The Death of MPS

As the preeminent MPS consulting firm you probably wonder how this title made it onto Strategy Development’s blog. Does Strategy Development really think that MPS will die? The answer to that question is the same as the answer to a few others: Will CPP leasing die? Will digital products die? Will color output devices die? Of course the answer to all of these questions, including the death of MPS, is a resounding “No,” not in the foreseeable future.

So then why “The Death of MPS?” What I do expect to die are individuals (not physically just in discussion), companies, anybody, viewing MPS as some discreet business. I cannot wait to stop getting e-mails touting the latest show on MPS; the latest study on MPS; the latest definition of MPS; the latest MPS sliced bread.

Cost per page, or in the day cost-per-copy, was going to change the business forever; a business model shift and not simply a new approach to leasing. It did change the business in that it built in great switching cost and protected aftermarket. It also had a slight change on the business in the requirement to capture meters and the elimination of large aftermarket sales teams. But it was an evolutionary change and not a revolutionary change. Sure the software providers needed to catch up, but they did, and the dealer/reseller needed to transition their supply reps to meter collectors and supply shippers, and they did, but it wasn’t much of a blip on the screen with the benefit of hindsight.

Then digital was going to forever change the business. Remember the research firms saying, “if you don’t own the network you won’t sell copiers/printers?” A significant business model shift that would leave many copier companies in the dust and out of business: Well that never happened. Digital did have an effect that we are feeling now, printer and copiers go head-to-head, but it was a long change that provided a lot of opportunity to adapt. Owning the network never had an effect on acquiring output devices, and the dealer/reseller developed the skills to sell and maintain digital products and to leverage the professional services that could be sold with, or after, the installation of the device connected to the network.

Then color and production—take your choice: Dealers couldn’t afford to sell and maintain these devices. They were the bailiwick of the OEM with their hordes of cash and ability to deploy sophisticates sales professionals and support teams to support the products. Sorry, wrong again. Dealers adapted and successfully sold color and production, tweaking their business model as they went along.

And now MPS: Some would leave you to believe that MPS was some new and exciting space. I sold my first real MPS agreement in 2002—eight years ago—only we called it fleet management and it was inside of a facilities management (FM) agreement. To be fair our FM team was selling fleet management for years before that, I simply was involved in this transaction because it was a multi-million dollar contract and the customer wanted a full equipment refresh built into the agreement, with the equipment being refreshed over the multi-year agreement. In other words it had Balance Sheet risk so it needed executive engagement. I was also involved in numerous transactions in the enterprise space where the customer wanted to optimize and standardize their output fleet and use professional services, like advanced capture and routing, fax servers, variable data printing, web submission, and document management, to improve their workflow. Today you call these transactions MPS.

For most dealers/resellers MPS is a new go-to-market strategy and it does require changes in the business model, but those changes are becoming a lot clearer today. Early adapters dealt with remote monitoring software that was unpredictable at best. Today’s entrants find software that works well and improves every day. Early adapters worked with leading leasing companies to define contracts; today’s entrants benefit by having contracts that are well written for MPS. Early adapters had vision or faith, or maybe both, that MPS was a real revenue stream where they could make a profit. Today’s entrants have numerous examples of companies in the space growing rapidly and earning nice margins.

The success factors, from a high level perspective, of MPS are also clearly defined: Have a business plan, make an investment in the MPS business, use dedicated sales professionals, use a services led approach, employee quarterly business reviews, be hardware independent, and invest in sales, service and back office operations training. That’s not to say that companies aren’t adapting a MPS strategy at different times or only in portions. You have early and successful adapters, like FlexPrint, and you have many dealers/resellers who say they are in MPS because it is what they feel they need to say, but they really aren’t. The same was true of CPP, color, production, digital, and professional services. I remember Leslie in NYC (acquired by Danka) being the poster child for color back in the day.

We no longer talk about the risk of using a CPP model in our sales approach nor do we view it as a creative marketing approach. We no longer advertise that our products are digital or talk about the analog to digital transformation. We no longer look at production and color devices and wonder if we’ll ever be able to sell and support the devices. Think about this for less than a second: If you didn’t use CPP, didn’t sell digital devices, color, or production what would you be? Not a lot of debate needed as it is an easy answer, basically out of business.

An MPS contract can include imaging and printing devices, support and supply of those devices, software applications related to documents, and consulting services. What does that sound like to you? If you’re reading this blog, and not lost in cyberspace, my guess is it sound like your business? Am I on the mark? So the longer you take to really get into MPS the greater proportion of your customers that will be signing MPS agreements with a competitor. If you competitor is good at MPS it will only be a matter of a few quarters after they get into your account that you are totally displaced. Therefore, MPS becomes both your growth approach and your survival.

This post is really focused on the dealer /reseller. For the OEM MPS can have a significant effect on their business. If all of the dealers / resellers suddenly become hardware agnostic—they simply sell and support what is best for the end users—it could accelerate the winners and the losers in the OEM space. There is also the issue of compatible supplies and InfoTrends has done a good job of quantifying the possible effect on a OEMs revenue stream in this area. The bottom line is that day is coming so the OEMs need to develop a model that makes their products the best choice for deployment inside of an MPS agreement. Maybe we’ll make that the topic of a later post.

How to Make Money in MPS

That seems to be the new theme of all of the MPS conferences and road shows. I guess just holding a MPS event is passé so the event coordinators needed a new theme. As a member of the leading consulting firm in the MPS space, I thought the theme was rather humorous. I mean could anybody really be in MPS and not be making money in a 56%+ GP business? Then, and this is true, As I was writing this blog post I received an e-mail from a dealer asking me for some free advice on how to fix his MPS business, on which he is “getting killed.” I took that to mean he is losing money.

This dealer principal explained that he had worked with two “consultants” on how to set-up his MPS program and inferred that they had sent him down the wrong path (he named the consultants but I will not). I’ll note that this dealer principal had spoken to me about two years back regarding helping him set-up his program and remarked that SD was too expensive; the two “consultants” in question seem to make a living speaking at vendor events about MPS so maybe he didn’t even pay them for their “advice.” Now after getting his bargain basement advice he wants to know how to fix his program for free? Doesn’t sound like much of a bargain….maybe Strategy Development was less expensive afterall.

The e-mail isn’t the point of the post I originally was writing it simply changed the focus slightly so let’s get back to the point. You can make a lot of money in MPS; the model is tried and true and Strategy Development has clients that have been executing on it for the last five years. If you go back and read the articles written by Strategy Development consultants you can pretty much design your own high profit MPS program based on our model. Those dealers and resellers that are committed to MPS—who invest in getting a real MPS program off the ground—are earning profits in excess of the copier model of 15%.

How do you achieve those returns? Not by going to conferences with a bunch of vendor’s giving you their spin on MPS; so you can stop doing that now and just add that expense back into your profit.

The first thing you need is an absolute commitment to building an MPS business. You need the same passion and commitment you had when you started the company you now lead.

The second item is an investment. I don’t know how to put it any other way except to state that you cannot rationally believe you can enter a new space without any investment, yet I see people trying to do it every month with MPS.

Third is an education. If you are a copier dealer that started your company you probably had experience in the copier space. If you are a VAR you probably had experience in the VAR space. Unless you have experience selling outsourcing (facilities management) it will be a long road for you to travel to learn the MPS space. You can travel that road alone but you’ll pay one way or another—either through mistakes or by investing in a consultant. An important note on the advice you seek: Make sure you are investing in real expertise. As the aforementioned e-mail demonstrates not all advice is equal.

Last, and tying into the commitment, is an open mind. Although MPS is about “putting marks on paper,” just like selling printers or copiers, it is not selling printers or copiers and it requires a different approach.
Follow these simple steps and you won’t have to worry about making money in MPS. You’re worry will be that more companies crack the code and start to experience success in your area!