Thoughts from the ELFA

I recently read an ELFA presentation (Equipment Leasing and Finance Association) titled, “As the drum turns….The World of used Copiers.” Can you picture 300 – 400 leasing company representatives in a large room listening to this stimulating presentation? The world of used copiers—where was I for this one!

IDC’s research was referenced throughout the presentation—and along with InfoTrends and Gartner—I consider IDC a reputable research firm. Clearly the point of the presentation was to highlight changes in the used copier space. That aspect of the presentation was eye opening for me simply from the perspective that used color MFDs from the same vintage as mono MFDs actually sell for less on the used market.

The presentation had numerous examples but I’ll simply take one that is representative: A Canon iR5570 with a list price of $17,100 had a “remarketer sale price” of $1,350, or 8% of the original equipment price (OEP) and a Canon iRC5870U, with a list price of $19,100 had a remarketer sale price of $300, 2% of OEP. With the lower lease approval rate driving increased rental of lease end devices I assume the remarketer sale price will continue to decrease, forcing leasing rates higher since residual value is part of the equation to determine lease rate.

Increasing lease rates won’t be any fun for those companies that still rely 100% on the “bigger better faster same price” model of moving your year on year aftermarket price increases over to the funding side of the lease to sell a new box and take care of the buyout, reducing your aftermarket revenue and generating a commission for a rep. But for those companies that still work on this zero sum game the good news is that according to IDC, as reported by the ELFA in this presentation, average unit sales prices (AUSP) have dropped precipitously. That drop will allow you to continue to fund the buyout of the swap and maintain the “bigger better faster new price” suicide march [not the point of this post but think about it….you are selling a MFD at a lower price than you did four years earlier, reducing the aftermarket rate to below what the current placement started at four years earlier (and far below the current rate with three years of compounded increases) and probably paying your sales rep the same amount as you did four years ago to place the other unit since it probably has about the same amount of “GP” in the deal….how’s that work financially?).

Just how big is that AUSP decrease? Let’s first talk about mono-connected boxes and use the seven year look that ELFA used in their analysis; this is an absolute seven year decrease and not a compounded annual decrease—in other words, it is the decrease from seven years back until 2009. Segment 2 (43%), segment 3 (30%), segment 4 (24%), segment 5 (27%) and segment 6 (12%). Even scarier was color, using the same methodology, segment 1 (49%), segment 2 (54%), segment 3 (55%), segment 4 (25%) and segment 5 (61%).

Strategy Development has spoken about using environmental information in your planning and in previous posts on this blog we have already highlighted some of the year on year unit placement decreases. Now you have information on unit placement decreases, there is indication that lease rates will rise (interest rates can’t stay at zero forever and used equipment pricing isn’t holding), and AUSP is decreasing. Juxtapose those issues against more and more non-contract devices moving to contracts (MPS) and your ability to reduce your general and administrative expense and increase your service margins and you have some great environmental issues on which to build a solid business plan.

We will be running our BTA Business Planning Workshop in October in the Miami area—hope to see you there so that you can seize the future!

What is MPS?

Yesterday, Document Solutions Daily, a great publication available by subscription, had a link to a blog post titled “MPS Isn’t Just for the Big Boys.” Although the post details what can be described as an admirable job by a sales person to place a MFD, and that sales person works for a well known and respected copier company—so this commentary isn’t directed at either the sales person or the employer—does the post really describe an MPS agreement?

I ask the question for two reasons. First to define the MPS space, because if selling one MFD to replace an older MFD and some printers is MPS we may as well simply pull out the market size stats that have been put forth by Info Trends, Gartner, and IDC for the last few decades and change the title at the top from “copier and printer market” to “MPS Market.” It seems like anything with MPS on it sells so why not? Second is focus, the MPS space is a high growth high profit business today so should dealers / resellers really be looking at single placements of MFDs as an MPS opportunity?

Don’t get me wrong—I want sales professionals that can solve problems to get me new customers and retain those customers. If I still owned a copier dealership I would want them to sell copiers and I would want reps with problem solving skills to sell MPS. But I would clearly define my MPS space so I am not spending time in areas with little to no ROI.

Few companies with 250 – 1,000 knowledge employees are in MPS contracts today so why deploy resources at companies with fewer than 10 employees? Moreover, why focus on the hardware placement when the profits are in the aftermarket? We shouldn’t be measuring MPS by selling and MFD….we should be measuring MPS by how much recurring revenue it brings to our business. Strategy Development has been encouraging traditional copier dealers to get away from measuring sales success by hardware sales and to start measuring sales success by aftermarket growth. If you own the contract on the equipment you will sell the equipment.

So congratulations to that sales professional and the company mentioned in the blog—it appears as if you helped that customer solve a business problem with the correct MFD. But I would encourage companies to take a rifle approach to MPS and focus to the sweet spot, companies with 250 – 1,000 knowledge worker employees. Once that market is saturated with MPS contracts you can work your way down the food chain if you find it necessary and profitable. Don’t lose focus just yet!

Gartner Released Prediction of Print Technologies

By 2012, over 75% of all printed bills and statements in the U.S. will have advertisements for products and services, generating more than $2.8 billion in ad revenue for billers
-Do you sell variable data?

By 2012, over 30% of enterprise customers with document intensive business processes will use applications or custom workflows deployed on MFPs to lower paper process costs and improve worker productivity
-Are you selling advanced capture and routing?

By 2012, over 70% of businesses with more than 250 employees will adopt a managed print services program
-This is your core; are you selling MPS (Attend the BTA MPS Sales Workshop)

By 2012, over 80% of enterprise businesses will be using fax servers

Printer Market 4Q 2008: News That Isn't Fit To Print

ChannelWeb's publication of Gartner's placement statistics for printers and copiers is sobering, although not surprising. The economny--which as of late actually seems to be improving--may be driving the lower hardware investment, but my guess is that the process changes implemented to operate with fewer devices will be maintained by many of the companies when the economy starts to grow. Executives that manage budgets, the CIOs, CFOs, and Chief Procurement Officers (CPO) have now set a new, and lower, bar for output device expense.

The imaging business is still a great business. Make sure you have a plan in place to leverage this new environment. The link below will take you to ChannelWeb's article on the Gartner stats:

http://www.crn.com/hardware/215900485;jsessionid=ICR4AUYE2SGMMQSNDLPCKH0CJUNN2JVN?cid=VARBusinessFeed

Gartner pushes managed print services

Printer, copier and MFP sales are in a tailspin, but Gartner says end users should be investing in deployment alternatives

Read the article in CRN: http://www.channelweb.co.uk/crn/news/2236608/gartner-pushes-managed-print#Szene_1