Cost-Per-Seat MPS: The Future … Or Just a Figment of the Imagination?

by Raegen Pietrucha

“Cost-per-seat MPS.” Say those words aloud. Perhaps you’ve never heard them together before; I myself was only introduced to the concept last year, having caught Greg Walters’ mention of it during a panel discussion at CompTIA’s Breakaway event.

But perhaps you have heard them before. Repeat those words again anyway, though — “cost-per-seat MPS.” Let them roll off your tongue and roam around a bit in your noggin. See how it feels to let them sink in.

Then, if you haven’t already, formulate an opinion about this concept … because if you don’t already have one, it will surely prove necessary to get one during these next few years because cost-per-seat MPS will either be the subject of one of those “Remember when” conversations at the next trade show you attend — like “Remember when we thought this was the year of color?” — or it will become the way print gets sold.

Where did this cost-per-seat MPS concept come from?

Many IT services are sold on a cost-per-seat basis today, including hardware (e.g., desktops, mobile devices and servers); software (e.g., ECM and CRM); and platforms (e.g., cloud file sharing and collaboration). So, clearly, the cost-per-seat — or “per-user” — pricing model is nothing new at this point. Once desktops started replacing “dumb terminals,” cost per seat was simply the payment plan that made the most sense, said Tony Byrne, president of the Real Story Group. “Software was getting loaded on each machine, (so) you would charge by seat. That was the fairest way to do it.”

Considering how great a role software plays in the overwhelming majority of MPS programs today, it’s surprising our industry didn’t think about selling MPS on a per-seat basis sooner. “IT managers are used to buying that way,” said West McDonald, owner of FocusMPS, so why not extend the concept to print as well?

And when you factor the MPS-commoditization element into the equation, the absence of conversation on the subject of charging per seat for MPS becomes even more astonishing. Moving from device and even page sales to a true managed service charged per user protects against commoditization and differentiates an offering from those of competitors, said Corey Simpson, director of member communities at CompTIA. How? “Price per seat further distances you from that initial product or single offering,” he said.

Add to that the fact that print volumes are decreasing — often at the very hands of MPS dealers who, selling on a cost-per-page model, still offer up reduced print as the primary benefit of managed print — and it’s just plain dumbfounding that cost-per-seat selling hasn’t been more thoroughly considered, especially given the inherent flaw in today’s most popular MPS pricing structure. “In the current model that we have, volume decreases are not good,” McDonald said. “But if a dealer has seat-based pricing, then volume decreases actually equate to increased margin now instead of loss of revenue.”

Most importantly, though, per-seat pricing benefits customers. For one, “the customer doesn’t get nickel-and-dimed” every time they use your service, said Vince Tinnirello, CEO of Anchor Network Solutions, Inc. — or, in this particular case, every time they print a page. Per-seat pricing could therefore be a big relief to customers who fear unregulated printing costs. “Customers really do have a hard time trying to understand variable cost, and even if we’re giving them a cost per page, they still worry: ‘What if we print too much?’” McDonald said.

All-you-can-eat print through a per-seat model, on the other hand, gives customers budgetability — especially in a perpetually changing user environment. No matter what pricing model MPS dealers choose, they will always have to “manage both the relationship and the process,” Tinnirello said, so why not be flexible by saying, “We support users and whatever pages they print, no matter how many”?

The moment an MPS dealer makes print prices stable in a mutable user environment, the moment that provider betters the dealership’s value proposition as well as the relationship with the customer. And that, naturally, will improve the sales process immeasurably. “Whenever you can make the contract easier to understand, you can shorten the sales cycle that’s associated with it,” Simpson said. “You no longer have a need to go through the technical resources and inventory things on an itemized level with customers. It’s much simpler for end users to understand, which makes it easier for them to say yes.” 

So why hasn’t the print industry jumped on this bandwagon yet?

For the time being, it appears that the cost-per-seat model has been relegated to the domain of pure-play IT vendors. Indeed, when I asked Byrne, McDonald, Simpson and Tinnirello if they knew of anyone in the MPS space offering a per-user contract for print, no names sprang to mind.

McDonald is optimistic, though, that this won’t be the case for long — especially given the number of companies he’s been having conversations with that are currently investigating the option. And who could blame them for doing so, with OEMs at the very least tossing the idea around?

Still, to examine the downsides of a cost-per-seat pricing model at this time requires a deeper look into some of the pitfalls MSPs, IT VARs, etc., experience in the world of managed services.  

An MSP himself, Tinnirello boldly stated, “I don’t think there are any downsides, unless you don’t price appropriately.” But that’s a big area of concern. First and foremost, it could be challenging for MPS dealers to price print profitablty on a per-seat basis — especially when the difficulties associated with calculating costs per page (factoring in consumable costs, hardware maintenance and repair, etc.) just got ironed out, McDonald said.

And what about the actual service part that a dealer would have to provide, hardware technicians aside? When it comes to IT, “you have to be managing all of the activities that a user is going to be involved in,” Simpson said, “and by not itemizing out what you’re supporting, you can get some requests in there that you’re not prepared to support.” We know the MPS world has to become much more services-oriented, but are we clear on all the items MPS dealers will have to support from a print perspective as this transition takes place? 

Then there’s the matter of tracking actual usage after establishing pricing — which is already “a nightmare” in the IT world, according to Byrne. In a per-seat IT environment, “customers frequently end up overpaying, … (and) you subject yourself to potentially onerous audits,” he said. MPS dealers wouldn’t want to discourage printing or encourage behind-the-scenes seat/login sharing because they priced seats too high, but they wouldn’t want to give the seats away, either.

For per-seat pricing to be fair, Byrne said, “it has to be (for) something that’s mass usage rather than niche usage. If it’s something where more people using it means getting more value out of it, then seats make sense.”

This brings us to the issue of print’s relevancy heading into the future: Will people be printing less or more down the line? Is this something the print industry has any control over, or will the matter be decided by mobility, technology or something else? Could print be revived through a per-seat model, achieving the “mass usage” status Byrne referred to? Would workers in a per-seat printing environment really use the function, thereby restoring value to print as opposed to looking at it strictly through a price lens — merely as a cost to be cut?

And now the $64,000 question …

So is a cost-per-seat pricing model truly viable for MPS? And if so, what would it take for dealers to sell this way?

Byrne believes that, when it comes to print, “seat licenses may not be a good measure of usage volume or intensity, let alone business value. You’re trying to align price to value. You have to ask yourself as a customer, ‘Am I getting more value out of this by expanding the number of people using it?’ and I’m not sure in a managed print environment that I am.”

Although a huge fan of the model in his own IT business, Tinnirello also believes per-seat pricing may not be the best fit for MPS clients. “I don’t really see where managed print makes sense for small businesses,” he said. “I’ve tried it a handful of times, and I think it’s a good deal for me but not for the client. And it’s hard getting people to change and go to that type of a model when they’re used to paying based on ‘Here’s what you used.’” The transition might be made easier due to that guaranteed predictable cost — critical to the success of any per-seat pricing model — but when it comes to printing, that cost may be hard to guarantee over the long term.

In spite of all this, however, Tinnirello was quick to add, “If the industry can find a way on the print side to make it work, … I see tremendous value.”

Without doubt, figuring out how to apply a cost-per-seat price to an MPS environment will be a challenge, but Simpson believes it’s one that this industry could — and should — overcome because it essentially means dealers can change client behavior (i.e., truly facilitate the elimination of excessive printing) without sacrificing profits, making it a mutually beneficial situation. “You have the same number of users; you’re just using less toner, you’re using less paper, you’re having fewer service calls, and everyone’s costs go down,” he said. “That’s a huge win.”

McDonald also thinks cost-per-seat MPS is possible and promising — even essential — though certainly more homework on the subject is necessary, and MPS dealers need to assess client environments and build protections into contracts more thoroughly than ever before to guarantee success. “The more I look at the risks that are facing our industry, the more I see that cost per page as a pricing mechanism is advantageous,” he said. “It’s too easy to commoditize MPS, and knowing that volumes are trending downwards, having just a cost-per-page model and thinking that’s going to carry us through the next 10 years is pretty naive.”

So will we see cost-per-seat MPS in five years?

Hurdles must be leapt, to be sure, for there to be any chance that cost-per-seat MPS will catch on. In spite of all the obstacles the experts pointed out, however, the biggest may actually be in the minds of MPS dealers themselves. McDonald has experienced dealers’ fear of and subsequent resistance to the mere thought of the model many times over. “When I talk to dealers, … they’re worried about volumes going up dramatically,” he said. “But it’s just like cost per laptop. They don’t go up; they just continue to go down. That’s what technology does; every year you get more for less.”

“For price-per-seat MPS, it’s going to be a huge uphill battle,” Simpson admitted. Still, he too remains ever-faithful that our industry will ultimately embrace it, taking it from the realm of talk into reality. “I think very few are going to do it at first,” he said, “but those few will become very, very good at it, and then that’ll actually drive other people into it.”

 

Sources

Anchor Network Solutions
www.anchornetworksolutions.com

CompTIA
www.comptia.org

FocusMPS
www.focusmps.com

Real Story Group
www.realstorygroup.com

 

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