Does your MPS program focus on CPP or TCO?

What’s the difference? It depends on who you ask.

In recent months there have been a number of blog postings focused on the subject of TCO (total cost of ownership) for MPS opportunities. In most cases the author’s belief is focusing on TCO, and not on CPP, is the best way to distinguish yourself from your competition. Most articles will compared the components of both CPP and TCO, and some will suggest that CPP programs only focus on supplies, parts and service and TCO focuses on all the true costs of managing the fleet: Items like paper, IT support, network cost, etc.

The articles/post/presentations usually conclude with, those who focus on TCO are looking at the whole picture and are perceived more favorably as business consultants/advisors, differentiating them from the competition, therefore ultimately winning more lucrative MPS opportunities.

In theory I would agree that the broader your viewpoint, i.e. assessment and review, the more positive you should be perceived by the prospects you are focused on ,and in doing so, you might increase your chances for signing more MPS agreements. The problem I have with most of the postings is that the basis of comparison is very short-sighted when it comes to what is included in a CPP and too broad when you focus on their definition of TCO.

If you are looking at a transactional CPP (device basis), it will most likely include only supplies, service and parts, and the comparison would be accurate. But, if you take this basis and compare it to costs related to managing a fleet of devices, it is not an accurate assessment. You are comparing apples to oranges.

For those who are familiar with the Strategy Development’s MPS model, as clients or through our workshops, you know that the focus of the assessment in an MPS opportunity is identifying and quantifying all expenses directly attributed to the managing of the fleet of devices that you will assume when the prospect moves forward with your proposal. It is fleet based, it captures toner usage, service expense, parts, acquisition costs, maintenance, inventory carrying costs, obsolescence, and IT support. It focuses on capturing all expenses related to the services you will assume when the contract is signed.

In turn you convert the sum of these expenses to a CPP, so your prospect has a clear understanding as to the cost of producing a document in their organization. In fact you are capturing the TCO (minus paper). You do not focus on expenses that are not impacted through the implementation of this outsource agreement. For example, paper and network costs are two expenses that are consistently mentioned as costs that should be included in the TCO. I disagree with this belief.

The reason paper is not included is pretty straight forward. It is difficult to monitor or control, it is a commodity that adds very little, if any, value to the agreement, and it is not going away. In fact more of it may disappear before it ever gets into the printing device, making pilferage a real challenge to control, so why would you want to include it?

Including the costs of the network might not be as straight forward as paper. Even though printers drain network resources (Information Week says that 55% of network traffic is attributed to printers) the reasons you should not include it in your analysis are 1) you are not assuming the responsibility for the network, 2) the infrastructure and cost are not going away at the time a MPS program is implemented, 3) attempting to capture something that is not going away and you are not assuming responsibility for, will add significant time to your sales cycle and possibly decrease your chances of getting the deal. Yes, it might distinguish you from the competition but will this distinction secure the opportunity and will the prospect provide their costs for this knowing that you are not taking over this responsibility? I think not.

In summary, if you follow the Strategy Development model and identify and propose your opportunity on a fleet based, blended CPP you are in fact providing your prospect with an analysis of all the services and expenses you are assuming (i.e. costs directly associated with managing the fleet of printers). What more do you need? This is a TCO for the services you will provide. Why would you see a need to take it further?