by Robert Palmer | 10/21/15
I was privileged to attend a Lexmark analyst briefing held last week in Lexington, Kentucky. With only a handful of press and industry analysts in attendance, the event offered unique insight into Lexmark’s ongoing strategy as it continues its transformation from a hardware vendor to that of a solutions company. At the same time, Lexmark used the event to showcase its beautiful new Customer Engagement Center.
Officially opened last June, the Customer Engagement Center is a 10,000-square-foot facility located on campus at Lexmark’s global headquarters in Lexington. Equipped with everything from custom-built furniture to state-of-the art technology, the center is designed to provide customers and channel partners alike with an interactive experience. The new Lexmark logo and the now familiar green color scheme were prominently featured throughout every room.
According to Mike Johnson, VP of Lexmark’s North America Business Channels & SMB business, Lexmark spent approximately $8.5 million on the Customer Engagement Center and has already hosted more than 50 on-site customer visits. With that kind of investment Lexmark is obviously hoping for a positive and lasting impression, and based on my personal experience that will not be a problem. The facility is quite impressive.
Upon entering the building, visitors are greeted with an interactive wall display that features multiple monitors strategically placed to resemble large data pixels falling from top to bottom. According to Lexmark, the display is meant to invoke the impression of moving from unstructured to structured data. The monitors can be used to show one large seamless display or for highlighting different images tailored to the target audience. It is a very cool design scheme that allows Lexmark to highlight its brand and to immediately engage visitors both visually and through targeted messaging.
A new conference room also stresses the Lexmark branding and color scheme, while utilizing innovative audio/video technology to allow sales teams to host local meetings as well as national and global events via video conferencing. Lexmark has gone to great lengths to ensure that customers can experience the venue even from remote locations.
But it is the demonstration area and Solutions Lab that really set Lexmark’s Customer Engagement Center apart. The showroom includes several staged areas complete with video monitors and interactive displays for demonstrating solutions targeted at various verticals. Here again, Lexmark has gone to great lengths to create a customized environment, while utilizing technology to allow remote attendees to become part of the action. There is even a mobile robot called Lexi that can be used to display the face of a remote participant and be programmed to follow the groups wherever they go during the course of an onsite visit.
Glass dividers in the demonstration room can easily be rolled in and out to create specific designs and manage traffic flow through the various sections. In each of the solutions areas, there are multiple divider walls that are designed to replicate specific environments, such as a hospital, a retail staging area, or a fast food joint. These walls sit on rolling tracks so they can quickly be moved into place and completely change the look and feel depending upon the target audience.
The conference room in the demonstration area is built theater style and features a really cool multi-panel glass wall display that looks like something out of “Minority Report” or some other futuristic movie. During our visit, Lexmark executives walked us through several presentations and it was quite impressive to see presenters sliding images and text boxes across various screens with the swipe of a finger. The technology innovation combined with a focus to detail will no doubt help Lexmark win mindshare with customers, prospects and channel partners.
From hardware to solutions
Lexmark executives also used the event to discuss current performance and long-term strategic objectives. Not surprisingly, they emphasized Lexmark’s continued transition to a solutions company by highlighting its spate of acquisitions. Since acquiring Perceptive Software, which has become the cornerstone of its solutions portfolio, Lexmark has snapped up 14 different software companies. Indeed, the firm notes that it has spent more than $2 billion in acquisitions since 2010 — the latest of which was the much-publicized Kofax deal.
Lexmark’s future strategy, according to Johnson, will be tied directly to helping businesses manage the numerous challenges related to information explosion by leveraging solutions enabled through the smart MFP. Citing numbers from IDC and Gartner, Lexmark says that 80 percent of the information in organizations today remains unstructured and basically inaccessible, creating serious workflow bottlenecks and a lack of visibility into business-critical issues.
Lexmark says that its software assets are not only essential in helping to resolve business process issues for customers, but also key to driving top-line revenue growth. The Kofax acquisition alone nearly doubles Lexmark’s Enterprise Software annualized revenue. In fiscal Q2, Lexmark’s Enterprise Software and MPS combined revenues grew 37 percent, and now comprise 40 percent of total revenue. Those are impressive numbers, but Lexmark believes it can drive further growth by leveraging solutions to target specific vertical industries, particularly in the mid-market customer segment.
Lexmark is banking on what it calls three key differentiators to help take its strategy to the customer and the channel: best-in-class A4 MFPs for the office environment; a solutions portfolio that will allow customers to leverage the smart MFP as an on-ramp and off-ramp to information; and deep industry expertise in specific markets where inefficient information silos are prevalent.
Much of the discussion with executives during the analyst event focused on Lexmark’s Business Solutions Dealer (BSD) program. According to Greg Chavers, director of Lexmark’s U.S. Copier Channel Sales, Lexmark is pleased with the growth and coverage it has nurtured from its BSD channel to date. Nevertheless, the firm is moving into what it calls Phase 2 for the BSD channel to better align incentives and target goals to address the open market. “The focus is on improving profitability for the dealer,” Chavers says.
The plan is for Lexmark to help dealers along an accelerated growth plan fueled by solutions aimed at the mid-market opportunity. Lexmark defines the mid-level market as customers that fall immediately below its named enterprise accounts, with between 500 and 4,000 employees. According to Chavers, there are approximately 200,000 businesses in the U.S. that fall into this category, so this is obviously a huge opportunity for Lexmark and its channel partners.
Lexmark says it will open up resources previously available only to enterprise businesses to help partners attack the mid-market segment. “We are going to give our partners the solutions and support they need to attack those accounts,” Chavers explains. “Our partners have asked us for the ability to use some of our enterprise services and solutions, and we are going to open up those resources to the channel to attack the mid-market opportunity.”
Even with all of the focus on solutions, Lexmark is quick to point out that hard-copy imaging will always be a key part of its business. The firm notes that every part of its strategy revolves around the business of output, and that the continued migration toward software and solutions is key to driving increased hardware sales. In fact, Lexmark stated that imaging would likely represent the majority of its business for at least the next five years.
Lexmark has done a masterful job of building its solutions portfolio, while bolstering its position in the overall hardcopy market. In comparison with traditional A3 vendors, Lexmark’s BSD program is still in its infancy. Nevertheless, the firm continues to make strides with office equipment dealers thanks to its solid A4 platform and broad range of solutions-enabled machines.
Leveraging solutions-enabled MFPs as an on- and off-ramp to the network is a crucial strategic play but not necessarily a differentiated strategy. Pretty much every hardcopy OEM these days is taking a similar tact. Lexmark’s success in the enterprise sector has stemmed from its strength in specific verticals, such as healthcare, retail, finance, legal, and hospitality. Lexmark needs to develop its partner solutions programs to drive channel enablement in these same vertical industries so it can replicate the success it has had with direct accounts.
That, in part, is what the Phase 2 BSD program is all about. With acquisitions such as Perceptive, Kofax and ReadSoft, Lexmark certainly has the software assets to address customer needs related to information management. It will be interesting to see how effectively Lexmark can be at bringing these solutions capabilities to its channel partners.
Robert Palmer is chief analyst and a managing partner for BPO Media, which publishes The Imaging Channel and Workflow magazines. As a market analyst and industry consultant, Palmer has more than 25 years experience in the imaging industry covering technology and business sectors for prominent market research firms such as Lyra Research and InfoTrends. Palmer is a popular speaker and he presents regularly at industry conferences and trade events in the U.S., Europe, and Japan. He is also active in a variety of imaging industry forums and currently serves on the board of directors for the Managed Print Services Association (MPSA). Contact him at firstname.lastname@example.org.