue. All of the responses appear on the “BTA Idea Exchange,” which can be accessed via the home page of the BTA Web site, www.bta.org. (You will need your member login and password.) It is my hope that the responses provide you with some new insight or ideas — or at least confirm that you are on the right track. (For instance, are you pursuing MPS?) I “Obviously, the most popular answer is managed print services or document storage and retrieval. The office equipment dealer cannot read anything without seeing the value of these strategies. However, we must get back to Selling 101. We must evaluate our

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customers’ problems and help them find the correct solutions. The right answer might be MPS or document storage, but we don’t know that until we ask. So, the dealer must be ready and able to provide these solutions.

Our game plan for 2010 is to stay focused on our customers’ problems and address them with the best solutions the industry can provide.” — Mike Upchurch, President, Business Machines Inc., Raleigh, N.C. I “HP printer service. Also, developing a sales strategy that combines MFP sales reps with a specialist who goes in to do TCO audits. Until this gets off the ground, the specialist will have to be a person on staff who is good at nurturing an account.” — Troy Paterson, Vice President of Sales, Copy Systems Inc., Des Moines, Iowa I “MPS is the greatest new opportunity although I use ‘new’ lightly, as this opportunity is moving fast! Lots of folks say they do MPS, but all it is is Office Depot with service.

Be different and be comprehensive and you will win the business.” — Susan Woodhull, Owner, Woodhull LLC, Springboro, Ohio I “If dealers haven’t already succeeded in implementing an MPS offering, they ’d better. If they have, the next area of profitability is ‘managed services’ — proactive monitoring of the customer’s IT infrastructure.” — Russ Bennett, President, Bennett Office Technologies Inc., Willmar, Minn.

I “Managed print services, A4 and document management. The best strategy is to have a committed team of reps contacting businesses in their territories to uncover opportunities and offer solutions in combination with direct mail.” — Todd Fitzsimons, President, Network Imaging LLC, Southington, Conn. I — Brent Hoskins

Executive Director/BTA Editor/Office Technology Brent Hoskins brent@bta.org (816) 303-4040 Associate Editor Elizabeth Marvel elizabeth@bta.org (816) 303-4060 Contributing Writers Tom Callinan, Strategy Development www.strategydevelopment.org Robert C. Goldberg, General Counsel Business Technology Association Katsuhiko Machida, JBMIA www.jbmia.or.jp Susan Muth, Strategic Business Solutions Inc. www.susanmuth.com Wayne Outlaw, Outlaw Group www.outlawgroup.com

®

Business Technology Association 12411 Wornall Road Kansas City, MO 64145 (816) 941-3100 www.bta.org Member Services: (800) 505-2821 BTA Legal Hotline: (800) 869-6688 Valerie Briseno Membership & Marketing Manager valerie@bta.org Mary Hopkins Database Administrator mary@bta.org Teresa Leerar Bookkeeper teresa@bta.org Brian Smith Membership Sales Representative brian@bta.org ©2010 by the Business Technology Association. All Rights Reserved. No part of this publication may be reproduced by any means without the written permission of the publisher. Every effort is made to ensure the accuracy of published material.

However, the publisher assumes no liability for errors in articles nor are opinions expressed necessarily those of the publisher.

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BTA PRESIDENT’S MESSAGE

®

2009-2010 Board of Directors

Register for ITEX 2010 Show Today f you have not already done so, I encourage you to register today for ITEX 2010, scheduled for March 3-4 at the Las Vegas Convention Center in Las Vegas. Each year, this show proves to be a key industry networking and educational event for office technology dealers. Of course, it also provides a great opportunity to see the products and services of many of our industry’s vendors. ITEX 2010 should be a stop on your road map to success in the new year.

The show is being promoted as “the hybrid dealer event.” In their promotions, our friends at Imaging Network, the hosts of ITEX 2010, state: “Dealers once grounded in delivering reliable hardware offerings and services have found that traditional capabilities barely open the door to winning a customer’s business. The environment has shifted and the dealer channel demands a transformation to being comprised of consultative solution providers who integrate offerings of hardware, software and services to become single-source providers for their customers — the ultimate hybrid dealers.”

Certainly, the focus of ITEX 2010 is right on track with what many in the industry know to be true. This isn’t your father’s copier business, but is an industry that has been transformed, first by the transition to digital and connectivity, then by the arrival of softwarebased solutions from hardware manufacturers and independent software vendors, and more recently by the rise of managed print services with the goal of being that singlesource provider. When you add to that the pressures of the poor economy and the growing need to further distinguish your

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dealership from the competition, it becomes clear that receiving insight and guidance through industry education is very important.

The ITEX 2010 schedule includes an impressive education session line-up specifically focused, in part, on the hybrid dealer.

These include such sessions as: “Network Services: Building a World Class Help Desk,” “Why You Need to Be in MPS Today” and “How Professional Services Tie Your Solutions Business Together.” I am pleased to note that two of BTA’s own will be among the presenters. BTA President-Elect Rock Janecek will be one of the three presenters of “Creating the Ideal Service and IT Teams.”

Likewise, BTA General Counsel Bob Goldberg will be co-presenting “Succession Planning and Exit Strategies for Your Business.”

He will also present “Establish Content and E-mail Management for Legal Compliance.”

BTA will have a strong presence at ITEX as in recent years. Please drop by our booth (#249) in the exhibit hall. While you are there, pick up an invitation to attend BTA’s Meet & Greet Reception, scheduled for 4:30 p.m. to 7 p.m. on Wednesday, March 3, at the Las Vegas Hilton. At our reception, we will be presenting the 2010 BTA Channel’s Choice awards. The event will also provide a nice venue to network with your fellow dealers, visit with vendor sponsors, learn more about BTA and enjoy free food and drinks.

Registration for ITEX 2010 is easy. Just visit www.itexshow.com. The registration form can be accessed from the home page.

Th e pre-regi stration amount i s $149.

However, BTA members may register at the discount rate of $79. Simply use the code BTA9B when registering.

I look forward to seeing you in Las Vegas. I — Bill James

President Bill James WJS Enterprises Inc. 3315 Ridgelake Drive Metairie, LA 70002 bjames@wjsenterprises.com President-Elect Rock Janecek Burtronics Business Systems Inc. 216 S. Arrowhead Ave. San Bernardino, CA 92408 rjanecek@burtronics.com Vice President Tom Ouellette Budget Document Technology 251 Goddard Road Lewiston, ME 04240 touellette@bdtme.com BTA East Todd J. Fitzsimons Network Imaging LLC 122 Spring St. Southington, CT 06489 tjfitzsimons@networkimaging.biz BTA Mid-America Ron Hulett U.S. Business Systems Inc. 3221 Southview Drive Elkhart, IN 46514 ron.hulett@usbus.com BTA Southeast Terry Chapman Business Electronics Corp.

219 Oxmoor Circle Birmingham, AL 35209 tchapman@businesselectronics.com BTA West Lokke Patrick Docutxt Corp.

11110 E. Artesia Blvd., Ste. B Cerritos, CA 90703 lokke@docutxt.com Ex-Officio/Immediate Past President Ronelle Ingram Steven Enterprises Inc. 17952 Sky Park Circle, Ste. E Irvine, CA 92614 ronellei@msn.com Ex-Officio/General Counsel Robert C. Goldberg Schoenberg Finkel Newman & Rosenberg LLC 222 S. Riverside Plaza, Ste. 2100 Chicago, IL 60606 robert.goldberg@sfnr.com

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When it comes to award-winning products, Lexmark delivers.

Lexmark business products have received great reviews in the past year, including a reputable 2009 Better Buys for Business Editor’s Choice for the XS658dfe! What’s more, our innovative E-task solutions, featuring Eco Copy, MyMFP and Remote Copy, won a 2009 Buyer’s Lab Outstanding Achievement Award! In addition to great products, you can also enjoy the benefits fi of great Lexmark programs, like the Lexmark Business Solutions Dealer (BSD) Program with exclusive pricing and incentives that allow you to aggressively compete and win!

Learn more at our ITEX booth # 331 or contact us at 877.999.4360.

Lexmark and Lexmark with diamond design are trademarks of Lexmark International, Inc. registered in the United States and/or other countries.

All other trademarks are the property of their respective owners. ©2009 Lexmark International, Inc. 740 New Circle Rd., Lexington, KY 40550.

“We continue to believe there is a very important role that A4 can play for the independent copier dealers…Lexmark has got it right…Lexmark has the right approach to our dealer audience.”

Frank Cannata, Publisher and Editor, The Cannata Report and Live Wire

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Security Solutions Helping to safeguard information confidentiality by: Brent Hoskins, Office Technology Magazine

hile many end users still remain unconcerned or unaware of th e information security risks associated with MFPs, today there are a growing number of product features that help to safeguard the confidentiality of electronic documents and data in the workplace. The features also ser ve to maintain the integrity of information and control its accessibility. Increasingly, anyone with malicious intent will often find the office MFP well protected.

Initi al ly it was employe e s in th e federal government who saw the risks inherent to MFPs and sought solutions. With data streaming in and out, and with the use of an internal hard drive, the MFP was viewed as akin to the personal computer, long known as hardware whose data required security. Given the confidential and even classified information government employees gather and generate, they made their concerns known to MFP manufacturers.

“When we first came out with our data security kit, it was definitely customer driven; it was in response to a government request,” acknowledges Vince Jannelli, associate director of applications and partners for Sharp Imaging and Information Company of America. “They wanted the risk mitigation of the encryption and overwrite on the hard drive. That was the genesis of it.”

Government officials received what they requested — an MFP solution that encrypts data prior to being written to RAM or flash memory or the hard drive and overwrites deleted data to help ensure all information is virtually irretrievable by unauthorized users. However, says Jannelli, the government sought an assurance that the data security kit would deliver as promised. Specifically, he says, “they wanted

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Common Criteria Certification to prove that we actually did what we said we did.”

The rigorous, government sponsored certification process, also known as ISO 15408 and implemented in 2002, requires certain security features of networked devices used in conjunction with the entering, processing and transmitting, etc., of national security information to be validated. While Sharp was the first MFP manufacturer to have a product validat ed through th e pro cess, today Common Crit eria C ertification of product security features is commonplace among MFP manufacturers.

Likewise, manufacturers are also now embracing the IEEE 2600™-2008 family of standards for hardcopy device and systems security, resulting from efforts that began in 2004. The standards project is sponsored by the IEEE Information Assurance Standards Committee of the IEEE Computer Society. The standards define copier/MFP and printer security requirements in such areas as authentication, authorization, privacy, integrity, device management, and physical and information security. Among the sponsors of the standards initiative are such companies as Canon, Hewlett-Packard, Konica Minolta, Kyocera Mita, Lexmark, Oki, Ricoh, Samsung, Sharp and Toshiba.

“Essentially, a number of manufacturers sat down together to address the question: ‘What security features need to be on these products?’” says Jannelli, noting that the catalyst for the development of the standards was end-user demand and inquiries regarding such features. “The interest in security has risen to such a point that customers are saying, ‘I need someone to guide me as to what the true risks are and the best way to mitigate those risks.’”

Government agencies have remained the dominant

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“Its use is still ramping up.

When you walk into any DoD facility today, not every copier/MFP in use is covered by CAC implementation, but certainly most of the new copier/MFPs being rolled in are covered.”

— Ron Nevo, Sharp Imaging and Information Company of America customer group requiring security features. In recent years, the rise in use of common access cards (CACs) has been among the focal points for manufacturers selling to the government. “Basically, the use of a common access card is a Department of Defense (DoD) requirement,” says Ron Nevo, senior product planning and marketing manager of security and applications at Sharp. “If you need to do anything with a machine, you have to authenticate with your CAC, which is a smart card. Its use is still ramping up. When you walk into any DoD facility today, not every copier/MFP in use is covered by CAC implementation, but certainly most of the new copier/MFPs being rolled in are covered.”

While the government remains dominant in terms of security requirements, the commercial market is increasingly adapting such requirements as well. Akisa Matsuda, director of software solutions for Kyocera Mita America Inc., says security features used to be primarily a “nice-to-have” but today are becoming a “must-have.” The bid requests received by the manufacturer confirm the change. “The customer has decided that you have to have security features in order to enter the bid process,” she says. “If you don’t have it, you cannot submit a bid. This is not something where you can offer an alternative solution.”

In recent months, Matsuda says she has noticed an increase in the inclusion of security features as a requirement in bid requests, not only from government agencies, but also in the education, financial and healthcare industries. She has noticed, too, a shift from simply viewing security as an arbitrary bid criterion to viewing it as a real solution to specific, practical needs. “They do have confidential information that they want to protect,” she says. “For example, I recently heard a comment from a customer representing a school that they are concerned about students hacking into their system, so they really want to address the need for security.”

InkCycle ad Dec 09:Layout 1

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marketing at Kyocera, emDennis Amorosano, sen“More customers are phasi z e s that althou g h ior director of solutions marnow looking beyond the many customers do have keting and business support specific reasons in mind for for Canon U.S.A. Inc., says basic capabilities of just product security features, there are two primary areas connecting the device to security implementation of concern among cusa network in a secure simply for peace of mind is tomers seeking to address manner. Increasingly, they also becoming more comthe need for security. “I think want to do things that are mon. “A lot of times, the IT the most common concern tied to securing the document ... “ directive is ‘let’s just secure has been and continues to — Dennis Amorosano everything and that way we be related to securing the Canon U.S.A. Inc. never have to worry about device, given that it is atanything,’” he says. “Even tached to the customer’s network,” he says. “So, for example, some customers want to though the residual data on a hard drive is incomplete data understand the level of flexibility they have in configuring for the most part, from the IT standpoint it’s ‘I don’t even the different types of ports on the device. In many cases, they want that much data unsecured.’ So, they prefer to basically want to close down many of the ports on the device, particu- lock it all down.”

Are you helping your customers “lock it all down” or larly, of course, those ports they are not going to be utilizing.”

The second area of primary concern, “are the latent address specific needs through the implementation and use images that have been processed by the device,” says of MFP security features? It is not simply an opportunity for Amorosano. “The customers want to know how they can manufacturers seeking to better serve customers and secure effectively protect images that may reside on the hard drive new product placements in major accounts or the federal of the device following the completion of the job. Of course, government. Dealers should remember, for example, notes Canon offers a number of different methods to ensure that Jannelli, that the DoD extends well beyond large military any images that may have been written on the hard drive of bases. “Don’t forget about the National Guard bases,” he the device can ultimately be protected, whether it be by says. “They are mostly dealer opportunities because they are encrypting the entire hard drive or by implementing an at the state level.”

There are, as noted, many commercial businesses increasoverwrite of jobs following their completion.”

Like other manufacturers, Amorosano says Canon offers ingly seeking to better protect information and documents. a broad range of security features, not just those that “The dealership’s general line sales reps need to have at least a address the two primary concerns. Other features he cites, base level of understanding as to the security capabilities that for example, include: user authentication, verifying that the are inherent in the product platform in order to effectively user is who he (or she) claims to be through passwords or address security concerns that may be raised by the customer smart cards or both; access control, associated with the in the normal sales cycle,” says Amorosano. “Today, almost user’s role and privileges, determining what the user can every customer is asking questions about security.

“It is an opportunity,” he says. “More customers are now access and the actions he can take on the device; and logging and auditing, which provide audit trails of who looking beyond the basic capabilities of just connecting the device to a network in a secure manner. Increasingly, they accessed and printed specific documents, etc.

“We have tried to take a holistic approach to looking at the want to do things that are tied to securing the document, protopic of security, because there are so many different types of viding audit controls, etc. Dealerships have the capabilities security-related issues that can come up when you are con- and technical skills that make them well positioned to necting these devices inside of a customer’s environment,” support these requirements as they continue says Amorosano. “So, depending on the kinds of concerns to emerge in the marketplace.”

Brent Hoskins, executive director of that a customer has, the dealer can then talk in terms of the the Business Technology Association, particular capabilities they can offer with Canon devices in is editor of Office Technology magazine. one of the security areas.”

He can be reached at brent@bta.org.

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FMAudit ad May 09:Layout 1

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2010’s Opportunities Dealers share expectations & advice for the new year Compiled by: Brent Hoskins, Office Technology Magazine

n 2010, what do you believe will be the greatest areas of opportunity for dealers in the office technology industry? What do you believe will be the best strategies for success in pursuing those opportunities?

Recently, Office Technology asked these questions of its readers via an email sur vey. Among th e many responses received, the opportunities cited as the greatest for the new year are varied, although some common areas of focus emerged.

Perhaps the comments shared by your fellow dealers will mirror your plans for 2010 — or provide new ideas.

Following are many of the responses. Additional responses can be found on page 6 and on the BTA Web site, www.bta.org. Click on “BTA Idea Exchange” in the left column of the home page. (You will need your member login and password.)

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“The best opportunity is in offering comprehensive solutions instead of selling a particular brand or box. This includes managed print services, document management solutions, scanning solutions, financing options and anything that can help your customer concentrate on what they do best.”

Steven Cobb, President Dean’s Office Machines Inc., Greensboro, N.C. “It is imperative that dealers work diligently to add click volume to their monthly/quarterly billings and keep a very close tab on the number of clicks they are billing so they can address customer click volume decreases. It is also imperative that dealers increase their per-click rate to customers on an annual basis and that those click rates be nothing less than 10 percent (there will certainly be hold-outs from this procedure, especially where the account has a guaranteed 16 | w w w . o f f i c e t e c h n o l o g y m a g . c o m | J a n u a r y 2 0 1 0

rate). This is necessary because as we sell new systems, they are going under a new contract at a reduction in rate. In this economy, it is extremely difficult to place new systems and increase the customer’s total payout. With that said, it explains why it is so important to have a successful managed print services (MPS) program and that you have it working properly. As we know, there is no silver bullet, and a successful and profitable MPS program is a lot of work and requires dedicated people to perform the tasks required. Additionally, having a focus on “solutions” selling with specific software and making sure you have proper charges for installation, implementation and training to eliminate ‘scope creep’ is vital. Another revenue opportunity (and truly a customer service program) is the dealership’s help desk and charging for the services rendered. We are so used to providing this type of service for free that it sometimes requires a company culture change to implement. But the most important thing is for the dealer to have quality associates to make all of this happen at a profit and be perceived by customers as the truly ‘value-add’ programs that they are.”

John Heiser, Executive Vice President MT Business Technologies Inc., Mansfield, Ohio “Due to the economic recession we all are facing, we are seeing a need for network support at higher levels than ever. We have seen companies reduce their IT staffs, which, in turn, has opened up network service opportunities. This will open up our opportunity to sell the many network devices we offer. Back when copiers became digital and could connect, we all felt that gaining control of a company’s network would ensure our ability to sell our connected devices. After many years of trying to gain network

Kyocera Mita ad Jan 10:Layout 1

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Typical Printer

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New Year Survey Jan 10:New Year Survey Jan 10

control, the recession has given us the opportunity to become more embedded in our customer’s office.”

Mark Watson, President CDS Office Technologies, Springfield, Ill.

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Your hardware, software and service marketing will all have to focus on the customer’s bottom line — not image, cool features, new ‘bells and whistles’ and so forth.

“Managed print services and professional services are the keys for us in 2010. Changing the mindset of our reps (and total company) from box-selling to solution-selling will be a major emphasis. This is the direction we must travel to remain competitive and successful.”

Rollie Schultz, Vice President Gordon Flesch Co. Inc., Madison, Wis. “Technology-driven products. I believe salespeople must double down. Knowledge and service will be key in 2010.”

Frank Sluss, President Business World, St. Croix, Virgin Islands “Becoming a more diverse vendor for our clients; strengthening our internal and external communications so everyone we touch understands who we are and what we’re capable of doing.”

Michael Steinhoff, President Rhyme Business Products, Portage, Wis.

“Managed print services and document management are two areas with great current opportunity in spite of the negative business environment. The ability to change the value proposition for our clients with innovative approaches that legitimately help them reduce current costs and better manage their businesses should be particularly attractive at this time. If implemented properly, this focus presents an excellent opportunity for sustainable success for dealers in the medium to long term. Dealers not already engaged in these areas should seriously consider adding these products and services to their portfolios.”

Richard Mark, Managing Director RL Mark & Co. Ltd., St. Michael, Barbados “The greatest opportunity appears to be in the document management solutions arena. BTA has sponsored training in this area and several document management enterprises have developed programs for dealers to offer to their customers. These solutions seem particularly suited for small to medium-sized businesses and that is the bulk of the 18 | w w w . o f f i c e t e c h n o l o g y m a g . c o m | J a n u a r y 2 0 1 0

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dealership’s customer base.”

Nancy Taylor, President Taylor Bu sin ess Equipm ent LLC, Chicago, Ill.

“Our bankers in central California do not see any real improvement in our local economy until at least the end of 2010.

Should that be true, we feel it is more important than ever to provide our customers the best service, and to help them hopefully reduce their costs in producing and managing their documents by placing the right equipment, MPS or existing service. More customers are choosing to purchase color MFPs when replacing their old equipment — often replacing faxes and printers that are more expensive to operate. We also are selling and renting more used equipment to customers who cannot get lease financing, or who are not wanting to commit to any long-term agreements when they are not sure what is around the corner.”

Teri Brymer, General Manager California Business Machine Co., Fresno, Calif.

“Dealers who can show customers how to save money will succeed in 2010. Your hardware, software and service marketing will all have to focus on the customer’s bottom line — not image, cool features, new ‘bells and whistles’ and so forth.”

Jay Nolan, President & Owner Mountain Advocate Media Inc., Barbourville, Ky. “We’re continuing to pursue MPS opportunities in healthcare and customer-facing professional services firms.”

Tom Senecal, President Laser’s Resource, Grand Rapids, Mich.

“Color MFPs, archiving and document management software (paperless) and MPS.” Harry Fields, President Chattanooga Business Machines, Chattanooga, Tenn.

“I think the greatest opportunities will be writing CPP maintenance contracts on in-place printers and documenting customers’ current estimated costs and offering to fix these costs for them so that they are budgetable numbers.”

Barry Wallingford, President Atlantic Business Systems, Melbourne, Fla.

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Outlaw Jan 10:Outlaw Jan 10

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Sales Force Effectiveness Is your dealership ready for success in 2010? by: Wayne Outlaw, Outlaw Group

any have been through some very challenging economic times in recent months, but now we all have the opportunity to reflect back on 2009 and learn. In 2009, you may have had to make some difficult decisions (such as reducing overhead and cutting expenses) to have the opportunity to be ready in January — ready to tackle 2010 and beyond . However, even as the economy appears to be improving, unless we have a catastrophic event, what you did for 2009 will not be enough to be effective for 2010.

As the economy continues to improve, the question is: “Does your dealership have the ability to capture the opportunities available next year and beyond?”

Just as the banks had to rid themselves of “toxic” assets to pass a stress test, your dealership may have to rid itself of some “toxic” elements, such as unproductive activities, low performing salespeople and even limiting beliefs to be successful in 2010 and beyond.

Every several years you hear the mantra, “selling in this business has changed.” It is fair to say that those who do not believe that mantra and adapt better strategies have suffered significantly in the past months and it will only be worse in the future. While the actions that created a successful dealership are, for the most part, still good business, there are some significant differences that must be addressed if you want to achieve your full potential in the future.

No longer can bad habits, ineffective management, empty sales territories and managers or employees who are not performing be allowed if you want to pass your own stress test — and, most importantly, pass the test with your customers. Today’s customer is looking for innovative solutions to his (or her) problems, not just changing out one machine for another.

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While this may have been a difficult time to get decision makers to make decisions, many of our clients have posted record months and are ahead of previous years, especially in profit. In short, those not bound by the past and those willing to innovate and root out ineffective practices are succeeding in 2009 and will continue to succeed in years ahead.

How does your dealership stack up?

There are some consistent characteristics of successful companies. Now is a great time to take a clear, objective look at your dealership and ask if it is displaying the characteristics of today’s most successful companies. Look at your dealership and ask if there are areas where you need improvement to ensure success in the future.

Individual & Team Sales Productivity What is the average monthly sales revenue for each individual and for the entire sales team? Do your salespeople consistently meet the quotas or expectations for their type of territory and assignment? Have there been discussions with salespeople about their habitual underperformance or specific negative performance issues, and have those issues been resolved? If anyone is more than 20 percent below budget, or has a negative trend longer than 60 days, you are paying a price.

Sales Staffing Is every territory staffed with a capable performer to produce critical sales revenue? Remember, a sale today will likely lead to two or three times that in future revenue of upgrades, service and supplies. If you have five territories and one is open or ineffective, you are losing 20 percent; and if you have two open, you are losing up to 40 percent. Even if

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you have someone working an open terCompetent, Effective Sales Calls Each sales call must ritory (and even if the owner works it Today, we cannot rely on the cusbut does not receive commission) that is tomer simply needing a new machine be conducted by a still a significant drain in future revenue and buying from us because we have competent sales and profit. been effective in taking care of them in professional who can Not only is unemployment high with the past. Each sales call must be conuncover the customer’s the recent changes in the industry, but ducted by a competent sales professpecific needs and create many people are open to new opportunisional who can uncover the customer’s motivation ... to buy. ties. While it is always a good strategy to specific needs and create motivation for continuously recruit for a top performer, the customer to buy. With products and now more than ever, recruiting support is available. Imagine systems becoming more capable and advanced, it is even the impact on your organization if you could replace the more important that sales calls be highly effective. bottom 25 percent of your lowest performers with individIn times where customers need to reduce expenditures, uals who are capable of producing in the top 25 percent. A the competition to a buying decision may not be another simple exercise in math will give you enough motivation to dealer or manufacturer, but may be an internal expense, take the time and effort to find more top performers. such as employee payroll. In these instances, the quality of While employee referrals and recruiting by management the sales call and the skill of the sales rep will determine if has always been the best solution, new and innovative job the customer sees the real value of the product, your dealerboards focused specifically on the industry can be a consis- ship and, ultimately, makes a positive decision. tent source of top performers. There are industry benchmarked measurements that can help assess candidates to Skill, Not Just Product Training Many manufacturers provide great product training, assist you in making more accurate hiring decisions. technical training or even application training. What is not Territory Integrity easily available is training that will enable the salesperson to Are your territories balanced and equitable? It is easy to understand why customers make buying decisions and how have some territories with greater potential than others. to move a customer through the sales cycle. They must learn Have you allowed a significant imbalance to develop over how to uncover the customer’s real needs and what will the years as turnover has occurred? You can spot this if your motivate him to make a positive buying decision. Most existing salespeople are able to easily work their existing importantly, the customer must know how to justify the customer population to make a good living, while new sales- expenditure with real, substantial benefits. people find it difficult to get started, because their sales If a salesperson does not have these skills, he will struggle must be primarily from new business. Because new business to meet quota and succeed in a challenging economic enviis more difficult to generate and new people are less skilled, ronment. One way to test how well salespeople are doing is this increases turnover, which perpetuates the problem. to consistently go on sales calls and observe them selling. A quick check can be done by reviewing the last proposal preExpectations & Budgets sented to a prospect to see how much is clearly boilerplate It is critical to have high expectations not only of sales- verbiage and what is specific to that customer’s needs. Is it people, but also of the sales management team. The expec- persuasive enough to ensure a positive decision? Most protations must be balanced, reasonable and based on the posals are simply price quotes with product specifications. ability of the individual to meet those expectations. It is If that is what is contained in a proposal, is it any wonder best to begin at a reasonable level and increase expecta- the lowest price wins, or even that the prospect finds it easy tions until the individual has an opportunity to meet the to delay or not make a decision? full level of expectations for the company. Creating specific budgets and finite activity levels for a new employee that New Business is Essential increase over time (or ramp up), increases retention and While it is important for a salesperson to uncover new makes it easier for a sales manager to quickly address a per- business prospects and close them, that importance is not formance problem. just for the individual. It is easy for a company to become w w w . o f f i c e t e c h n o l o g y m a g . c o m | J a n u a r y 2 0 1 0 | 21

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not just total sales revenue. If an inditoo complacent living off of its installed Performance is not just vidual, even if he has been meeting population. Look at the transactions minimum expectations, is not getting that are occurring with existing cusgetting a couple of big the full potential from his sales, he is a tomers to see if they are being upgraded deals — it is also low performer. or traded too frequently at the expense having a sufficient of healthy margins. Some may justify number of orders, of the this as keeping competition from getting Ensure Sales Managers Manage right type, at the right the business, but it is still killing marMany salespeople receive a promotion margins, consistently. gins. If there is not enough new business to management, but never effectively activity, individuals will come to rely too transition from selling to managing. heavily on the existing population at the expense of margins. Sales managers tend to go on sales calls with sales reps as an “expert salesperson” (or closer), rather than as a manager and Address Low Performance coach. Instead of improving the ability of the salesperson to Now, more than ever, it is essential that sales managers perform well on all calls, they focus on getting a specific address low performance by sales representatives. Low per- order. While this may provide short-term relief by getting formance is not just the inability to meet a revenue quota, orders, it does not solve the problem of developing a highbut it is also not having sufficient sales activities, generating performing sales organization that consistently produces ample prospects to keep the sales funnel full and having a results. Not only do many managers fail to coach, they also sufficient “success ratio” of moving the prospect through the fail to manage a salesperson’s productivity. steps of the sale to a close. Performance is not just getting a Recently, a manager told me that he had never had an couple of big deals — it is also having a sufficient number of effective review or forecast session and, as a result, did not orders of the right type, at the right margins, consistently. know how to do one with his salespeople. The best way to do Today, it is important for the sales manager to know the this is to spend time each month using a structured agenda “real” performance of the individual and take action if it is to uncover and evaluate performance and to determine not not sufficient for the future. just a forecast, but a commitment for the coming month.

How are your salespeople being managed?

Constantly Track How well you and your managers do in these 11 key Dealerships have CRM systems that keep track of areas will determine the effectiveness of your sales organiprospects, activities and sales. Unfortunately, many do not zation for 2010. Can you afford to not have a highly effecuse these systems to their full potential or adapt them to tive sales organization? If you would like to evaluate and help manage the sales organization. It goes without saying increase your sales organization’s effectiveness, e-mail that all information on customers and potential new wayne@outlawgroup.com and ask for a copy of the “Orgaaccounts should be accurate and up to date. If you do not nizational Performance Evaluation Roadmap to Greater know the activity of each salesperson and his prospects’ Sales Force Effectiveness.” accounts, and if that knowledge is not used to manage, you Wayne Outlaw is the founder of Outlaw Group, a firm that are losing sales performance and valuable revenue dollars. assists companies in integrating problem identification, Salespeople and sales managers do not like having an up-tosolution development and implementation to increase date, accurate sales information system because it may point performance. The firm conducts organizational surveys, out shortcomings or lack of activity that has to be changed. develops staffing solutions, designs performance management systems, creates customized training and provides learning tools. Prior to establishing the Outlaw Group, Outlaw spent 13 Addressing Low Productivity Unless territories are well balanced and budgets are set to years at Xerox, where, as a sales manager, he reflect potential, it is possible that a salesperson meeting took a last-place (78th) sales team to first quota may actually be a low performer. To know if an indiplace in just one month, with the same staff. vidual is a low performer and to be able to address the issue, He developed the benchmark sales strategy it is essential to look at selling skills and sales activities, as used worldwide by Xerox to beat well as the number, type and margin of each transaction — lower-priced competition.

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PRINCIPAL ISSUES

JBMIA New Year’s Message Association president reports on main areas of focus by: Katsuhiko Machida, JBMIA

Editor’s Note: Expressing his best wishes to members of the Business Technology Association in the new year, the following was submitted by Katsuhiko Machida, president of the Japan Business Machine and Information System Industries Association (JBMIA). Machida is also chairman and CEO of Sharp Corp. ith the worldwide recession that followed the Lehman sho ck, th e past year has been one of great upheaval that has not spared the business machine industry.

As we head into the new year of 2010, I hope for a great year ahead for the members of both BTA and JBMIA. As we look to turn difficulties into hopes, we must make 2010 a year of meeting new challenges with strength and a view toward growth. The current recession is more than just cyclical in nature — it is much more structural. There are no guarantees that, after a certain period of time passes, demand will return to the level that it was at before. As such, in order to survive the recession, instead of taking the passive view of waiting until demand gets back to a certain level, we feel that we have to take a more active position and attitude, to become the engine that produces its own changes.

As we face these new challenges, it is essential that we firmly understand the changes that are happening in the global business environment. And, with changing technologies, I feel that there are three main areas we should focus on.

First is the challenge of global warming. The response to global warming within offices is already far behind in many countries and the move toward zero-emission buildings and structures has accelerated all over the world.

Offices are the “playing field” of our industry. We have been active in the development of “office innovations.” But we believe that in the future there will be a focus on “eco solutions” for the “greening” of offices that will be key for our industry. In addition to comfort and efficiency, which have long been our goals, we feel that we also need to show our

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commitment to reducing environmental impacts.

The second challenge is to determine how business machines will deal with the changing trend of cloud computing. For example, with the use of servers on a distributed network to run applications and store data, we feel that the spread of cloud computing represents a major paradigm shift for the business machine industry.

The third challenge is the move toward electronic books and paperless offices. New mediums such as electronic paper, etc., are continuing to be developed and these products have all of the convenience of regular paper.

This represents a challenge to develop new business models.

JBMIA is promoting research into how best to deal with these changing business environments and technologies.

Against the backdrop of this new era, I wish all of the member companies of BTA and JBMIA the best for the new year as we continue to promote and seek to play a major role in business innovation.

The Japan Business Machine and Information System Industries Association (JBMIA, www.jbmia.or.jp) was formerly the Japan Business Machine Makers Association (JBMA), which was established in 1960. The name was changed in 2002. The association’s member companies, which previously attached greater importance to hardware, are now offering total business solutions. In keeping up with these changes, JBMIA has broadened the scope of its membership qualifications with the intent of broadening the association’s scope with sales and software-related companies, as well as manufacturers. JBMIA is committed to contributing to the creation and utilization of knowledge in the workplace by means of information technology while proposing “UC” (Ubiquitous workware and Collaboration) as the symbol words of next-generation offices, replacing “OA” (Office Automation). Activities of JBMIA include those related to environmental preservation, standardization, product safety and international cooperation. w w w . o f f i c e t e c h n o l o g y m a g . c o m | J a n u a r y 2 0 1 0 | 23

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PRINCIPAL ISSUES

Making the Leap Expand offerings by moving into network technology by: Susan Muth, Strategic Business Solutions Inc.

s the impact of industry changes affect office technology dealerships, dealers may want to look to broaden their suite of current product and service offerings and expand their customer bases in order to stay profitable. One approach that is largely being considered in the industry is to broaden from just office technology to network technology as well. In order to gravitate upstream into the route/switch and server world of technology delivery, it will take more than just a leap of faith. Of primary importance is a deliberate, strategic plan that will determine how quickly and effectively a move can be made into this new arena.

As you create this plan, here are a few key issues to consider: Buy or Build? — Should you acquire an existing network technology reseller or build your own delivery model? The pros and cons of each are great. Buying an existing reseller can provide customers and technical capabilities that compliment your current business. Building your own delivery model can require time and investment. Having a strategic direction about what you are buying or building will help to streamline this process.

Selection of Technology — Do you want to deliver broadbased, high-end services with current name recognition and respect in the IT industry? Are you interested in delivering networking managed services that are much like managed print services? Or do you want to deliver low-end, turnkey solutions?

What suite of add-on services can you sell that compliment the high or low end? Will you provide far-reaching Cisco solutions that comprise more than 90 percent of networks worldwide, or boutique solutions such as 3Com, Shortell or Microsoft Small Business?

What level partner will you become — Premier, Silver or Gold? What are the qualifications and costs of these levels and why should you consider them? What pricing discounts and margin opportunities do each bring?

What will comprise your total package of partners? What associated services will you offer and how will you select them? For example: Will you sell APC power or Emerson? Will you sell Fortinet or Checkpoint security? What factors do you

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need to consider to determine the right mix of partners? The technology partner you select is a major determination of the direction you will take your company.

Customer Base — What is the total addressable market of customers who require technology in the given geography that you will want to service? How does this compliment your current customer base and how can this expand it? Are you selling to the small, medium or large business customer?

Competition — What does the competitive landscape look like in the area you have targeted? Are they IT value-added resellers (VARs) that are boutique firms that have been delivering these services for some time? Or are they simply branch offices of a larger reseller? What does the scale of each of these mean for the competition and product pricing?

Define Your Sweet Spot — It is important to consider where your sweet spot in the IT industry will be. Will it be in delivering voice, security, unified communications or wireless?

Will you only concentrate on one or two? Will you concentrate on a vertical market (healthcare, banking, education, etc.)?

Value Proposition — In making this transition you will have to be able to sell your credibility. Why should a customer believe that you are now a technology expert? How can you provide services that are from a different capability set and what is your experience delivering them? How can your salespeople tell a story about your business to their IT decision makers that will differentiate you from the rest?

Once you have given these issues proper consideration, the strategy can take direction. A transition will take time and resources. The move upstream to networking can be lucrative and can give you a solid foundation for the future. The network technology industry remains an incredible opportunity as the depth increases. Now is the time to take advantage of the marketplace and position yourself for the future.

Susan Muth is president of Strategic Business Solutions Inc., based in Cincinnati, Ohio.

She can be reached at susan@susanmuth.com.

Visit www.susanmuth.com.

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BTA HIGHLIGHTS The following new members joined BTA during the month of November:

Dealer Members CTWP, Waco, TX Duffie’s Copier Consultants LLC, Forest City, NC Great Lakes Office Technology, Plymouth, MI Ideal Office Machines, Searcy, AR Service Associate Members Catalyst Performance Learning, Merrimack, NH Vendor Associate Member Falcon Technology Solutions, Savage, MN Oki Data Americas Inc., Mt. Laurel, NJ Smart Power Systems, Houston, TX For full contact information of these new members, visit www.bta.org.

BTA’s MPS Workshops The BTA MPS Sales Workshop, taught by consultants with Strategy Development, will provide dealerships the information they need to establish a managed print services strategy that will allow them to significantly increase the quantity of captured prints, lock in customers, distinguish themselves from competitors and, ultimately, sell more hardware. Visit www.bta.org/MPSSales for more information.

Frequently, operations and service are left to “figure it out on their own” after the contract is written. The BTA MPS Operations & Service Workshop is designed to jumpstart the understanding of how to set up and manage all operational and service aspects of an MPS agreement. For information, visit www.bta.org/MPSOperationsService.

For more information on BTA member benefits, visit www.bta.org.

For the benefit of its dealer members, each month, BTA features two of its Vendor or Service Associate members in this space.

BTA Service Associate member ManagedPrint Marketing.com helps dealerships market their MPS programs using exclusive video communication technology. You can easily add a compelling MPS commercial to your current Web site, use video with your e-mails or build your own MPS sales offense system. The company understands the MPS business and will get you the results you need with the Clevel prospects you want. Customize your own MPS marketing package with: MPS lead generation tools — online, video and print; MPS presentation collaterals; and automated MPS campaigns. www.managedprintmarketing.com BTA Vendor Associate member emFAST Inc. is an industry pioneer in network fax communication. emFAST has enhanced fax messaging from a simple document transport mechanism into an indispensable business tool that fully integrates into critical areas requiring communication capabilities including unified communications, business process workflows, multifunction peripheral devices and major enterprise content management and resource planning systems. www.emFAST.com A full list of BTA Vendor and Service Associate members can be found online at www.bta.org.

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COURTS & CAPITOLS

A Model for Success Tips to help you create a long-term strategy by: Robert C. Goldberg, General Counsel for the Business Technology Association

n last month’s Courts & Capitols column, I began a discussion of ways in which a dealership owner can strengthen his (or her) business for the long term. Two strategies to accomplish this lie in customer selection and detailed prequalification, and mandating all-inclusive contracts. This month, I will discuss these two strategies in-depth.

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Strategy 1: Customer Selection and Pre-qualification “Our customers are our greatest asset” is not an over-statement of truth. In fact, when valuing a dealership, acquiring companies will look very closely at the executed program agreements between dealers and leasing companies to ensure that the dealer actually “owns” the customer (versus the leasing company). Well, what happens when 50 percent of your current customers are mortgage companies, commercial real estate firms, small businesses, new businesses and others that continue to fill the “no” bucket? The industry statistics in the graphic to the right tell the true tale.

Keeping Customers — Successful dealerships and salespeople have a clear understanding of these statistics and have adjusted their customer approach. For example, you are scheduled to meet with a mortgage company that has been a good-paying customer of yours for 10 years. You know that your “normal” credit application will typically be declined since most leasing companies have completely blacklisted mortgage companies. So, you have trained your sales team to take a revised approach: “Thank you for being a great customer for the past 10 years.

We truly appreciate your business. We are also pleased that you have decided to take a look at some new equipment from us. As always, we would like to do a detailed assessment of your needs and make a recommendation that fits your budget.

As we all know, our credit markets have been through some turbulent times lately. Unfortunately, leasing companies have been hit very hard and it has become extremely difficult to get lease approvals lately. Before we get started with our assessment, I would like to spend some time together to secure a lease approval so I do not waste any of your time. Would you work with me on that? Great, here is what I will need. Normally, on a $20,000 transaction I would not need to ask you for a financial statement. However, in today’s world, it is the best 26 | w w w . o f f i c e t e c h n o l o g y m a g . c o m | J a n u a r y 2 0 1 0

reflection of your company’s financial condition and will help us to get a ‘yes’ from the leasing company. Along with that, I would like to complete a full credit application and submit them together. Would you make that information available?”

What would your salespeople do if the answer to that question was “no”? By postponing the discussion to the end of the assessment process or proceeding when they do not agree to give you the requested information, you are setting yourself up for a lot of frustration and wasted time. Of the hundreds of conversations that I have had with dealers and manufacturers throughout the country this past year, the primary area that they are focused on is a better use of their limited time and resources. This business is difficult without wasting time on transactions that are likely to get declined. If an outright purchase is not an option (a good qualifying question up-front) then it is essential to train your salespeople on how to ask, what to ask for and when to walk away. Take a lesson from the real estate industry — buyers with pre-approved mortgages are much more attractive.

Other helpful tips include: Check with their current leasing company. Is the customer paying them as agreed?

Check with your accounting department. Are they paying you as agreed?

Do some research — the Internet, local newspapers and industry magazines are all good sources to learn about your

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the verticals you wish to approach. They customers and prospects. will have visibility into their credit quality.

Ask your customer. If they are doing Past successes, references well, they will want to talk about it.

Selling at the CFO/CEO level to and case studies are Seeking Customers — Acquiring new increase your chances of getting a clear a great way to extend customer relationships is an essential piece understanding of a company’s financial deep into certain vertical to any sustainable growth strategy. Nothing condition. I have never heard of a “recommarkets. Which vertical is more disheartening than getting the first mender” giving out a financial statement. markets does your appointment, gaining commitment, getting Research is the key. Just like with your company specialize in? the sale and losing the deal because you current customers, potential new cuscannot find someone to approve their tomers will want to tell their stories. Local credit. Unlike current customers, you have very little visibility papers and publications, the Internet, trade associations and into their pay histories and financial condition. To maximize chambers of commerce will all help a lot. your chances of approval, a successful customer selection Strategy 2: Mandate all-inclusive contracts strategy will focus on: Vertical marketing — Past successes, references and case Independent dealerships and manufacturers both bear a studies are a great way to extend deep into certain vertical similar fiscal model — a majority of their revenue and profit markets. Which vertical markets does your company specialize comes from aftermarket. As our economy turned violently downin? Blitzing good vertical markets (as opposed to avoiding ward, the consistent cry was that “page volume is way down” and restricted verticals) is a great way to consistently close busi- it was mostly due to the customer’s own business decline (layoffs, ness. Check with your primary leasing company — it can mandates to only use monochrome copies, etc.). So, if a 20 provide you a comprehensive list of good vertical markets. percent decline in aftermarket revenue/profit is “out of our Networking with other service providers that specialize in control” then the only natural response was to:

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Meanwhile, our “Eagles” have experienced Sell more — Well, that is pretty tough a range from slight declines to modest these days.

A bundled lease locks revenue growth. The reason for this is very Cut expenses — Which typically has in your aftermarket basic, but very powerful. You write a conmeant layoffs and other cuts that have revenue for the full term tract with a monthly allowance of 10,000 reduced your service levels. Tom Peters ... Moreover, a bundled pages. If the customer’s page volume drops said it best: “You can’t shrink your way to contract provides a to 8,000, you still get paid for 10,000 — greatness.” However, it was the only prusolid exit barrier for guaranteed revenue at a higher profit dent thing to do at the time. your customers. (because you only had to provide service/ On the surface, these two actions seem supplies for 8,000). I can sense your eyes to be the only options. But when we take a close look at our “Eagles” (Dealerships that have maintained rolling right about now. “Sure, I know all this and I get the same 80 percent-plus lease approval percentages and have experi- thing when I sign them up under my service agreements.” This enced aftermarket revenue growth, despite the economy), they may be true, but when you analyze the financial statements of seem to be doing things quite differently. Sure, they made the “Eagles” you will find consistency — a vast majority of their some cuts (everyone has some “fat”) but the focus is not as contracts with guaranteed, sustainable revenue. Here is the simple math formula: sustained aftermarket revenue plus much inward as outward — toward the customer.

The Long-Term Benefits of Bundling — “Bundling” in annual 5 to 10 percent escalations minus some contracts you these terms is simply marketing the lease payment together need to adjust as a customer accommodation minus some conwith the monthly service contract to result in a bundled con- tracts you may lose to competition plus some cost reductions tract. As elementary as this might seem, let us take a closer equals a nice profit. look at the benefits of partnering with a leasing company that has expertise in bundled contract administration. Your dealer- A Final Thought Times are difficult. The good news is that the recession has ship will see the following benefits: Increased customer retention rates — Most dealers sell ended and that “yesterday” is way behind us. If there are 20 either monthly or annual service/supply contracts. A bundled percent fewer MFPs and associated pages being sold then that lease locks in your aftermarket revenue for the full term and means 80 percent of customers are still doing what you had typically includes pre-programmed escalation and additional hoped. So, as the overall opportunity narrows, many have fee income (interim rent, supply shipping fee reimbursement, turned to a desperate price competition. They will certainly etc.). Moreover, a bundled contract provides a solid exit win a few deals, but it is not a sustainable model and it is defibarrier for your customers. When a lease buyout is quoted, nitely self-defeating. Michael Porter, Harvard professor and coryour aftermarket revenue is included in the quote to the cus- porate competitiveness expert, recently provided this solid tomer. Your “upgrade advantage” will win deals or, at advice (I paraphrase): “In tough economic times, it is imperative minimum, get the customer talking with your company to that you focus on what you do well — become more of who you understand their options. Either way, you win. already are — what you are the best at. When times are tough, Reduction in administrative costs — Most quality do not try to become something you are not, or you will fail.” providers will not charge you for the administration of a As always, I strongly recommend that you seek the advice of bundled agreement. The cost reduction, typically estimated at one of our industry’s many expert consultants, join BTA and about $30 per contract per month, is a pure bottom-line exchange ideas with your peers, or go meet with an “Eagle.” savings. This is a negotiable item with your leasing partner.

Spend the time re-educating your sales team in better cus Increased selling margin — It has remained a consistent tomer selection, pre-qualification and mandate the use of allfact that dealers sell with higher equipment and aftermarket inclusive contracts. This model will weather any storm. profitability when the contract is bundled. When it is a bundled Finally, choose your leasing partner for the managed print services (MPS) contract, you will unlock your future, not that day’s best rate. The operative words are “partner” and “relationship.” highest profit opportunity of all.

Revenue stability — My obser vation is that most Robert C. Goldberg is general counsel dealers/manufacturers have experienced (on average) a 15 to for the Business Technology Association.

20 percent decrease in aftermarket revenue over the past year.

He can be reached at robert.goldberg@sfnr.com.

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MPS STRATEGIES

The Wake-Up Call Transition your dealership to a service-led model by: Tom Callinan, Strategy Development

n the past two years, copier/MFP unit placements in the United States have decreased by almost 30 percent. What does that mean for the office technology dealer? It is simple. If you have the same market share you had in 2007, then your equipment revenue has decreased by at least 30 percent. That equipment revenue decrease may be even more, due to lower average unit selling prices, but 30 percent is a fair estimate. If you believe the research firms, in the next three years unit placements are going to decrease by almost 20 percent.

So, in a six- or seven-year period, copier/MFP (A3) unit placements will have decreased by more than 40 percent.

What does that mean? It will result in significant structural change in the industry. By that I mean there will be fewer manufacturers and fewer channel players (dealers).

If you have made it through the first two paragraphs of this article, I clearly have your attention. Is it time to bail out of the industry? Possibly, if you do not think you can execute a plan to transition your company from a hardware-focused business to a service model. If you do not have the desire, capital or management talent to continue to evolve, then selling your business is probably your best bet.

For those of you who are still having fun, there are great profits waiting for you in the service-led business. Yes, I am referring to managed print services (MPS). But, after four years of speaking, writing, consulting and educating on MPS, I still find that most dealers want to try to turn MPS into a hardware business. I am constantly asked two questions: “What is the best line to carry for MPS?” “What copier/MFP company has the best MPS program?”

Over the period spanning 2008 to 2013, page volumes on monochrome A3 devices are forecasted to decrease from 140 billion to 59 billion. This is significant in that most of those A3 pages are under some type of contract with the copier/MFP channel, either through dealers or direct. That means that

I

more than 50 percent of the aftermarket revenue you currently enjoy from monochrome copier/MFPs will evaporate. Over that same period, prints on monochrome A4 devices are forecasted to decrease from 400 billion to 311 billion. That is significant for two reasons. First, the current ratio of A3 to A4 volume is less than 1-to-3, and in 2013 it is forecasted to be greater than 1-to-5. Prints will continue to move to printers. The second major significance is that most of those pages are not under any contract. So, there are 311 billion pages up for grabs.

Unit pl ac em ents and p a ge s are growing for both A3 and A4 color units, but with the same shift of prints to A4. From the current ratio of 1-to-1.3, the gap on color prints will expand to 1-to-1.5 in favor of A4 units.

If you are serious about staying in the imaging business, you had better get focused on capturing those pages that are not under contract. It is not about the product line that you carry, it is all about the sales strategy and services you provide. This is not to say that you should forgo equipment revenue; my belief, and the belief of all of Strategy Development’s consultants, is that you should get 100 percent of the revenue inside of your customer’s business. What has changed is that 15 years ago, you were defined by your product line. You were a “Canon dealer,” “Ricoh dealer,” “Sharp dealer,” etc. However, moving forward, you will be defined by how much you are growing your aftermarket revenue. Once you control the output of your customers with a contract, you will control the products the customer acquires.

I realize that for decades “equipment revenue growth” was a strong barometer for a healthy copier/MFP company. Unfortunately, the copier/MFP company as we know it is atrophying away. That is not to say that the copier/MFP industry is not attractive; for those who are in this business today, it provides strong profits and operating income, although from a decreasing revenue stream. But there will also be fewer dealerships, so the w w w . o f f i c e t e c h n o l o g y m a g . c o m | J a n u a r y 2 0 1 0 | 29

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opportunity will remain for those dealerDo not wait for the industry to bounce Get a plan in place ships that survive. What is important is that back; your future is in MPS. Think back to to transition your office technology dealers begin to think of those 311 billion pages that are not under their companies as imaging companies and contract — at $0.015 per page, repredealership to a serviceshift their focus from equipment revenue senting more than $4.5 billion in revenue, led model where you growth to aftermarket revenue growth. simply in mono chrom e and without measure health by Dealers need to view their companies as selling a dollar in equipment. Granted, the growth in your service providers rather than as equipment not all of those pages will end up on a aftermarket revenue. companies. Network integration compacontract, but if 25 percent of them are put nies sell availability and performance, not on an MPS agreement, that will result in switches and cables. MPS providers sell outsourcing of the more than $1.1 billion in revenue. Color A4 adds at least four management of the print environment and not printers or times the page revenue, so with 25 percent penetration, we copier/MFPs. Does that mean that MPS providers do not sell are talking about a $5.5 billion business without ever selling copier/MFPs and printers? Of course not. Forty percent of their a device. revenue is derived from hardware. But MPS dealers think of Get a plan in place to transition your dealership to a servicethemselves as service providers, just like many technology com- led model where you measure health by the growth in your panies that sell network integration, security or virtualization. aftermarket revenue. If you started four years ago, you would I know there are many who believe things will be back to have had the time to experiment and perfect your offering. At normal as soon as the recession is over. Well, the recession is this point you need a quick start, so get some professional help over by most accounts. I am sure that over time, lease in launching your program.

Tom Callinan is the founding principal of Strategy Development, approvals will begin to increase, although never back to the level they were at two years ago. Clearly, a 90 percent approval a consulting and advanced sales training firm that developed and delivers the BTA MPS Sales Workshop and BTA rate was not a sustainable model for those lending the money.

MPS Service & Operations Workshop to help But how many of those transactions did you actually lose dealers enter the lucrative MPS space. He can be versus going to a third or fifth leasing source or carrying the reached at callinan@strategydevelopment.org paper yourself ? Leasing had a minor impact on our industry or (610) 527-3317. but it, along with the recession, has masked the real issue: Visit www.strategydevelopment.org. decreasing unit placements.

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