Each spring marks the beginning of the annual dealer meetings for many printer/MFP manufacturers, and Ricoh was one of those, welcoming its dealers to the Wynn Hotel in Las Vegas for Convergence 2015 March 2-4. Convergence 2015 offered several noticeable differences compared with previous Ricoh dealer events.
With a theme of “Collaborate.Succeed,” Ricoh is obviously looking to position itself as a true partner investing in the future of the dealer channel. It was clear from the opening session that Ricoh continues to take great strides toward strengthening its dealer relationships. Opening remarks from Ricoh executives were met with resounding applause at various intervals, which has not always been the case at previous events.
Ricoh’s troubled past with the dealer channel extends back several years, when the firm began to aggressively build out its direct organization and focus intently on direct sales. The acquisition of IKON in 2008 put additional strain on dealer relations, causing some dealers loyal to Ricoh in the past to shift their allegiance to alternative brands. A lack of trust had come between Ricoh and its dealers, and many felt that the independent channel was not well represented within the Ricoh organization.
Steadily, Ricoh has been working to bring dealers back into the fold by strengthening its product line, further engaging dealers through programs such as CHAMPS, and working hard to establish clear rules of engagement between dealers and the direct organization. The result was clearly visible at this year’s Convergence event. For the most part, dealers were highly engaged and anxious to hear about the new technology, products, and services that Ricoh is bringing to market.
More importantly, dealers are moving Ricoh product in ever increasing numbers. Senior VP Jim Coriddi noted in his opening remarks that the dealer channel now accounts for more than 37 percent of Ricoh’s total unit sales, which is a significant achievement for Ricoh. At the same time, a core set of dealers has remained loyal to Ricoh and contributed greatly to the firm’s success. According to Coriddi, 80 percent of Ricoh family dealers, including Ricoh, Savin, and Lanier brands, have been so for more than 20 years. He also pointed out that almost half (47 percent) of the firm’s 436 dealers are dedicated Ricoh dealers.
Ricoh backed up its progress in the channel with a firm commitment to help dealers drive profitable growth for their businesses. To do that, Ricoh says it will continue to listen to dealer partners and deliver solutions that will foster increased collaboration and long-term success. CEO Martin Brodigan put Ricoh’s recent success with the channel in perspective. “We will never be good enough,” he proclaimed. “However good we get we want to get better. We are listening to the channel.”
What About Hardware?
Another element that separated Convergence 2015 from previous Ricoh dealer meetings — indeed from most other dealer events — was a clear lack of hardware discussion during the opening sessions. Like most OEMs these days, Ricoh has embarked on a services-led strategy focusing less on products and hardware and more on solutions, services, and other adjacent businesses to help drive new revenue and profits — both for itself and the channel.
As a result, the mantra at virtually every dealer meeting these days is fairly predictable: “we are no longer a box company but instead a solutions company focused on solving customer problems.” Typically, that statement is followed by a 45-minute presentation showcasing the latest and greatest hardware with an emphasis on faster speeds, more capacity, improved usability, and the list goes on. That was not the case at Ricoh’s event. There was barely any mention of upcoming products, no slides showing where holes have been filled in the product line, not even a picture of an actual MFP until fairly late in the program.
Nevertheless, Ricoh did talk about its performance in various hardware segments, and for good reason. Coriddi noted that sales of Ricoh A3 MFPs climbed 16 percent in FY 2014, and 20 percent of that growth was color. Perhaps more telling is the fact that revenue from sales of hardware grew 8 percent, which is not easy to do considering the maturity of the market and the fact that pricing pressures continue to push ASPs lower and lower.
Coriddi also touted Ricoh’s performance in the production print space, stating that production color units grew 19 percent in FY 2014. Indeed, Ricoh claims it is now number one in production color with a 25 percent share of the market, and in fact number one in production print overall. Once again, this is a significant achievement for Ricoh considering it was not even a player in the production market 10 years ago.
Obviously, Ricoh’s position in the production market was bolstered significantly by its acquisition of InfoPrint a few years back. Since then, Ricoh has rolled out a steady progression of new technologies and products targeting a variety of commercial, graphics, and enterprise segments. Production hardware and related services represent important revenue opportunities for the channel, and there is no question that dealers are moving to production print in ever increasing numbers. Ricoh placed significant emphasis on its production machines at the product expo, attracting a constant stream of interested attendees.
CHAMPS Gains Momentum
Understandably, Ricoh put a great deal of emphasis on its CHAMPS program at Convergence 2015. As a tiered certification program, CHAMPS provides a comprehensive set of tools and infrastructure to help dealers expand into various services businesses. Leading up to the event, Ricoh offered a variety of solutions through CHAMPS grouped under three different service modules: Managed document and business process services, digital imaging services, and production print services. At Convergence 2015, Ricoh introduced a fourth module: Cloud IT services delivered through its acquisition of mindSHIFT.
Providing an engagement path for mindSHIFT came as welcome news to dealers — especially those who have been struggling to break into IT services. Since the acquisition last year, Ricoh has been relatively quiet as to how it would deploy mindSHIFT services to the channel. By folding IT services into the CHAMPS program, dealers will have a clear path to become educated and certified to deliver IT services to customers.
This is an important part of Ricoh’s overall services strategy. Competitors such as Konica Minolta (through its acquisition of All Covered) and others have made significant strides pushing IT services through the dealer channel. At the same time, mindSHIFT offers distinct advantages for dealers — particularly for those who have hesitated to jump into IT services because of the major investment required in terms of service delivery and business model transformation.
With its powerful cloud infrastructure and remote management capabilities, mindSHIFT can ease the implementation burden for dealers. Indeed, once a contract is established, dealers can offer certain cloud services to customers literally in minutes. Even the business model for dealers is fairly unobtrusive. According to mindSHIFT’s CEO Mona Abutaleb, services billing is basically a pass-through process that is transparent to the customer. Ricoh will give the dealers a monthly bill with an online report and the dealer will decide how to charge for those services and present the bill to the customer. Managed IT services could be offered standalone or perhaps folded into an existing service or MPS contract.
While mindSHIFT currently offers a fairly broad portfolio of managed service offerings, Ricoh is taking a phased approach to rolling out services to dealers. The initial rollout will include server management, IT help desk services, hosted exchange e-mail services, and e-mail archiving. Since the acquisition, mindSHIFT has been working to educate Ricoh’s dealer support group so that training could be made available to the dealers through the CHAMPS program. As a CHAMPS service offering, dealers will need to attend training and become certified in order to offer mindSHIFT services. According to Martin Brodigan, the mindSHIFT acquisition will help Ricoh surpass $170M in IT services this year.
Ask the Panel
One of the more interesting points of the opening day occurred when Jim Coriddi, Martin Brodigan, and SVP Dave Green took center stage for a Q&A session. Using the Convergence app that was available for download prior to the event, attendees were able to submit questions for Ricoh executives to address directly. The format obviously allowed Ricoh time to filter through and choose the desired questions and to formulate a response. Nevertheless, the session came across as fairly unscripted and it did not seem that responses were all that rehearsed.
Ricoh actually deserves some kudos for coming up with a creative approach for taking questions directly from the dealers. It is almost impossible to conduct an open Q&A during large dealer events because the audience is so large that it could become a scheduling nightmare. An open forum would also put executives in the precarious position of being forced to answer some uncomfortable questions submitted by those seeking to undermine the entire process, which is why it rarely happens.
The first question posed during the Ricoh event came as no surprise: What is Ricoh’s position on 3D printing? The answer, however, was frank and to the point. Brodigan basically responded by saying that Ricoh is not ready to address the 3D printing market in the U.S. “The one thing that 3D printing has in common with our business is the word print,” he proclaimed. “Other than that, there is not a lot.” Brodigan added that Ricoh is closely investigating opportunities but has no plans to enter the 3D printing market in the U.S. until it can do so with a proper and profitable business model — both for itself and the channel.
The topic of 3D printing has reached overhyped status in the dealer channel these days. With great fanfare and the promise of double digital growth, many traditional printing vendors have jumped into the 3D printing market over the past couple years. Even Ricoh Japan is attacking the market with its own business to sell 3D printers and related manufacturing and fabrication services. Entering the 3D market is a natural step for hardware OEMs, which have invested huge sums in imaging technology and related assets central to the core of 3D printing. Translating that opportunity into a profitable business model for the traditional MFP dealer is an entirely different matter.
Dealers are naturally drawn to the idea due to the high margins and incredible hardware profits. A single 3D printer can sell for hundreds of thousands — even millions of dollars. Nevertheless, 3D printing is not like other adjacent business opportunities. In most cases, it requires significant investment in new skill sets, sales tools, and overall business strategy. It also commands a very deep understanding of vertical markets and the existing needs within the regional customer base. Laying low is a difficult stance for Ricoh U.S. to take given the momentum competitors such as Konica Minolta, HP, and others are creating in the 3D printing market. Even so, a more cautionary approach could permit Ricoh to take advantage of better opportunities in the future.
With the topic of 3D printing out of the way, most of the remaining questions covered during the Q&A session were fairly common. What is Ricoh doing to support dealer growth? How will Ricoh improve order and parts fulfillment? How does Ricoh stack up against the competition? These were fairly basic questions with what seemed like standard answers. Perhaps more interesting was the question not asked. According to Brodigan, there was no question submitted by anyone regarding rules of engagement between Ricoh direct and the dealer channel. Once again, this speaks volumes as to the progress Ricoh has made with its dealer partners.
There was a lot to appreciate at Ricoh Convergence 2015. Dealers are clearly happy with Ricoh, not only with the firm’s hardware and solutions but also with the level of support and strategic direction. It is good to see Ricoh making traction with CHAMPS. In the past, dealers have expressed some apprehension and confusion with the program, mostly related to the complexities of various service levels and requirements for education and certification. CHAMPS requires commitment and investment from the dealer, and many had expressed some uncertainty as to how, when, and where to engage with the program. Those issues are waning as more and more dealers are coming into the CHAMPS program, and some at very high levels of engagement.
Make no mistake, CHAMPS is a major component in Ricoh’s overall services-lead strategy. According to Brodigan, the transition to services is key to driving profitable growth for the dealers, and CHAMPS is the engine that Ricoh will leverage to facilitate that growth. What Ricoh is doing with mindSHIFT is another important cog in that wheel. It is interesting that Ricoh is only allowing dealers to engage with mindSHIFT through the CHAMPS program, especially when you consider that many dealers have yet to sign up.
In a separate conversation with Jim Coriddi, we were told that roughly 30 percent of Ricoh’s dealers have become certified at some level in the CHAMPS program. It is also worth noting that mindSHIFT has a good history of selling IT services through its own reseller channel. Given these two factors, it might seem that Ricoh could broaden its coverage by allowing dealers to engage directly with mindSHIFT for IT services. Ricoh, however, believes that dealers will be better served in the long run by leveraging the sales tools and other resources available through CHAMPS.
From a hardware perspective, Ricoh is making great progress in a number of areas. It has achieved market share and unit growth at a time when the overall market is flat to declining. The firm has expanded its A4 product line significantly, while continuing to push improvements in the areas of performance and usability across the entire lineup. Meanwhile, Ricoh has become a major force in the production space, which is paying huge dividends for the office channel. Ricoh is not only helping dealers expand into the production print market, it is also providing a clear path to production print services, which is an area that is seeing great margin and profit.
This article originally appeared in the April 2015 issue of The Imaging Channel
Robert Palmer is Research Vice President with IDC's Imaging, Printing and Document Solutions team. He is responsible for written research, forecasts, and analysis in multiple practice areas covering managed print services, document solutions, business workflow automation and optimization, and hard copy transformation. Palmer's research also includes a particular emphasis on the office imaging channel and transformational strategies and technologies impacting the future of the office imaging market.