Wednesday, December 16, 2009

Paul Schulman leaving Global

In an e-mail dated December, 9 to the Global leadership team, Michael Shea announced that Paul Schulman has decided to leave Global effective December 31.

Paul was one of Global’s most visible leaders as President and COO and in his previous position as SVP of Business Development. Paul was well known and respected in both the dealer community as well as within Global. I know his leadership will be missed at Global.

I got to know Paul on a dealer trip almost 15 years back. He is engaging, intelligent, and passionate about the business. The announcement stated that Paul left because “(he) decided his work at Global is now accomplished.” I hope that is true and that we are not seeing the second iteration of the IKON story where politics and egos became the determinant of who stayed and who goes.

Tom Johnson led a great “build-up” as he called it; he let the successful entrepreneurs, and eventually professional management, run their business and quickly weeded out the unsuccessful players. It never appeared that politics had any influence on Tom’s decisions—performance did. Tom made Global the envy of the industry and made his shareholders and investors a phenomenal ROI. Paul Schulman thrived in this environment. As president of IKON NYC I competed against Paul’s company, Carr Business, and I can tell you he was a strong but honest competitor that grew year after year.

I am confident that Paul will use his leadership skills and business acumen to lead another successful venture. I enjoyed the time that Paul spent making the copier industry a better place and wish him continued success.

Tuesday, December 8, 2009

MPS: The 30% Catastrophe

Many commentators in the MPS space like to talk about the 30% savings companies receive through an MPS agreement. I guess it helps them sell research, advance the theory of displacing printers with departmental MFDs, or helps the weak sales person generate some commission and retain his (her) job for a period.

But I have to ask a simple question, what is the rational to deliberately taking 30% of the revenue out of our industry? Overcapacity and technological improvements are already creating year on year decreases in hardware and aftermarket pricing and A4 is replacing A3 at a lower unit selling price. Those environmental changes should easily drive 10% of revenue per year out of our industry. Over the last two years units sales have decrease by more than 30%; they are gone and probably will never come back. Now we are all going to join in a concerted effort to drive an additional 30% of revenue out of the imaging space? Let’s all go to the jungle and drink some Jim Jones juice!

You can read my blog post from September titled: MPS: Growth Strategy or Harbinger of a Smaller Pie on the topic that MPS is not new revenue, simply a revenue shift from transactional to contractual. We are not generating new industry revenue with MPS; different players are capturing the revenue, which is good for those MPS providers in the short term.

As the industry leading MPS consulting firm we have been advocating for companies to adopt an MPS strategy for the past four years. Nevertheless, when you do launch your MPS strategy there is no reason to lead with a value proposition of saving a company 30%. Managing copiers, printers, scanners, and fax units is not a core competency for most companies; it is a nuisance area. Tying up valuable IT employees to remove misfeeds, install maintenance kits, or replace feed tires irritates CIO’s and IT directors who do not have enough resources to devote to their more mission critical projects like business intelligence, security, virtualization, and unified communications. Therein lies the value proposition—you build a business case for outsourcing.

I led a $225 million outsourcing business and that was simply the services revenue; there was an additional $60 million or so in equipment sold into the facilities management (FM) accounts. A portion of that $225 M was “fleet management” agreements. There are industry commentators who want to tell you MPS is not FM, but curiously those commentators have no FM background so how could they possibly make that statement? We didn’t sell outsourcing by telling companies we would save them money. At times it cost more money to outsource but the customer outsourced because we took away areas of their business that were not core competencies: Areas that distracted them from their business. Nuisance areas like imaging and printer fleets to most companies.

There were many FM agreements that included “gain share,” where working with the customer we drove efficiencies that resulted in lower cost that we shared with the customer. But the key there is the phrase “working with the customer.” You can do the same with an MPS agreement. Strategy Development’s three phases of MPS are manage, optimize and improve. Manage comes first followed by optimize and improve. Working with the customer—after you are generating revenue from an MPS agreement (manage)—you can help your customer make a decision on the lowest TCO device for each location that will provide the required functionality. This is where the cost savings come from, although reaching 30% is a stretch.

Why does Strategy Development have what appears to be a significantly different take than many industry commentators? For one, we are on the front lines every single day working on MPS transactions with our clients; and, we are fortunate to have the most successful MPS companies in the country as our clients. So we know what is happening out there and our client’s are not saving their customers 30% to get them to sign a contract. Our clients are building business cases that support an outsourced agreement with their customers.

Second, we don’t recommend what we would categorize as “scams” for selling MPS agreements. A relationship started on a lie cannot end well. Coverage area is, in the vast majority of the situations a scam; I will add that it is an easily exposed scam as more and more companies enter the MPS space. So “saving 30%” with a coverage area scam is no more a real savings than the consistent 16% returns investors thought they were getting with Bernie Madoff were wealth creation.

Next, we aren’t trying to sell you research and we aren’t consulting for end user companies. If there is a business out there that is trying to sell you something, be it research, training, a trade show, or newsletters and at the same time they are out telling end user companies that they can drive down their spend with you by 30% I recommend you cut off their nutrition—avoid them. When that business can’t survive because the industry cut them off maybe they’ll stop selling sensationalism and start selling reality.

Lastly, we aren’t a manufacturer trying to keep their factories churning out boxes and the trailing supplies and parts in an ever decreasing space that already has significant over capacity. We aren’t telling you go out there and replace all of their “Brand A” printers with “Our brand” printers or MFDs. We aren’t suggesting that you turn your sales force into change management consultants. That is a really tough sell that will be embraced by a small segment of the business population. Let’s thank God for that because if everybody out there reduces their device count by 60% or 70% we had better find something else to sell…..and fast!

Get into MPS but make certain you truly understand the MPS space so that you maximize revenue and margins. Because of the revenue shift described in the aforementioned blog post it can be a significant revenue driver. But the opportunity to capture significant new revenue combined with the 30% decline in MFD unit sales, which is really hurting the core copier business, has brought out every snake oil salesman in the land with the latest “elixir” for an MPS program. Choose wisely as any further delay in launching a successful program will be critical. Once those prospects are another company’s customers they will be locked into contracts that will be difficult to change.

If you want the best sales, back office operations, and service training the industry has to offer check out the BTA MPS Sales and BTA MPS Ops and Service Workshops at

Where’s the Silver Bullet

I talk to many business owners that are looking for the cure to their ailment—and they would prefer something that cures them quickly. What is the ailment? Lower revenue and operating income. Some want to recreate the good old days of growth and can’t understand why that would be so difficult. Heck, in the 80’s we just worked hard and revenues increased: Why can’t we do that now? Are the new Generation X, Y, or Z kids simply lazy? My experienced reps just can’t seem to get the appointments they were once able to achieve. They’re all spoiled—we need to put them back on draw against commission and make the hungry!

If only it were that easy. Let’s start with the most obvious, although constantly over looked fact that it is not the 80’s anymore. That means that copiers are not a growth technology any longer. It means that the product extensions that allowed us to continually move upstream and replace other products is almost gone (HP, Xerox, and some other players are going full bore after displacing all printing presses with sheet fed and cut sheet high speed “digital presses” as one of the last product extensions left to conquer). Our color devices have brought outsourced work back in house and replaced presses as has our segment six production devices. B2C went main stream and penetration has stalled in the 30% range. Fax machines have gone the way of the typewriter. Copier (and printer) placements are down substantially over the last two years and are projected to continue to decrease, albeit at a slower pace.

The 80’s brought us Bill Gates (and Paul Allen but he is almost forgotten) and Microsoft, Steve Jobs and Apple, and IBM’s invention of the PC. Since then Larry and Sergey founded Google, who can even remember those two guys from Yahoo and Al Gore invented the Internet! Copiers are not “high tech,” or more appropriately, “sexy” devices to sell. Your fraternity or sorority buddies might be envious of your job at Google, Facebook, or Genentech, but selling copiers won’t elicit that same feeling.

It is a great industry with solid profits and recurring revenues, and sales professionals can still make a good living, but we have to face reality and understand that people aren’t standing in line to apply for jobs in our industry. For those of you who weren’t in the business in the 80’s I can recall when a Sunday ad in the paper (Do they still exist?) resulted in a lobby packed with applicants on Monday. The only chance you had to get the job, which was straight commission (draw) was to show up Monday…..with a wagon or van close behind.

What does all this mean? It is tougher to grow in a declining market than in an increasing market and your potential employees, and customers for that matter, have a lot more information available to make a decision. So how do you thrive in this new environment? Get real about putting together a solid business plan and stop wasting your time looking for the silver bullet. Maybe you don’t have the best website on earth, maybe your reps can set more appointments, maybe you do need some basic sales training…..anything is possible. But I’d bet that your rep’s telephone and sales skills aren’t any worse than they were 20 years ago and you grew then.

The aforementioned internet provides job seekers with lots of information. Want to know what salary or commissions to expect for your education and experience? Go to or one of their competitors. Want to know what a company pays the specific job you are interested in? Go to or one of the thousands of blog sites available. Sales professionals are fungible—they can take a job with you selling copiers, they can sell medical supplies, pharmaceuticals, software, or ads on Google. The common thread of those last four is that they pay salaries. Now if you are ambitious you will take the opportunity with an “unlimited” variable compensation component over one with fixed bonuses. But will you take the opportunity of unlimited compensation—with no foundation (salary) over one with a solid base? Not if you could get the latter; for those not paying a salary that is known as adverse selection. You only get a pool of candidates that cannot get the jobs that pay a salary. Wonder why your turnover is 100% and your productivity is low?

As for growth, it isn’t in the copier space. Just in case you don’t believe me take a look at unit placements in any InfoTrends, IDC, or Gartner research. Placements, in the 1,300,000 area in 2007, have dropped to 900,000 or so in 2009. What does that mean? If you maintain your market share you will sell 30% fewer units in 2009 than you did in 2007. It is that simple. Add to that lower average unit selling price and your equipment revenue for equal market share is off more than 30%. Those units are never coming back…..they are actually going lower.
The industry has been talking about it for years but if you are not focused on clicks over placements you are chasing a quickly declining revenue stream. The answer—managed print services.

Done correctly MPS is a totally different business than you are in today. It is a solution that is focused to growing your aftermarket—it is not focused on equipment. So whether you sell Canon, Ricoh, Konica Minolta, Sharp, HP or one of the many other brands is irrelevant. You will sell equipment into your MPS agreements—and brands do have value, as any first year marketing student will tell you—but providing a consultative outsourced approach is what companies are buying with MPS.

So take the time to put together a solid business plan that has your company transitioning to clicks over equipment revenue. Transitioning is the key as you don’t want to throw out the baby with the bath water. The number you need to talk about day and night is your recurring revenue stream. With focus you can easily grow that revenue 30% or more year on year. If you want to find the silver bullet for selling more copiers I wish you luck. If you want to continue to lead a growth company that generates significant profits forget the bullet and hunker down with your senior team to put together a plan that gets you growing.