Top 10 CIO Issues for 2010

Bob Evans, VP of InformationWeek Global CIO Unit wrote this week on the focus areas for CIOs in 2010. When I read the article I started to think about where MPS fit in allowing CIOs to accomplish their goals this calendar year, and how to approach those regarding MPS.

Top 10 CIO Issues for 2010 per Bob Evans, VP of InformationWeek Global CIO Unit

1. The cloud imperative – Cloud computing takes the top spot because this allows for CIOs to really attack #2. Despite all the questions and concerns, it offers CIOs huge potential for flipping the 80/20 ratio and exploiting #3 (driving revenue growth).

2. The 80/20 spending trap – If the majority of your IT dollars are spent keeping the lights on, then how will IT organizations fund transformative and customer-centric projects?

3. CIO-led revenue growth and customer engagement – If you don’t become part of the company’s revenue engine, and you choose to keep yourself isolated from customers, how can you expect to be taken seriously in today’s economy?

4. Mastering end-to-end business processes – CIO has the chance to analyze and understand all business processes end-to-end. It’s a remarkable opportunity. Where is the waste? Where is the latency? How is the revenue mix changing? Where is the new-product opportunity?

5. Business Intelligence and Predictive Analytics – You’ve got plenty of data, but how much insightful information? Are you able to see over the horizon? CIOs that seize the initiative will have a huge advantage.

6. External information vs. internal information – What is going on outside your four walls is more important than what’s going on inside. What are customers saying about you? Do you talk back? Do you listen?

7. CIO priorities, CIO compensation, CIO evaluation – Does comp reflect growth and customers and market –centric innovation? Is performance measured by plumbing-style metrics or by business-value breakthroughs?

8. Vendor consolidation, with radical exceptions – For the past couple of years CIO’s have reduced the vendor list – but have you also cut access to innovative ideas? Have you connected with unconventional vendors whose solutions might help spark a breakthrough?

9. The mobile enterprise – If a team of peers, customers, and competitors were to do a day-long review of your company’s mobile capabilities, would you be eager to share the results with boss?

10. The transformation quotient – When the economy turns, CIOs need to be out in front with new ideas and leadership on how their companies can aggressively tap into the new opportunities that await while shedding old restrictions about what a CIO’s responsibilities area and what they are not.

This paints a pretty complete view of what is important in IT organizations today. Obviously MPS doesn’t address all 10 and that is ok. Number 1 is out obviously, unless you are already an expert in Cloud Computing with applications like Software as a Service (SaaS), Utility Computing, Web Services, Platform as a Service (PaaS), etc. in your portfolio of professional services. Also out are numbers 3, 5, 6, 7, 9 and 10. What, did you think MPS was going to eradicate every IT woe in the world?

How does MPS address numbers 2, 4 and 8 respectively?

Number 2 - CEOs are increasingly focused on IT strategies that aggressively shift budget dollars from an internal focus to external.

MPS accomplish this by allowing IT to reallocate their resources to more strategic external focused projects by shedding the managing of the fleet of printers. This also allows them to outsource a nuisance area because printers are not strategic in the IT world and they don’t like dealing with them. Typically they have no imaging or output fleet strategy because equipment, supplies and maintenance are reactive. I hear the objection coming…”What happens when the IT person I am working with wants to “protect” the employee that is doing four to 10 hours a week on printer repair?” A) You are at the wrong level. B) IT organizations of today/tomorrow will be tasked with generating revenue (see #3 above) and if they don’t understand this today they will soon enough. Maybe you are the resource to help them realize this.

Number 4 – Mastering end-to-end business process as it relates to an imaging fleet is difficult when investment in supporting the fleet is so fragmented over multiple internal budgets.

The assessment process in MPS allows for you to identify and quantify all of the cost related to managing and maintaining the fleet. The assessment will also find waste as it relates to how the fleet is utilized. You also identify waste in manpower, capital expenditures on hardware and costs related to maintaining and supplying the infrastructure. After completing the detailed assessment you will work with them, in the strategy session, on a plan to capitalize on this opportunity and manage what they have today. Over time they can reduce the investment with proper device selection and management.

Number 8 – Vendor consolidations… this is always a tricky obstacle.

In complex organizations where decision making is made up of multiple players you have to recognize that there are existing relationships with many of these vendors that you are suddenly trying to unseat. These vendors are engaged with numerous employees and functional areas, and possibly each of them has worked with their primary contacts in areas such as purchasing, facilities, IT, finance, etc. for years. I know MPS and the reduction of multiple invoices is a good talk track but what about the discussion on overlap in responsibility or the discussion on current procurement methods or the time each vendor wants with their primary contact and their getting involved with other functional areas. Each of these relationships takes time to maintain and that pulls resources from what they need to do on a daily/weekly/monthly basis.

The bottom line – MPS is not going to cure every IT organizations challenges but if you have the right discussion points prepared for IT’s focus areas you will have a higher probability of building a business case for moving forward.

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 www.bta.org

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

CFO Magazine and MPS

Below you can find a link to an article in the May, 2009 issue of CFO Magazine focused to savings in the technology area. “Hiring Managed Service Providers” is one of the seven highlighted areas, and managed print services is the example under the MS heading.

But before you leave add yourself as a follower to this blog and to the group “Print Management” on Linked In.

Don’t get hung-up on the source of the article. Although published in CFO, you will note that there is only a single reference to a CFO in the entire article, and even that is more of a technical expert role to the CTO. All of the savings mentioned were driven by the CIO’s team. In over 60% of engagements the decision to enter an MPS agreement is made inside of the CIO’s organization: They own the budget for acquiring and supporting technology.

http://www.cfo.com/article.cfm/13526087

How Well Do You Understand the “C” Level?

Consultants, trainers, and authors earn a nice living pontificating about how to sell to the “C” level. If you have spent any time in sales you have heard how only “C” level employees have the ability to weigh the business impact of your product or service; you have also heard that the CFO is the person you want to speak to about saving money.

I believe there are few simple and unilateral solutions to complex problems. Unless your target market is small entrepreneurial companies, the belief that only a handful of employees truly understand how to evaluate business impact is misplaced. It may border on naïve and could be insulting to the people that actually make the decision regarding your product or service.

Saving money is not the sole purview of the CFO. Any business manager with control of a budget wants to find better value where they currently spend money so that they can fund other projects. Maybe you can save them money in their imaging and printing fleet that they can spend on a virtualization project?

If you sell a product or service that can have strategic impact or significant risk for a company then the decision will be made in the “C” suite. Trying to convince a company to adopt a six sigma initiative? Better call on the CEO. It is extremely expensive in the near term with the payback being long term, culture changing at every level of the organization, and has a high rate of failure. The CEO’s job could be on the line if it fails.

The key is to identify the person that has the budget responsibility for what you are selling. If you are selling training you will want to speak to the director of training and development. If you are selling office supplies you will be talking to purchasing. If you are selling liability insurance you will want to speak to the company’s risk manager. If only the “C” suite could make these decisions then it would not be logical to have these other employees; would it?

You can raise your entry point but only if you change your value proposition. MPS has changed the value proposition for purchasing printers, copiers, supplies, services, and some software. Prior to MPS these items were most frequently purchased by low level IT or purchasing. As part of an MPS agreement you can raise the value proposition to the level of middle management: Most frequently the director of IT. But it is not a highly strategic or risky endeavor so the “C” suite, except in the smallest of companies that would qualify for an MPS agreement, will not probably not be involved.

I realize it is human nature to look for exceptions so I will state up front you will find them. In a law firm you will need to be on the “business side” of the decision process so you will probably be calling on a COO or CFO. Then there are the “C” suite executives that have developmental opportunities in the delegation area and who will want to be involved in many tactical decisions. But for the most part if you identify the person that controls the budget, and your value proposition does not have an impact on the company’s strategy or involve high risk, you are at the correct level.

Xerox's Managed Migration

Departing chief Anne Mulcahy on why printing less is good business for her company.


NORWALK, Conn. -- Anne Mulcahy came to the leadership position at Xerox in the midst of a financial crisis when she was a little-known sales executive. Named chairwoman and chief executive in 2001, she faced an SEC investigation of the company, a loss of market share, restated earnings and a downward-spiraling stock price. She sold assets, pared debt and rebuilt Xerox's product line to include more services and advanced industrial printers. She spoke to Forbes in May, just before announcing she would resign as CEO effective July 1. She remains chairwoman of Xerox. This is a transcript of a recent interview with Forbes' Quentin Hardy.

http://www.forbes.com/2009/07/01/xerox-mulcahy-innovation-intelligent-technology-retiring.html

Strategy Development Launch MPS Mentoring Program

Bryn Mawr, PA (June 2009) — Over the last four years, Strategy Development has helped hundreds of dealers enter the managed print services (MPS) space through their industry leading consulting and training practices. The Strategy Development Team leveraged their significant experience leading large outsourcing, professional services, and equipment focused businesses to develop the services led MPS approach now advocated by most industry players.

Based on the Strategy Development Print Management Processes, the MPS Mentoring Program offers a Sales Track and Operations Track to help channel players enter the fast growing MPS space.

MPS Mentoring Sales Track

Dedicated Print Management Sales Professionals participate in a 13 week webinar series covering every aspect of the print management / MPS sale. Each weekly training event is paired with a weekly best practices call so that participants have the opportunity to learn from the other participants in their cohort. The Strategy Development consultants facilitate these calls and hold monthly update calls with the participant’s manager to ensure the learning’s are being applied and reinforced.

MPS Operations Mentoring Track

With the industry leading service and financial operations consultants on staff, nobody is better positioned to help you understand the processes and requirements to effectively support an MPS business. Over this 12 week program, with offsetting biweekly webinars supported by biweekly individual dealer calls, your team will learn how to build a business plan, developing a compensation plan, profitably price and manage MPS transactions, and handle all of the intricacies of installation and service, among other operational areas.

Participants in the mentoring program receive a toolset that includes:

• Sample contracts

• Web based employment ad

• Power Point scripted value proposition

• Power Point strategy session template

• Power Point proposal template

• Pricing tool

“We have encountered numerous VARs and BTA Dealers that sought the level of expertise that they could only get from Strategy Development and our team of employee consultants, but who did not have the resources to commit to a full consulting engagement,” commented Tom Callinan, managing principal. “Our mentoring program will provide a strong foundation for a VAR, BTA Dealer, or OEM Branch to launch a successful MPS strategy.”

Callinan continued “Our consulting engagements have helped channel players add millions of dollars in monthly reoccurring revenue, which I think is the correct way to measure an MPS program. You can extrapolate monthly clicks into multimillion print agreements over a three year period, but marketing spin doesn’t pay the bills so look at reoccurring revenue to drive your program.”

In addition to the consulting and mentoring programs, Strategy Development developed and instructs the BTA Print Management Workshop, open to all channel players. Ed Carroll, principal of Strategy Development, commented “An industry trainer recently commented that his MPS training doesn’t work. After having over 100 companies represented in our BTA training program, I can tell you unequivocally that our training program produces measurable results. The choice seems clear.”

You now have a choice on how to use the industry leading expertise of the Strategy Development Team: Consulting engagement, mentoring program, or training in partnership with the BTA.

For information on the MPS Mentoring Program or to request an complimentary assessment contact Tom Callinan at callinan@strategydevelopment.org or 610.527.3317

Strategy Development, a management consulting firm focused to the technology and outsourcing space, specializes in business planning, sales effectiveness, advanced sales training, and operational and service improvement. For more information visit Strategy Development at www.strategydevelopment.org


The Business Technology Association (BTA) serves office technology dealerships, manufacturers, distributors and service companies. Its members manufacture and/or sell and service hardware, software and supplies that help businesses be more efficient and save money. Through education, information and guidance, BTA members are the premier source of the technology used by businesses throughout the United States every day.

Still Wondering if A4 Will Impact the Industry?

Sharp(R) Frontier Series Powers Company Into the Color MFP Segment 3'S Top Position in Leading Market Research Firm's US Quarterly Hardcopy Peripheral Tracker

First Quarter Shipment Results Show Sharp's Dramatic Market Foray Has Resulted in Increased Market Share as Well as Higher Overall Market Sale

-- 06/05/09 -- Sharp Imaging and Information Company of America (SIICA), a division of Sharp Electronics Corporation, today announced that they have finished with the highest overall United States market share for 31-44ppm* color MFPs** in Q1 2009. This data was made available by IDC, a premier global provider of market intelligence, and shows a dramatic increase in unit sales by Sharp over last year; particularly in the A4 subcategory of the same speed range, where SIICA was able to capture major market gains in less than two quarters.

Sharp's strong performance in the category was bolstered by the introduction of the company's award-winning Frontier Series A4 MFPs. According to the report, in just less than two full quarters, Sharp was able to move from having no presence in the color A4 31-44ppm color MFP segment, to a 40% share. This explosive growth, coupled with continued strong sales in the A3 sales, helped Sharp gain the largest percentage of overall 31-44ppm color MFP* sales for Q1 2009. In fact, the entry of the new Frontier Series helped to nearly double the total number of A4 31-44ppm color MFP units sold by all manufacturers between Q1 2008 and Q1 2009.

"Despite a challenging economic climate, Sharp continues to innovate and introduce new products that revolutionize the way companies work," said Ed McLaughlin, president, Sharp Imaging and Information Company of America. "This innovation can not be overlooked, and companies are finding products such as our Frontier Series help them work more efficiently and economically. In addition, dealers have found that the A4 Frontier line is fitting in nicely into their customers' workgroups without taking away from A3 sales. It speaks volumes about how smart our dealers are and the need for truly innovative new products as we continue to move forward."

Sharp introduced the MX-C311, MX-C401, DX-C311 and DX-C401 models as part of the Frontier Series MFPs in Q4 2008 and the DX-C310 and DX-C400 in Q1 of 2009. These units feature digital color copier, network printer and scanner capabilities in a single MFP, and a unique design that makes them aesthetically pleasing when placed directly in the workgroup. Sharp's newest A3 devices include the MX-4100N, MX-4101N, and MX-5001N, which were introduced in Q1 2009.

With Frontier, Sharp has successfully leveraged the Sharp OSA® development platform to change the MFP from a print/copy device into an IT document management system. Sharp A3 and A4 MFPs feature Sharp OSA technology, making them truly customizable; a brilliant 8.5" touchscreen panel for easy operation; and Sharp's award-winning security suite, which provides a multi-tiered system that protects data at every step of the document cycle. Sharp A3 MFPs also feature a retractable keyboard as a standard feature -- something not found on any other A3 MFP.

McLaughlin continued to say, "Sharp remains dedicated to producing a wide range of high quality MFPs that are changing the competitive landscape and giving our dealers the most comprehensive product line available."

For information about the complete line of Sharp MFP products, contact Sharp Electronics Corporation, Sharp Plaza, Mahwah, N.J. 07495-1163, or call 1-800-BE-SHARP. For online product information, visit Sharp's Web site at sharpusa.com.

*Based on letter speeds for Segment 3

**Source: IDC US Quarterly Hardcopy Peripheral Tracker, Q1 2009 for Laser Multifunction (print and at least one other function) and Single-Function Printers shipments.

Xerox Joins as Gold Sponsor for the Solutions Summit and Office Document Strategy Conference

(Weymouth, MA) June 18, 2009…. InfoTrends, the leading worldwide consulting firm for the digital imaging and document solutions industry, announced today that Xerox, a leading document management technology and services enterprise, has signed as a Gold Sponsor for their upcoming Solutions Summit and Office Document Strategy (ODS) Conference. The inaugural Solutions Summit will take place September 29-30, 2009, and the Office Document Strategy Conference will follow immediately September 30 – October 1, 2009. Both events will be hosted at the Hyatt Harborside, in Boston, Massachusetts.

http://www.infotrends.com/main/public/Content/Press/2009/06.18.2009.2.html

Why All The To Do About Printed Page Coverage

For year’s copier vendors have been selling pages on a cost per page (CPP) basis without regard to an end user company’s page coverage. In so doing they have been able to achieve nice profit margins that allow them to provide quality service, an easy to understand pricing model, fund growth and provide a fair return to the stakeholders.

With copier unit placements dropping rapidly the traditional copier dealers are now moving into the printer world, bringing with them their CPP model. But many dealers are suddenly talking about page coverage area. After selling pages for years why worry about coverage area now. More important, how do you calculate coverage area? Do you take a month’s worth of samples and send them to a coverage area lab for analysis? Do we calibrate print management sales reps’ eyes to ensure they can accurately calculate coverage area?

I believe there are many players driving page coverage, all with a bias. Statistics tells us that with a normal distribution curve 95% of N fall within two standard deviations. Of the remaining 5 percent, half would fall into the “greater than expected” profit range and the other 2.5 percent would fall into the lower than expected range. Do you usually manage your process to the 2 percent?

Moreover, it appears as if there is more evidence that page coverage is not the big concern it is made out to be. Xerox, in discussing the hybrid pricing approach on their ColorCube 9200, estimates it can bring the average cost of color copies down by 62 percent.

So using my deductive reasoning, since Xerox has stated that a normal color page will be in the range of any other copier, but there will be savings with pages with less coverage, doesn’t is stand to reason that Xerox is counting on significantly more pages having low coverage? That is something to consider.

Here’s the link to this and other information on the ColorCube 9200, which does look like a nice device:
http://www.sfgate.com/cgi-bin/blogs/techchron/detail?&entry_id=39738

Print Managed Services firms told to target IT managers' headaches

Service providers that position themselves as a consultative business focused on relieving IT management pain-points stand to reap benefits.

Follow the link below:


http://www.itbusiness.ca/it/client/en/home/News.asp?id=53057&cid=6

First HP Now Xerox: Is Tiered Color Pricing The Future of Color CPP?

HP started tiered pricing with their Edgeline product. With low enough color density your expense per color page could be as low as that of a black print. If the color increased you fell into the accent color range or professional color range, and were charged accordingly.

The tiered approach had a lot of fans on both sides of the transaction. The vendor selling the CPP had great comfort that they were being fairly compensated for the quantity of supplies they would be providing. The users of the product were comfortable that they weren’t paying too much for color prints, particularly on those documents with only a few words in color.

We’ll have to wait to see what path HP takes with the development of the Edgeline. Now that Xerox has entered the tiered color pricing game other OEMs are sure to follow. The link below will take you to an article on Xerox’s new ColorQube 9200 series and the “Hybrid” pricing approach.

http://socialcomputing.ulitzer.com/node/952771

Developing An Effective Print Management Sales Process

Part two of this six part series was recently published in ENX Magazine. You can follow the link to view this article.

http://enxmag.com/2007/new%20site%202007/website/2009_MONTHS/april2009/article_DevelopingEffectivePrintManagement_tcallinan_apr09.htm

If you would like to launch a print management / MPS program at your company please contact the professionals at Strategy Development or attend the BTA Print Management Workshop:

http://www.bta.org/i4a/pages/index.cfm?pageid=2127

Sea Change For the Copier Dealer

For years making a healthy profit has been a fairly easy formula for the principal of a copier dealership: Increase your unit placements, provide high quality customer service, and reap the benefits of the profitable aftermarket stream (defined as supplies, service and parts). Actually, it is a model similar to many, car dealerships being one that comes immediately to mind. Hold that example as we progress through this article.

This model of success was formulated during the late seventies and throughout the eighties as the industry flourished with technological advancements, product extensions, and year over year increases in units sold.

Many times the dealer channel has been told that there was a Sea Change occurring. First, companies like Alco (eventually IKON) and Danka were acquiring the independent dealer channel with the promise of leveraging efficiencies of scale. Some dealers wondered how they were going to compete against these behemoths. That fear never materialized as the Goliaths impaired themselves with poorly executed strategies.

Next, the transition to digital was going to be the tar pit of the copier dealership as network companies controlled the network. Remember the saying; whoever controlled the network controlled the output? Then came production units and the pundits who said that dealerships could never understand the space or afford the investment to be successful. This led to those that said the direct operations would be the death of the copier dealer. In reality, those direct operations that were not run to produce profit seem to be hurting the manufacturers themselves, but that is another subject.

I am confident that the Sea Change I am referring to is not a mirage: Year over year unit sales are declining—and rapidly. As detailed in a ChannelWeb article (see previous post) , Gartner reported that year over year fourth quarter shipments of copiers and printers in the professional segment, as opposed to consumer segment, declined by 25.3%. I saw a report by another research firm—included in a presentation so I am not quoting it since I did not see the original—that showed 2008 copier unit placements decreased 200,000 from 2007 and a projection that they would decrease by another 190,000 units in 2009. Placements were projected to decrease from 1,355,000 in 2007 to 963,000 in 2009. In case you are curious color was down year over year and projected to fall again and overall units were forecasted at 813,000 in 2012.

The dealer community has adapted to the roll-up years, the transition from analog to digital, into the color world, the proliferation of direct operations and the product extensions into the production space. And many of the dealerships around the country will adapt to the dramatic decrease in unit sales. The same can be said of the manufacturers: Many will adapt.

The other side of that equation is that there are quite a few that will not adapt. On the manufacturer side—and this has been said for years by many industry players but I think the time has finally arrived—there is simply too much distribution.

So back to that car dealership comparison; when we were buying 15 million + cars it was hard for a dealership or manufacturer to make a fatal mistake. Manufacturers produced inferior products and wasted billions of dollars in a multitude of areas. Car dealers were happy as the manufacturers drove traffic into their showrooms through big incentives. Then, unit sales fell 30% or more in a short period of time (sound familiar), the manufacturers cut back on incentives they could no longer afford to fund, and car dealerships (and soon it seems manufacturers) begin to fail.

The copier industry has a long and rewarding future for those dealerships that plan well. The second half of that statement is very important. If the predictions are accurate copier placements will decrease by 40% over the period 2007 – 2012. Combined with lower average unit selling price, the proliferation of printer based MFDs, and A4 units replacing A3 and you have a significantly lower revenue stream. Offsetting those decreases are color pages and capturing the prints made on the printers—print management or MPS. I believe the latter is a significantly larger revenue stream than the former.

But dealerships will also need to address high general and administrative expenses. At Strategy Development we believe that dealerships need to strive for a 10% G&A within the next five years. Our operations consulting practice is helping dealers put the plans in place to achieve that goal. We also believe that you need to maximize the return on aftermarket; our service consulting practice is helping dealerships achieve that goal. Our MPS practice has helped scores of dealerships launch successful print management initiatives; a must have to thrive in the future. And finally, and most important, you need a solid plan that ties together all of the aforementioned moving parts so that you are one of the dealerships that thrive through the Sea Change.

Get your plan in place, execute, and thrive!

This piece was also published in Document Solutions Daily (www.kworkpublishing.com)

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

What CEO’s Want From CIO’s

According to Information Week's Global CIO unit:

1) Create new products
2) Create new revenues
3) Deepen the company’s engagement with customers
4) Conserve cash, liberate trapped cash, and understand implications of cash flow
5) Create and enforce global standards for processes and applications
6) Unlock new ways to find, deliver, and assess higher value information
7) Reverse the 80:20 glut to make the first six possible
8) Create massively transparent organizations with all metrics focused on business value

Doesn't that list scream for print management? Numbers 4 and 5 are addressed with an MPS agreement. Number 6 benefits because you free up IT support time to work on higher value projects. The 80:20 glut references 80% of money spent in support and only 20% on innovation. MPS will cut their support expense over time. Number 8 will be addressed with quarterly account reviews.

I am not suggesting print management is the cure to all of IT's problems, or a major contributor to any of the eight focus areas. But it does help the CIO close the gap in the CEO's goals.

How Much Will The Copier Industry Change?

Significantly, if you pay attention to the research companies! I recently read a research report that indicated that mono copier based MFD placements had declined from 1.1 million in 2007 to 900,000 in 2008 and will decline another 20% in 2009. This analysis showed mono copier based MFD placements in the low 500,000s by 2012 (in case you missed it that is less than half of the 2007 placements). Think the answer is a shift to color? Not according to this report that showed color placements fairly static, rising from 250,000 in 2007 to 292,000 in 2012, after initially falling in 2008 and 2009. Nice percentage increase but only 40,000 units.

So a research group and their crystal ball are suggesting a “sea change” in the copier industry! Maybe they are wrong; it certainly would not be the first time. Maybe they are only half accurate and the industry will decline from 900,000 mono placements (let’s give them credit for accuracy on an event that already occurred, 2008) to 750,000, and color will remain under 300 thousand units. What will the industry look like when total placements decline from approximately 1.35 million in 2007 to 1 million in 2012? That is a 30% decline in placements. I would keep in mind they are stating that will occur this year, so they would have to be really far off in their predictions.

Let’s throw in the shift to A4 copier based units. Regardless of your desire, over the long term A4 will replace many A3 units at a lower average unit selling price (AUSP). Since we still have the same major copier manufacturers today as we did last year we clearly have a production over capacity issue: There are more factories pumping out more copiers than can be absorbed by end users. Over capacity—as any economist will tell you—leads to lower prices (the old supply and demand theorem). So you have a couple of dynamics suggesting AUSP will continue to decline.

Don’t jump off that ledge just yet! How do you deal with this news? In a word, “PLAN” for it. It wouldn’t surprise me if one or more copier manufacturer merged operations or was acquired by another manufacturer; in this situation operations being defined as technology and channel (dealers). It also wouldn’t surprise me if we had 50% fewer dealers by 2012. Fewer product placements will result in less distribution, either planned or unplanned. This is another fact to discuss with your economist friend.

So PLAN on being one of the thriving survivors!

Put together a strategic business plan that models out the change over the next five years. Launch and perfect a print management program. After all, where do you think some of that decline in copier placements is going? Yes, to printers! Not all of it as printer placements are also declining but there is a shift. And, all of that additional aftermarket revenue coming out of the printer fleet has the potential to more than offset the decline in copier hardware revenue—at a higher profit margin.

Focus on productivity in all departments. Lower equipment AUSP will translate into lower gross profit dollars, even if you maintain your gross profit percentage. Optimize operations so you can operate your back office with high customer service and low cost: Focus to processes and automation. Maximize your return on service. Drive improvements in all areas year over year: Stay focused and maintain a high intensity level.

You don’t want to be one of the “unplanned exits” from the industry and by planning now not only will insure your place in history but you will insure a high profit business. Copiers and printers are not going away, they are just fading slightly. It will remain a great business for those with a plan!

Maximize Service Return

Our current economy serves up many challenges; however, there’s never been a better time to take stock of your situation and get your service house in order. If you recognize the need to achieve a service return of 50%+ the best place to focus on is service productivity and staffing: labor is the largest and the most controllable service cost component you have.

There never seems to be the right time to “right-size” the service organization. When overstaffed there is always the tendency to say – “we will just grow into it” or “we will reduce staffing through normal attrition.” The problem with the first approach is if growth does occur, everyone is so comfortable with the current workload and pace that they will push for additional staffing rather than work harder and productivity will actually suffer. If the position taken is to reduce staffing through normal attrition you lose the opportunity for a planned cost reduction, and believe me, in today’s economy, turnover is at an all time low, so you may never get to where you need to be, and you will suffer a “lost opportunity”.

Here is a common observation relative to service staffing: When analysis concludes there is excess technician staffing the most frequently expressed justification is the need to maintain current service call response time levels. Response time tends to become the cloud cover for productivity issues associated with technical proficiency, resource planning, and time utilization. Obviously, when overstaffed, there are multiple productivity related processes that must be reviewed and changed to enable staffing reductions and still deliver quality service.

This year you have the perfect opportunity to right-size your service organization. Correct staffing levels are essential to controlling your costs, improving your productivity, and delivering the bottom line results you need. The key is determining how many resources you really need to support the customer base that you have while delivering quality service. If you have questions about how I can help you plan and optimize your staffing resources please contact me at woodard@strategydevelopment.org.

Control your G&A expenses

Controlling your G&A expenses is one of the most important requirements not only now, in a difficult economy, but long as the imaging business gets more and more competitive.
For years, it has been business as usual in the back office operations; if processing fell behind, the natural reaction was to add more employees to handle what was perceived as additional workload. Pretty soon, actual headcount grew to levels that could not be supported by the organization. Because employee expenses are the largest controllable expense area, G&A expenses were out of control. Orders were getting processed, but at a cost that could not be supported.
It is time to take a step back and re-assess how your back office is structured and determine if it still makes sense with the current and/or available technology. Understanding each person’s daily activities and tasks and how they measure up against what you need is a starting point. Beyond that, it would be time to reassess all of your current processes and you will most likely find that there are too many redundancies, unnecessary processes and inefficient use of available technology.
Periodic process inspection and, if necessary, re-design should be a regular part of business practices to make sure that you are as “lean and mean” as you can be. The ultimate goal being to continually drive down those G&A expenses that are leading to a degradation of your bottom line.
If you are setting a long-term target I suggest you need to have G&A expenses to 10% or less five years out. If you look at many of the companies that are entering the imaging space, VARs as an example, their G&A is below 10%. Competition is one consideration but changes in the industry are another driver. A4 will replace A3 at an accelerated rate as more copier companies introduce full A4 product lines. These new units will drive down average unit selling price, resulting in lower revenue for your company. You will need to be lean and mean to thrive so get focused on your G&A expense.
If I can help please contact me at boulden@strategydevelopment.org

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