January 2012 Office Technology

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CONTENTS Volume 18 • No. 7

FEATURE ARTICLES 10

Aftermarket Cartridges Today, a powerful force in the industry

FEATURE ARTICLES Capture the Magic BTA West hosts district event in Las Vegas

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by Brent Hoskins Office Technology Magazine

Take a look at today’s aftermarket cartridge industry and you will see many thriving companies that appear to be squarely focused on fair competition and quality. You will see an industry that lays claim to a significant percentage of the monochrome toner cartridge market and company executives eagerly eyeing the huge opportunity on the color side. There is no denying that aftermarket cartridges have become a powerful force in the office technology industry.

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by Brent Hoskins Office Technology Magazine

The Business Technology Association expanded its lineup of annual district events in 2011 from three to five. The second of the two new events for the year, BTA West’s Capture the Magic, was held Nov. 17-18 in Las Vegas.

COURTS & CAPITOLS Business Credit Make smart decisions for your dealership & family

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by Robert C. Goldberg BTA General Counsel

Boosting Performance Strategic changes produce dramatic improvements

There are many forms of credit available to a business. Because credit is a privilege that is earned and increases over time with good practices, the value of credit power is often within your control.

by Wayne Outlaw Outlaw Group Inc.

Now that the dust has settled and you have the final numbers, it is time to evaluate the year. Your analysis may show it has either been a good year or a challenging one. Regardless of results, all sales managers and dealership principals want to improve. If the year has been especially challenging, you may want to make significant changes. However, I suspect you will want to build on what you have done and increase the success that has been achieved.

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SERVICE CONNECTIONS Service Profitability Is it at risk in your dealership?

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by Ken Staubitz Strategy Development

There are many common factors affecting the service profits of your organization. Can you identify the areas impacting your profitability? If so, how are you going to improve your service profits?

The iCopier Integrating mobile technology into the MFP

by Michael Schwartz Image Systems for Business

The Gartner Group projects that in 2015, 1.104 billion mobile device units will be sold worldwide, a 372 percent increase from 2010. So, what does this have to do with MFP sales? The key is to marry the two devices — the MFP and the mobile device — in a way that would make it foolish not to incorporate the new capabilities into a business process. A significant relationship between the two would ignite a whole new reason to entertain an early upgrade.

D E PA R T M E N T S Business Technology Association

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• Education Calendar • BTA Highlights

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Executive Director’s Page

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BTA President’s Message

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Advertiser Index

4 | w w w. o f f i c e t e c h n o l o g y m ag.com | January 2012

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EXECUTIVE DIRECTOR’S PAGE

Dealers List 2012’s Top Opportunities

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he arrival of the new year always brings with it a sense of optimism and plans to make the next year better than the last. In 2012, 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, I asked these questions of a number of dealers via an email survey. Following are some of the responses I received. Perhaps they mirror your expectations or will provide you with some new ideas to consider.

“MPS will still be the greatest opportunity in 2012. Dedicated specialists are necessary to be successful.” — Gregg Petrie, Copiers Northwest Inc., Seattle, Wash.

“I believe the best opportunity will be in offering problem-solving solutions/new ideas instead of just replacing boxes. The best solution is to listen to the customers’ needs.” — Reena Philpot, Precision Duplicating Solutions, London, Ky. “A strong approach to cost reduction. I think sectors of the economy are moving, but most are still stagnant. Be diligent in customer retention and extremely aggressive in new-customer acquisition.” — Becky Horner, PTS Office Systems Inc., Las Cruces, N.M. “An increase in color versus mono in MFP sales. Let your prospects see the cost difference between them.” — Jeff Eaves, Appalachia Business Communications Corp., Johnson City, Tenn.

“I believe there will be an excellent opportunity for growth in the A4 MFP market.

There are just too many machines that need to be upgraded where most end users do not use 11-by-17. This will decrease service revenue and profit on the upgrade. However,

the dealer stands to gain by putting more machines under a contract on the upgrade side.” — Jerry Jackson, All South Copiers, Kennesaw, Ga. “Still MPS! It hasn’t stopped growing and I feel that we are just scratching the surface.” — Charles Hiotas, CJ Hiotas Inc., Grand Rapids, Mich.

“Managed network services. Tie them into an overall strategy of managed services encompassing printers, copiers, faxes, computers, servers, etc., to become the one-stop shop for your customers.” — Ken Vance, Oklahoma Office Systems LLC, Oklahoma City, Okla.

“For 2012, we will expand our sales force with an in-house telemarketing person; the objective will be to double our market share with copiers and grow our service maintenance business. The second objective will be to double our MPS business. The third objective will be to grow our supply business. If we accomplish these goals, we will build up our cash reserves and expand our sales department by another person.” — Tim Seeley Sr., Seeley Office Systems Inc., Glens Falls, N.Y. “Managed print and managed IT services. You need a good understanding of the print and IT deliverables with the right resources to be successful.” — Harvey Schilke, Protek, London, Ontario, Canada.

“MPS will continue to drive clicks up in the hybrid dealer model while increasing solution sales.” — Jim George, ProSource, Cincinnati, Ohio.

Will 2012 be the year you ramp up your MPS program, sell more A4 MFPs, develop a managed services program or transition more of your customers to color? Whatever you find to be the best opportunities for your dealership in 2012, best wishes for a year that proves to be one of ongoing prosperity and growth.  — 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 Robert C. Goldberg, General Counsel Business Technology Association Wayne Outlaw, Outlaw Group Inc. www.outlawgroup.com Michael Schwartz, Image Systems for Business www.imagesysgroup.com Ken Staubitz, Strategy Development www.strategydevelopment.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 Photo Credits: iStockphoto, Thinkstock. Cover created by Bruce Quade, Brand X Studio. ©2012 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.

6 | w w w. o f f i c e t e c h n o l o gymag.com | January 2012

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BTA PRESIDENT’S MESSAGE 2011-2012 Board of Directors

Register for Winter Break 2012 Today

I

n Lewiston, Maine, where I live, the average high temperature in the month of February is 31 degrees.

In contrast, the average high in Orlando, Fla., in February is 74 degrees.

Come the middle of winter, I know I’ll be looking for a break from the cold temperatures. BTA Southeast’s Winter Break 2012, scheduled for Feb. 10-11 at Orlando’s Rosen Plaza Hotel, will provide the perfect opportunity.

Of course, the event will offer much more than a break from the cold temperatures.

The schedule includes six education sessions, 27 exhibiting sponsors and an afternoon and evening at the Epcot theme park.

In addition, as a front-runner education opportunity, the BTA Service Management University is scheduled for Feb. 8-9 (For details, visit www.bta.org/SMU. Attendees of the front runner will receive free registration to Winter Break 2012.)

Winter Break 2012 gets under way on Friday morning, Feb. 10, with a keynote presentation, “Understanding Your Customer: Output Strategies,” by Marty Canning, president of Imaging Solutions and Services, Lexmark International. Canning’s presentation continues the “presidents series” at recent BTA district events.

In 2011, the presidents of Sharp, Konica Minolta and Toshiba each presented keynote sessions. It has been great to learn from our industry’s leaders. I’m looking forward to hearing Canning’s presentation.

The day continues with five additional education sessions. They are: “Recruiting & Selecting Sales Reps for MS & MPS,” with Rich Sissen, Sissen & Associates; “Service Challenges Every Dealer Faces,” with Ken Staubitz, Strategy Development; “Aftermarkets:

The Untapped Resource,” with Melissa Whitaker, Melissa Whitaker International; “The Rise of Social Media in Business,” with Martin Perry, in2communications Inc.; and “What’s on the Horizon for BTA Dealers in 2012: It Isn’t Just MFPs & Printers Anymore,” with Keith Kmetz, IDC. This is an outstanding lineup of speakers and topics. I know that attendees will find the insight and guidance shared of great value.

As noted, there will be 27 exhibiting sponsors at the event, providing attendees the opportunity to learn more about their products and services. They are: BEI Services, CAPSYS, Color Imaging, Compass Sales Solutions, Crawford Thomas, Densi, Diversified Computer Supplies, DocuWare, EDA, ESP (Breaks Sponsor), Epson, Falcon Technology Solutions, GreatAmerica Leasing, Image Star, InkCycle, Katun, LEAF, Lexmark, MSE, Muratec, N-able, NA Trading and Technology, OKI, Prism Pointe, SalesChain, SmartPower Systems and Square 9 (Lunch Sponsor).

Like all BTA district events, Winter Break 2012 will provide you plenty of opportunities to network with your fellow dealers and others in the industry, including a cocktail reception on the opening evening. As mentioned, on Saturday afternoon, following the morning education sessions, attendees will travel by bus to the Epcot theme park to enjoy the attractions and rides.

2011 was a great year for BTA district events. We ended the year with nearly 350 registrants over the five events that were held. I believe that 2012 will be even better as more dealers discover the value of these events, beginning with Winter Break 2012.

I encourage you to join me and many of your fellow dealers on Feb. 10-11 in Orlando for two days of education, networking and warm weather. For details or to register, visit www.bta.org/BTASoutheastEvent.  — Tom Ouellette

President Tom Ouellette Budget Document Technology 251 Goddard Road Lewiston, ME 04240 touellette@bdtme.com President-Elect Terence Chapman Business Electronics Corp.

219 Oxmoor Circle Birmingham, AL 35209 tchapman@businesselectronics.com Vice President Todd J. Fitzsimons Network Imaging LLC 122 Spring St. Southington, CT 06489 tjfitzsimons@ni-ct.com BTA East Rob Richardson Allied Document Solutions & Services Inc. 200 Church St. Swedesboro, NJ 08085 robr@ads-s.com BTA Mid-America Ron Hulett U.S. Business Systems Inc. 3221 Southview Drive Elkhart, IN 46514 ron.hulett@usbus.com BTA Southeast Jerry Jackson All South Copiers Inc. 3610 Kennesaw N. Industrial Parkway., Ste. D Kennesaw, GA 30144 jj@ascopiers.com BTA West Ronelle Ingram Steven Enterprises Inc. 17952 Sky Park Circle, Ste. E Irvine, CA 92614 ronellei@msn.com Ex-Officio/Immediate Past President Rock Janecek Burtronics Business Systems Inc. 216 S. Arrowhead Ave. San Bernardino, CA 92408 rjanecek@burtronics.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

8 | w w w. o f f i c e t e c h n o l o gymag.com | January 2012

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Aftermarket Cartridges Today, a powerful force in the industry by: Brent Hoskins, Office Technology Magazine

T

ake a look at today’s aftermarket toner cartridge industry and you will see many thriving companies that appear to be squarely focused on fair competition and quality. You will also see an industry that lays claim to a significant percentage of the monochrome toner cartridge market and company executives eagerly eyeing the huge opportunity on the color side.

Of course, when you look at the industry you will also see contentious and litigious relationships between some aftermarket suppliers and OEMs. Likewise, you will hear warnings about a few remaining unscrupulous players still tarnishing the image of the industry to some degree with poor-quality products and a history of violating OEM patents. Those warnings come with some simple advice to those selecting an aftermarket cartridge supplier: “Be cautious and ask lots of questions.”

There is no denying that aftermarket cartridges have become a powerful force in the office technology industry. In 2010, says John Shane, director of the Communication Supplies Consulting Service for InfoTrends, there were approximately 25 million monochrome remanufactured toner cartridges sold in the United States. Shane reports that when one adds all new-build compatible toner cartridge sales to that number, collectively they accounted for 25 percent of all U.S. sales of monochrome toner cartridges in 2010.

What is the difference between remanufactured and a new-build compatible? Daniel Stewart, channel marketing manager for Katun Corp., shares the basic definitions. “To remanufacture is to take a product that has gone through its first life cycle, have it torn down, remade and brought back up to OEM specifications,” he explains. “A new build is newly manufactured.”

Although it sells various other lines of aftermarket products,

Katun is in the business of selling both remanufactured and new-build compatible cartridges. “Everything that we build for copiers, primarily, is new build,” he says. “For laser printers, the majority of our cartridges are remanufactured. All of our Media Sciences [a company purchased by Katun in 2010] products are new builds.”

Other major players, including Micro Solutions Enterprises (MSE) and West Point Products, focus on the production of remanufactured cartridges. Although Katun has processes and practices in place to ensure product quality and avoid violations of OEM patents, executives at MSE and West Point Products warn dealers to do their due diligence before buying new-build compatibles for resale, given that there are still suppliers in the industry that sometimes violate patents and may also offer poor quality products made from low-grade plastics.

“There are a lot of knock-off products coming into the states right now that are violating patents and there has been increased legal action by the OEMs to put an end to that,” says Keith McKerley, senior vice president of sales for West Point Products, noting that dealers selling patentviolating products may find themselves in a bind. “There is a risk of a cease-and-desist order, which would cut off the dealer’s supply of cartridges, resulting in the need to scramble in order to replace that relationship. That’s not always an easy thing to do on short notice.”

Certainly, concerns about quality and patent violations have led some dealers to be particularly inquisitive when it comes to selecting an aftermarket supplier. “They should be,” Stewart says. “I think it is healthy to be skeptical. Early on in this industry a lot of things were ‘thrown against the wall to see what would stick.’ People rushed to market just trying to capture some profit stream without any consideration of

10 | ­w w w. o f f i c e t e c h n o l o gymag.com | January 2012

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quality. At Katun, we know lead position, utilizing and that you can’t go to market leveraging your technol“Dealers’ customers have with a product that is not a ogy, you can offer dealers a environmental initiatives in quality product and expect to product that will grow their place — especially larger have long-term customers.” profits at a higher rate than corporations — which gives Despite any persisting a monochrome product. I the dealers the opportunity negative issues involving a think that is where you turn few aftermarket vendors, the customer’s head.” to positively impact those there are positive areas of It should be noted that initiatives. Remanufacturing opportunity in today’s afthere is one color in paris considered superior ... to recycling ... ” termarket cartridge industicular that always has been — Keith McKerley try. Managed print services associated with aftermarWest Point Products (MPS) is one of those areas. ket cartridges — green.

“MPS has given the afterBecause remanufactured market a mild boost,” Shane says. “For monochrome, it is 13 cartridges are extending the life of the OEM cartridge core, percent. So, if the aftermarket share was 20 percent within a they are often seen as having a positive impact on the envicompany before MPS, it is 22.6 percent after MPS. For color, ronment. “It is really end-user driven,” McKerley says. “Dealthe boost is 8 percent. So, if aftermarket color was 5 percent ers’ customers have environmental initiatives in place — esin a company before MPS, it is now 5.4 percent.” pecially larger corporations — which gives the dealers the Although Shane says MPS has only provided aftermarket opportunity to positively impact those initiatives. Remancartridges a “mild boost,” suppliers assert that for an MPS ufacturing is considered superior by the EPA to recycling, engagement to be profitable, aftermarket supplies must be which requires the use of more energy. There’s a strong mesincluded whenever possible. “Nearly every MPS dealer would sage there for dealers — the environmental benefit — that agree that it is almost impossible to be profitable when you are they are now adding to their proposals.” placing OEM consumables into an MPS environment,” says While the environmental message may be positively reLuke Goldberg, senior vice president of MSE. “The only way ceived by end users focused on sustainability, it may not be to go head-to-head with an OEM is with a remanufactured, as strong of a deciding factor as some may believe and only high-quality consumable. There is just no other way to do it.” postpones the recycling or disposal of cartridges. Says GoldRay Loisel, senior vice president of MPS at West Point berg: “It is way below cost as a driver in terms of why end Products, concurs. “Most dealers have to use a remanufac- users buy aftermarket toner cartridges.” Says Stewart: “Ultured cartridge in an MPS environment to be competitive timately, cartridges are going to end up in the waste stream and profitable,” he says. “It is very difficult to be profitable somewhere. The critical point is what happens at the end with an OEM product.” of life. A lot of OEMs and responsible remanufacturers will Actually, says Loisel, the OEMs themselves have con- make sure the cartridges don’t end up in landfills, but infirmed the importance of aftermarket supplies in any effec- stead go into grinding or reclamation processes, so the mative MPS program. “Most of the OEMs today use remanu- terials can be used to make additional products.” factured cartridges for their MPS programs,” he says. “They Now 20-plus years old, there is one other notable trait of are doing this because they cannot be profitable using the today’s aftermarket cartridge industry. “There are definitely OEM product.” fewer remanufacturers today than there were 10 years ago,” While the aftermarket cartridge is making some strides says Tom Day, CEO of West Point Products. “The industry has with the rise of MPS, the predominant opportunity lies in consolidated in a couple of ways. There has been strategic concapturing more market share on the color side. In 2010, solidation through acquisitions and mergers, and there has Shane says, remanufactured and new-build compatible col- been natural evolution with some of the smaller remanufacor cartridges accounted for only 7 percent of all U.S. sales turers leaving the business. A lot of those small, regional reof color toner cartridges. “The goal is to grow color in the manufacturers — the so-called garage-based companies of 20 next five years to be 20 to 25 percent [of the total cartridge years ago — are now resellers focused on toner cartridge sales market],” Goldberg says. “There is no question — the growth and printer service, offering MPS programs in some cases.” opportunity is on the color side of the business.”

Although there are fewer players than in the past, there are Stewart shares a similar perspective. “The monochrome still plenty of companies for dealers to select from as their afside of the business is fairly mature,” he says. “The color termarket cartridge suppliers. Enough, in fact, that dealers side is where most of the growth is today. If you are in a should ask a number of questions in the due diligence process 12 | ­w w w. o f f i c e t e c h n o l ogymag.com | January 2012

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friends in the industry. What in order to ensure they are is the reputation, knowledge making the right choices. The “Anybody can say that they base and channel depth of suppliers themselves sugoffer a quality product, but the company?” gest several key questions. in real terms, find out how Given the nature of the afSays Loisel: “If I was a dealer, long the company has been termarket cartridge industry, I would be asking, ‘What doing this. And talk to your Day suggests one other area other value-added programs that dealers should ask about do you have for me?’ For exfriends in the industry. What when evaluating a supplier — ample, at West Point, we is the reputation, knowledge its commitment to eliminatbring a TCO tool, monitorbase and channel depth of the company?” ing any legal issues. “For exing software and service to — Daniel Stewart ample, at West Point, we have the table.’” Says Goldberg: “I Katun Corp. an in-house legal team that is would ask, ‘Where are the very thorough and diligent,” products being made?’ A lot of dealers who are buying cartridges through distribution re- he says. “We ensure that every single one of our ally don’t know who makes the cartridges. How do you know products is thoroughly vetted from an IP [intelthe distributor won’t change suppliers based on getting a bet- lectual property] standpoint.”  Brent Hoskins, executive director of the ter price or some other change in the market?” Says Stewart: Business Technology Association, is editor “Ask about the maturity of the company. Anybody can say of Office Technology magazine. He can be that they offer a quality product, but in real terms, find out reached at brent@bta.org or (816) 303-4040. how long the company has been doing this. And talk to your

14 | w w w. o f f i c e t e c h n o l ogymag.com | January 2012

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APRIL 18-19, 2012 THE MIRAGE • LAS VEGAS, NV www.itexshow.com

On the horizon in office solutions ITEX is where you’ll find what’s on the horizon in office solutions.

Top Reasons Attendees Visit ITEX

It’s the nation’s most comprehensive two-day event for the channel, bringing together dealers, resellers, distributors, VARs, vendors, OEMs and associations all under one roof.

• Comprehensive event experience encompassing all dealer initiatives —not just MPS • Quality of education • Opportunity to meet new vendors and existing partners • Dealer networking • MPS strategies and offerings • Service management information • Dealer support services

ITEX 2012 is where you will find: • Evolving technology: Discover the latest products and most innovative technologies that can move you beyond your core capabilities and drive your business to new paths.

• Integrated processes: Gain knowledge of processes and new strategies to reposition your business, generate new revenue

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Boosting Performance Strategic changes produce dramatic improvements by: Wayne Outlaw, Outlaw Group Inc.

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ow that the dust has settled and you have the final numbers, it is time to evaluate the year.

Your analysis may show it has either been a good year or a challenging one. Regardless of results, all sales managers and dealership principals want to improve. If the year has been especially challenging, you may want to make significant changes. However, I suspect you will want to build on what you have done and increase the success that has been achieved. By making small, but very strategic changes to the sales team, dramatic improvement can result.

The effect of changing a salesperson, learning more about each salesperson and using this information to coach, can make great improvements without a large investment or significant risk. We all know it is important for salespeople to have excellent sales skills, business knowledge and product knowledge, but many times it is simply not enough. They have to have the motivation, behaviors and cognitive abilities to be successful in key sales activities and, very importantly, do that at the pace required in today’s challenging business environment.

Many times, sales management simply tries to replace poor performers with experienced salespeople in hopes of fi lling the performance gap on the sales team. Unfortunately, this strategy often does not work as well as hoped.

Even if the individual has been successful in previous years or other assignments, he (or she) may not have the attributes needed for success in today’s market and in his new assignment. There is a better way to ensure increased results than by just hiring an experienced salesperson who claims to be successful and waiting to see if he will be productive.

Let us examine the improvement from making small, but important, strategic changes. To see the power of making these changes, we can use a typical sales team of eight individuals with an annual quota of $500,000 per person as our example.

A typical sales team can be divided into three productivity groups. The top performers usually consist of 20 percent

of the salespeople and each generates average sales of $700,000 annually, the middle performers 60 percent ($500,000 average annual sales) and the bottom performers 20 percent ($300,000 average annual sales). Incidentally, independent research and evidence from our consulting has shown that this performance distribution is fairly consistent, with approximately 16 percent of the sales force being top performers and 16 percent being bottom performers in a variety of industries and sizes of companies.

Top performers demonstrate to the rest of the sales force that there is opportunity for improvement. Every middle and bottom performer has the opportunity for greater productivity. Even those who perform over quota can improve. Any performance below the average of the top performers is an “opportunity cost” that drains revenue and profit from the company’s bottom line. Let us examine some strategies that can make improvements on your sales team and get more salespeople closer to top performance.

Simply getting one of the two bottom performers to reach quota would take the team up to 105 percent of plan. Replacing the other bottom performer with someone who has the same attributes of your top performers could raise the team’s productivity by another 10 percent. Addressing both of the team’s bottom performers who are below plan is a strategy everyone uses. But what else can be done to raise the productivity and performance of the team?

What many sales managers do not do is focus on making improvements to the middle performers, who make up half of the team and represent tremendous potential. How do you do this? One of the easiest ways is to get a clear understanding of the attributes of each salesperson compared to what is needed to be a top performer. With this knowledge, the sales manager can dramatically improve his effectiveness as a coach. If only one of the four middle performers becomes a top performer, it could add an additional $200,000 in revenue and raise team performance by another 5 percent. Imagine improving not just one middle performer, but two.

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off to fast start, it can actually eliminate Just making a change with three or early problems that cause turnover. four of the eight people on the team is By clearly defining The next step is to address the issues very possible and can produce an addithe attributes of top of the underperformers. If an underpertional $1 million in revenue. That level of performers and former does not have the attributes to improvement is worth a little effort and using them to coach be successful, coaching may have little change, but how do you do it? salespeople ... you can effect on his success and you will have First, you must know the attributes to replace him with someone who can required to be a top performer. Having make dramatic changes be successful. Do not spend the time a general idea of what is needed is not in sales performance. and effort training, coaching and mansufficient. This information is not only aging an underperformer if it will not needed to make a good hiring decision, but is also needed when coaching and developing a new create an opportunity to pay dividends with the individual.

Now, use the information you learned when assessing hire. No one ever hires a new salesperson saying, “I hope this person will be a mediocre performer.” Do not fall into the the sales team in a structured coaching process and focus trap of just fi lling a territory. Be absolutely certain that the on the middle performers. Examine each individual’s atperson you hire has the attributes of your top performers. tributes and compare them to those of your top performEvery new hire should have the ability to be a top salesper- ers. Help each person get a more accurate appraisal of his attributes compared to those that are needed. Many times, son. Do not compromise.

Now, use your knowledge of the new hire’s attributes to helping a person understand and accept what he needs to help the salesperson get off to a fast start. During the first few improve is the most important step to growth. Once he undays, it is critical to review his attributes compared to those of derstands the changes that are needed, help him develop a your top performers to get a clear understanding of his oppor- plan and hold him accountable to addressing the gaps or tunities and challenges. Not only will it help the individual get needed areas of improvement.

Do not neglect working with your top performers. Even they can improve if they have a clear understanding of their strengths and weaknesses. While they may not have as much opportunity for improvement as your middle or bottom performers, their level of performance actually sets the pace for the entire team. The more success the top performers have, the more the rest of the team will work to catch up. By raising the performance of the top performers, the middle will naturally move up.

Wholesale changes are not required to significantly improve your results. By clearly defining the attributes of top performers and using them to coach salespeople for improvement (or replacing them, if needed), you can make dramatic changes in sales performance.

If you are wondering how small, strategic changes can affect the performance of your sales team, Outlaw Group will provide a complimentary sales team analysis to estimate the monetary and performance value generated by improvements. Use the email address below to reach me.  Wayne Outlaw is president of the Outlaw Group Inc. The organization provides innovative staffing service and sales productivity systems for office technology companies. Outlaw is the author of the book, “Smart Staffing: How To Hire, Reward And Keep Top Employees To Grow Your Company.”

He can be reached at (800) 347-9361 or wayne@outlawgroup.com.

Visit www.outlawgroup.com.

20 | w w w. o f f i c e t e c h n o l ogymag.com | January 2012

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12/22/11 9:16 AM

The iCopier Integrating mobile technology into the MFP by: Michael Schwartz, Image Systems for Business

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dvancement in technology is an inevitable process that is never-ending and forever changing. There is really only one fundamental principle behind the motivation to invent and innovate: efficiency.

Efficiency can be broken down into two core elements: time and resources, both of which possess tangible and intangible properties. Naturally, there are numerous benefits of the evolution of technology other than these two elements, but for all intents and purposes, the reason for technology advancement is because of a measurable change in efficiency for the better.

The invention of the car was positive for consumers because it empowered them to move about at their leisure rather than relying on mass transportation like the railway.

It was negative for industries that relied on railroads, but created an entirely new economy for products related to the personal automobile. The same philosophy goes for telecommunications — it is bad for the post office, but is great for consumers, telecommunication carriers and the producers of the raw materials needed for the infrastructure and hardware. Again, it empowers the consumer with independence and creates a wealth of expanded business opportunities.

What all of this is pointing toward is the empowerment that copiers and, eventually, digital MFPs, have given businesses of all sizes over the past 30-plus years. Some may disagree, but unfortunately, the excitement and inventiveness of these devices has peaked. They are becoming commoditized and grouped in a large blob of monotonous machines which, to the customer (with exceptions), are “all pretty much the same.”

This is not news to anyone who has kept up with industry technology such as document management software, managed print services, color quality technology, cost accounting software, etc. Even with these additions to the suite of solutions that can be offered with an MFP, let’s be honest.

If a dealer looks to his (or her) right, left, up and down, his company is not unique in its offerings.

Getting back to consumer empowerment: Economies of scale have allowed mobile technology to become widely accessible to consumers over the past 20 years. Its growth does not seem to be slowing in any sense.

The Gartner Group projects that in 2015, 1.104 billion mobile device units will be sold worldwide, a 372 percent increase from 2010. Many have their brand preferences, but of these projected units, the Android operating platform will have a steady 50-percent market share from 2012 through 2015. Additionally, tablet PCs have exploded over the past two years. Apple sold approximately 8.5 million iPads in the United States since its launch in January of 2010, according to eMarketer. com, which also estimates that by 2014, 89.5 million Americans will be tablet users, with a staggering 60.8 million of those users being iPad-specific. These projections are defined by users of any age using a tablet at least once a month.

What do people do with these devices? They gather information. Nielsen published a list of the top 20 apps for the Android platform back in September, listing the following from numbers one to five, respectively: Google Maps, Gmail, Facebook, Google search and YouTube. QuickOfficePro — a word processing, spreadsheet, PDF and slideshow app — was listed at number nine.

Search engines, specifically Google, have enabled the consumer to research his own information and sort it by relevance. Another emergent use of these devices is mobile shopping. Given that this article is being written just after Thanksgiving, it is appropriate to point out that IBM noted that mobile shopping takes credit for 9.8 percent of Black Friday purchases, up from 3.2 percent last year — a 306-percent increase. PayPal also reported that payments made over the four-day Thanksgiving weekend via mobile device (phone or tablet) were up more than 500 percent from 2010.

OK, so what does this have to do with B2B sales and, more importantly, MFP sales? Mentioned earlier is the derivative impact of technology innovation. Clearly, the impact of the

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adoption of mobile devices on MFP sales purpose of this copy machine?” will not have the same correlation as Yes, this is a dramatization, but de... Development of automobiles and crude oil. But is it not velopment of purposeful integration purposeful integration the same principle of combining cars with mobile devices should be, without with mobile devices with electric power — two long-existent question, an integral piece of R&D at all should be ... an integral commodities that have lately combined manufacturers and software compapiece of R&D at all — that makes an entirely new marketnies in the MFP space. place for car dealerships and consumDo not be in denial — mobile devices manufacturers and ers? The key is to marry the two devices in the business environment will probsoftware companies ...

— the MFP and the mobile device — in ably mean fewer printed pages over time a way that would make it foolish not to — so why not hedge the likelihood of incorporate the new capabilities into a business process. fewer (highly competitive) clicks by figuring out how to use A significant relationship between the two would ignite a this technology combination for something other than marks whole new reason to entertain an early upgrade, rather than on a page. These companies’ executives must ask themselves: the customer simply opting for a “buyout” to purchase the “How do we make the next generation of our products releequipment at the end of the lease term. vant to the needs of its next generation of users?”  Currently, cell phones and tablets have the most practi- Michael Schwartz held part-time status at his family’s Somerset, cality at the consumer level. Historically, many consumer N.J., dealership, Image Systems for Business, from 2001 at 14 products derive from a business product that eventually years old, up until earning a bachelor’s degree in finance and trickles down, such a $499 scanner that routes and organizmarketing and taking on a full-time position es your personal documents with optical character recogniin 2009. He quickly immersed himself into tion using a plug-and-play document management system. the industry, attending BTA events, dealer This mobile uprising is going to have a backward integrameetings and related gatherings on behalf of tion into the business workplace. the company. Schwartz can be reached at Let us not forget the consumer who is part of the 91 permschwartz@imagesysgroup.com. cent of working America at the moment. Is that worker callVisit www.imagesysgroup.com. ing his boss to say he is going to be late for a meeting? Or does he text the boss? Is he carrying around a digital camera to take spontaneous pictures or using his 3.2-megapixel phone camera to take a photo, which is then uploaded to Twitter? How many people are sitting down at a desktop PC to send a presentation versus emailing it at a red (or, perhaps, even green) light?

The comfort level of mobile device usage is overwhelmingly high among consumers. As soon as their employers can figure out the best way to integrate these devices into their daily work processes, the more productive they will be because of the existing familiarity with these products. This can only happen if there are products available to integrate into.

There is a big burden on MFP manufacturers to start figuring out how to fully integrate their products into the mobile market. If they do not feel the pressure now, they certainly should. Currently, there are apps for the MFP — print-from/ scan-to mobile phone and others that are similar — but there is nothing that is sustainably and seamlessly assimilating the two devices together like peanut butter and jelly.

It is only a matter of time before that 15-year-old kid — who reads on an e-reader, sends 150 texts daily, gets his news from Facebook, takes school tests on a tablet and has his first startup company in ninth grade as a blogger — is going to end up in your workplace and ask, “What is the www.officetechnologymag.co m | J a n u a r y 2 0 1 2 | 23

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Capture the Magic BTA West hosts district event in Las Vegas by: Brent Hoskins, Office Technology Magazine

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roadening its efforts to provide dealers with opportunities to learn from experts, network with fellow dealers and gather new ideas and strategies, the Business Technology Association expanded its lineup of annual district events in 2011 from three to five. The second of the two new events for the year, BTA’s West’s Capture the Magic, was held Nov. 17-18 at the Paris Hotel Las Vegas. The event drew nearly 70 registrants.

A comment from Jim Donnellon, ABS Business Products Inc., Cincinnati, Ohio, reflects those received from many of the attendees. “I was impressed with how thorough BTA is,” he said. “The speakers were very good and the vendors were the right ones for me. Well done!”

Capture the Magic featured a keynote presentation, “The New Normal,” by Mark Mathews, president and COO of Toshiba America Business Solutions Inc. There were also five other education sessions: “Magical Procedures for Successful Dealerships,” with Bob Goldberg, BTA general counsel; “Capture the Opportunity,” with John Hey, Strategic Business Associates; “There is More to MPS Than Sales and Software,” with Ronelle Ingram, Steven Enterprises Inc.; “The MPS Contract: Getting it is Only the Start,” with Tom Callinan, Strategy Development; and “Beyond Traditional Sales,” with David Ramos, Strategy Development.

The event featured 31 exhibitors: ACM Technologies, Color Imaging, Crawford Thomas, Densi, Digital Gateway, Digitek, DocuWare, ECi Software Solutions, Epson, ESP, Evolved Office, Falcon Technology Solutions, FileBound, FMAudit, GreatAmerica Leasing, InkCycle, Innovolt, Katun, LEAF, Lexmark, Lion Technology Group, M-Files, MSE, Muratec, MWAi, NA Trading and Technology, SalesChain, Square 9, Strategy Development, Toshiba and West Point Products.

Capture the Magic concluded with David Copperfield’s show, “An Intimate Evening of Grand Illusion.”

For information on future BTA district events, visit www.bta.org/DistrictEvents.  Brent Hoskins, executive director of the Business Technology Association, is editor of Office Technology magazine. He can be reached at brent@bta.org.

Clockwise from top: BTA West’s Capture the Magic district event featured six education sessions; John Hey presents his education session; ECi’s Craig Fitzpatrick (left) visits with Frank Shoaf, Central Business Systems Inc., Lexington, Ky.; Mark Mathews, president and COO, Toshiba America Business Solutions Inc., presents his keynote address, “The New Normal.”

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‘The New Normal’ T

Clockwise from top of four photos: Bob Goldberg, BTA general counsel; Falcon Technology Solutions’ exhibit table; Ronelle Ingram, Steven Enterprises Inc.; and David Ramos, Strategy Development.

Clockwise from top of three photos: Attendees and exhibitors network during a break in education sessions; Tom Callinan, Strategy Development, presents his education session; 2011-12 BTA President Tom Ouellette (left) presents BTA Past President Rock Janecek with an award honoring his long-time service to BTA.

he recent recession and resulting volatility in the global economy, along with ever-changing end-user needs and continual advancements in mobile technology, have led to a new reality in today’s marketplace. “Constant change is here to stay,” said Mark Mathews, president and COO of Toshiba America Business Solutions Inc. (TABS). “We live in a dynamic, changing world. We have to accept that fact.”

Actually, said Mathews, in his keynote presentation, “The New Normal,” constant change can be a good thing. “I love change,” he said. “When things change, that’s when you get to move up.

It is when things are status quo that it is difficult to change. It is when stress comes to the system that you can grow.”

Of course, stress has arrived, Mathews said, highlighting such economic numbers as the nation’s current 2.5 percent GDP — ”It needs to be between 3 and 5 percent to dramatically reduce unemployment.” He also shared how he “vividly” remembers when the recession initially impacted the office technology industry — the day when “GE [Capital] said they were out of the market; ‘We are taking a hiatus, we are not leasing any more [office equipment].’”

Fortunately, Mathews said, after bottoming out at 40 percent, the lease approval rate is now back to near pre-recession levels.

However, economic uncertainties still loom, he continued, pointing to the current economic turmoil in Europe. “If you look at Toshiba’s business, we are roughly one-third U.S., one-third Europe and one-third Asia,” he said. “If there is a meltdown in Europe, it will have a ripple effect for [Toshiba and] all manufacturers, not just in this industry, but in all industries.”

Despite today’s economic woes, Mathews sees an era of new opportunity, though he emphasized that it will require dealerships to take a services-centric approach. Such a transformation is taking place at Toshiba, he said. “If you look at our products, we actually lead with professional services,” he explained. “We no longer lead trying to be a copier or MFP manufacturer.”

A dealership’s transformation needs to include pursuit of the managed print services (MPS) opportunity, Mathews said. Today, he said, Toshiba’s direct sales MPS business is up 75 percent, representing 12 percent of TABS’ total revenue. “You can triple what you’re doing today,” he said. “You can turn off the news about the European economy. You can turn off the news about unemployment. Triple your business by taking an MPS approach.”

In 2012, Mathews said, affirming the scope of the MFP opportunity, it is estimated that 70 percent of businesses with 250-plus employees will purchase their output devices through an MPS contract. “Today, when you look at all the business we’ve done this year, 62 percent of all large commercial bids have had an MPS element in them,” he added. “If you look over the last couple of months, it is probably more than 70 percent.”

Emphasizing that the opportunity does not end with MPS, Mathews encouraged dealers to also take a look at providing customers document security assessments and services. He also advised them to pay close attention to the changes that are occurring now and in the future in the areas of mobility and cloud computing. In addition, he advised dealers to make sure they are transitioning their customer base from monochrome to color MFPs. “Color is exploding,” Mathews said, noting that, on average, about a third of a dealership’s placements are color MFPs, representing about half of its revenues. “You can protect your base in this business by converting customers from black-and-white to color.” n —Brent Hoskins www.officetechnologymag.co m | J a n u a r y 2 0 1 2 | 25

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COURTS & CAPITOLS

Business Credit Make smart decisions for your dealership & family by: Robert C. Goldberg, General Counsel for the Business Technology Association

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s financial institutions begin to ease restrictions on loans, many dealers have expressed concerns about entering into lengthy loan agreements with their financial institutions. There is one rule regarding this that never varies and is always presented first: Do not sign a personal guarantee.

No one begins a business with the idea that it is going to fail.

Everyone is confident and optimistic regarding the future. You have visited with your attorney and established a corporation or limited liability company (LLC), which was done to isolate your business from other assets. A personal guarantee eliminates one of the objectives of a corporation or LLC. I speak from the experience of one dealer who signed a personal guarantee and subsequently lost his home. Do not sign a personal guarantee. If the financial institution insists, look elsewhere. Your family will be grateful and you will sleep much more soundly.

A personal guarantee is not the only issue to consider when seeking financing. Dealers are exceptional entrepreneurs.

They are successful because of their ideas, passion and drive.

Most dealers do not have accounting backgrounds and, as a result, are often unaware of just how important actively managing business credit is to success. Most businesses cannot survive without some form of credit, but do not let your enthusiasm for business cloud the risks of borrowing money.

There are many forms of credit available to a business, from business credit cards and lines of credit, to vendor credit terms and private-party loans. Even a property lease agreement is a form of credit. Because credit is a privilege that is earned and increases over time with good practices, the value of credit power is often within your control.

The importance of establishing and maintaining good credit can be critical to business success. Dealers agree that cash-flow management is one of their top concerns. Having a line of credit or other access to borrowing cash can be important for product purchases, expense management, meeting payroll and accounts payable.

When negotiating dealer agreements, many dealers I work with are not concerned about payment terms with their vendors, as they always take cash discounts. These dealers have negotiated favorable lines of credit with local financial institutions and manage those lines for all purposes including inhouse lease companies. Better terms are often available when you concentrate on building a relationship with one institution that knows you, your business and your objectives.

It is essential to arrange for credit before the need is critical.

If business is good, seek to increase your business credit line.

You do not have to access the full line, but having it available can be a great help if conditions change.

Monitor your credit ratings and ensure they are accurate.

Good credit can ensure that small businesses get financing when they need it. According to the SBA, insufficient or delayed financing is the second most-common reason for business failure. And, since most loan decisions below $100,000 are automated, the business credit file will often dictate the amount and terms of a loan. For businesses with poor credit ratings, banks may increase credit-card interest rates on average from 9 to 18 percent and loan interest rates on average from 8 to 12 percent.

Make smarter credit decisions regarding your customers.

Knowing your customers’ credit enables you to provide better terms to creditworthy customers and avoid doing business with customers who pay slowly — both of which can lead to improved cash flow. If you utilize a third-party leasing company, it can eliminate customer credit risk, but make sure that accurate information is provided to the lease company in each application. Do not inflate values. Taking a year’s maintenance up front and not managing the funds correctly is a recipe for disaster.

Credit is the lifeblood of your business. Spend time with your financial statements and credit terms to maximize your profitability and success. BTA offers its ProFinance workshop to help you understand the “sacred cows” of your business. If you have not attended, consider doing so in 2012. n Robert C. Goldberg is general counsel for the Business Technology Association.

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

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EDUCATION CALENDAR February 7-8

BTA Fundamentals of MPS Sales Workshop Las Vegas, NV Previously the BTA MPS Sales Workshop, this newly redesigned, two-day workshop is now the BTA Fundamentals of MPS Sales Workshop. This workshop will cover the MPS sales process for both small and mid-sized companies. Your sales team will learn the proper contact level and value proposition based on company size, how to get an appointment at the correct level and how to identify the areas of pain associated with the print environment based on company size.

Visit www.bta.org/MPSFundamentals to register.

8-9

BTA Service Management University (SMU) Orlando, FL This workshop will teach service leaders how to assess their departments’ strengths and weaknesses; develop specific, actionable plans to address areas of opportunity; execute action items to drive sustained profitability and quality customer service; and successfully deliver profitable service in the MPS world. Participants will leave with a road map on how to achieve 52 percent or more in service gross profits and 60-percent-plus margins in MPS. As the front-runner workshop for BTA Southeast’s Winter Break 2012 district event, SMU attendees will receive FREE registration to the BTA Southeast event. Visit www.bta.org/SMU to register.

9

BTA Advanced MPS Sales Workshop Las Vegas, NV Strategy Development’s one-day BTA Advanced MPS Sales Workshop was developed specifically to address the management and expansion of your MPS contracts. This workshop will focus solely on the quarterly business review (QBR), a process Strategy Development introduced to the MPS community. Strategy Development consultants will demonstrate a step-by-step process to properly conduct a successful QBR. With proper execution of the QBR, you will grow your revenue and profits. Visit www.bta.org/AdvancedMPSSales to register.

10-11 BTA Southeast’s Winter Break 2012 District Event Orlando, FL Winter Break 2012 will feature a keynote presentation by Marty Canning, president of Imaging Solutions and Services, Lexmark International Inc. There will also be five additional education sessions presented by industry leaders, as well as a round-table discussion that will allow attendees to discuss “hot topics” in the industry. Dealers will be able to participate in networking events that will allow them to connect with their peers. In addition, there will be time to visit with more than 25 exhibiting sponsors. To wrap up the event, attendees will travel to Epcot to spend an afternoon and evening at the park. Visit www.bta.org/BTASoutheastEvent for more information or to register.

For more information, visit www.bta.org/Education or call (800) 843-5059.

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BTA HIGHLIGHTS BTA would like to welcome the following new members to the association:

Dealer Members Business Equipment Service, Loveland, CO Copier Rental Solutions, Lake Oswego, OR CopySource, Coral Springs, FL Document Solutions, Albuquerque, NM Information to Imaging Technologies, Wilmington, DE Quality Digital Office Solutions, Lancaster, PA Service Associate Member CIT, Jacksonville, FL Vendor Associate Member CAPSYS Technologies, Colorado Springs, CO For full contact information of these new members, visit www.bta.org.

Professional Sales Profile

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

BTA Vendor Associate member CAPSYS is a developer of centralized and distributed document and data capture software that streamlines the process of acquiring documents and information for document imaging and document management systems. CAPSYS’ affordable software helps global enterprises automate their document-driven business processes, resulting in a reduction in operational costs, increased productivity and a rapid ROI. The company’s flagship software application, CAPSYS CAPTURE, is a powerful and flexible thin-client application that requires no workstation software to be installed, upgraded or maintained. www.capsystech.com

Like diagnostic tests help physicians diagnose medical problems more accurately and prescribe the best treatments, employee assessments can help sales managers screen, select, train and retain top salespeople. The Professional Sales Profile from Precision Hiring & Development is designed to help office technology dealers hire, develop and retain top sales producers. During January 2012, BTA members can receive a special buy-one-get-one-free deal on Professional Sales Profiles from Precision Hiring & Development. New BTA members can receive one free profile PLUS they can buy one profile and get one free. For more information on the Professional Sales Profile or to order, visit www.bta.org/ProfessionalSalesProfile.

BTA Service Associate member Print Management Solutions Group is a strategic alliance between the Learning Outsource Group and a powerful group of affiliate partners, with the mission of supporting document imaging dealers, resellers and OEMs with their development and implementation of profitable, sustainable MPS offerings. Print Management Solutions Group provides a seamless solution to improve sales and sales management effectiveness, service productivity and profitability, and operational efficiencies.

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

A full list of BTA Vendor and Service Associate members can be found online at www.bta.org.

www.printmanagementsolutionsgroup.com

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service connections

Service Profitability Is it at risk in your dealership? by: Ken Staubitz, Strategy Development

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here are many common factors affecting the service profits of your organization. I have yet to find an organization that has not wanted to improve its service margins to one degree or another. As I work with organizations, I often find service revenues flat or declining. In addition, it is not uncommon to find labor expense as a percentage of revenue flat or increasing.

Surprisingly, given the combination of the previous two factors, one might think that parts expense as a percentage of revenue will naturally be increasing as well, but often that is not the case. If your organization is primarily churning its base, then more than likely, your parts expense may be below benchmark, masking other inefficiencies within your service organization. At the end of the day, you might be wondering why your service gross profit percentages are below 52 percent, remaining flat or declining.

Looking beyond the financial analysis, you might also be experiencing a reduction in your response time and may be giving yourself a pat on the back because you think you are making strides in responding to your clients’ needs. After all, your service team’s first-call effectiveness might have improved as well, despite its decrease in productive hours. Do any of these circumstances sound familiar? If so, you are not alone.

Can you identify the areas impacting your profitability? If so, how are you going to improve your service profits in order to free up precious cash? Even though you may have your expenses and revenues allocated to the proper “buckets,” and despite your knowledge of the various financial and operational benchmarks, it is critical to identify the areas of opportunity, develop a plan for quantifiable improvement and execute your plan to improve.

One major factor impacting your profitability lies in monitoring your service base. There are various techniques to analyze changes in your base, regardless of your current ERP system (e.g., OMD, e-automate, etc.). Can you identify net new placements, upgrades (churn) and cancellations? Are you monitoring these changes in your base and their effects on your service organization? If so, are you managing your service department accordingly? Net new business (placements) is obviously a good thing, providing incremental revenue, workload and image volume. If your organization is experiencing organic growth (yes, it is possible), then your

organization is one of the few.

More often, organizations are simply upgrading their current machines-in-field (MIF), patting their sales staff members on their backs for a great month in hardware sales, but then wondering why their service revenues have been diminishing.

The effects of base churn resulting in a potential decrease in revenue from a lower per-copy rate and potential decrease in workload is a sore subject for many service leaders because they are left to deal with the associated pain. I am not advocating that the service leaders do not have a viable argument, however, two questions still remain: Are you aware of the effects of your base churn on your staffing requirements and are you doing anything about it? If not, gradual changes to your base over time can begin to erode your service margins — especially if you are operating “business as usual” by not making any necessary adjustments.

Merely monitoring your service base is not enough. It is important to identify the workload demand of your base in order to determine your staffing levels. If your organization is primarily upgrading its existing equipment, then you could also be experiencing a decrease in workload demand of the new equipment associated with the improved reliability of the new placements. A decrease in workload combined with the same staffing levels leads to excess capacity. Therefore, it is vital to the organization’s financial health to evaluate its workload demand and staffing levels throughout the year and make the necessary staffing adjustments.

To put this into perspective, let us look at ABC Company’s scenario, which is similar to those experienced by many office-equipment-centric service organizations. ABC has experienced a 5 percent decline in service revenue for the last two years. Though the organization has lost a few key accounts, this has been offset by bringing in additional new placements.

Aside from this, the organization has found that by monitoring its base, the majority of its historical hardware placements have come from upgrading its customers’ existing equipment.

ABC’s service force has remained the same for the last couple of years. The company has only given minimal raises to the overachievers who continue to support their customers.

Therefore, total labor expense has increased 6 percent and labor expense as a percentage of revenue crept from 29 percent www.officetechnologymag.co m | J a n u a r y 2 0 1 2 | 2 9

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sales team “does not have its act together.” to 33 percent during the same period.

Although ABC’s parts expense deFortunately, ABC has experienced a Despite the majority creased, it is important to identify the decrease in parts expense of 23 percent of ... placements being department’s parts spending targets to for the same period, reducing its parts exupgrades, one has to identify areas of excessive parts usage. pense as a percentage of revenue from 19 determine the workload Even though ABC’s parts expense is beto 15 percent. In addition, travel and traindemand and the staffing low benchmark, this reduction in expense ing expenses have remained flat over the has also been attributed to base churn. last two years. Despite all of these factors, levels associated with Therefore, it is still important to identify ABC’s service gross profit has remained the current fleet. machines with excessive parts usage in orflat at 46.5 percent for the past two years. der to create a plan to reduce the excessive If this were your company, what would you do to improve your service gross profit? Would your cur- parts expense. Doing this will improve the department’s profitrent management practices allow you to identify areas of op- ability by further reducing parts expense.

It is important to have the processes in place to identify the portunity? I am sure many would say, “Our service margins have remained flat because the sales team needs to get its act areas of opportunity before it is too late. In order to experitogether and quit upgrading our base.” Others may say, “The ence gains in profitability, one has to develop and execute the fix is easy. We are overstaffed and need to let two technicians plan to achieve its margin improvement. n Ken Staubitz is a service consultant with Strategy Development go and move forward.” with 14-plus years experience in all levels of service operations First, it is important to identify the areas of opportunity. and MPS service structure. Formerly with Cincinnati, OhioGiven ABC’s scenario — although it is unfortunate that service based Modern Office Methods (MOM) in various service and revenue has declined — the service leader needs to remain focused on areas that he (or she) can control. Despite the majority operational roles, Staubitz was MOM’s director of client services where he oversaw all service operations and of hardware placements being upgrades, one has to determine the workload demand and the staffing levels associated with managed a staff of 60-plus field service personnel.

He served on the Lanier Dealer Advisory the current fleet. By doing this, one can then quantify the staffCouncil and was an e-automate Service ing levels needed in order to support the organization’s MIF. In Committee member. He can be reached at ABC’s case, staff members should have been reduced to some staubitz@strategydevelopment.com. degree, since workload demand dropped with the improved reVisit www.strategydevelopment.com. liability of its new placements, despite the perception that the

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