Of Zombies and Butterflies: The Need for Channel Diversification

Anybody who watches “The Walking Dead” understands that transformations aren’t always fun, nor do they always result in something better than the original product. Zombies are evidence that unwanted change can result in some not-so-positive results. You start your day drinking orange juice and whisking the kids off to school only to be bitten by some grey-skinned member of the zombie apocalypse. Next thing you know you’re drooling, walking with a limp, and looking for some juicy brains to snack on. Talk about a bad way to start the first day of the rest of your undead life.

The converse, however, can also be experienced. Anybody who has ever seen a butterfly understands that transformation and diversification can be life-altering and beautiful in all the right ways. Butterflies are evidence that focused change can result in some amazing and wonderful things. You start your morning as an awkward pupa, spin up a silk chrysalis and come out a few days later with wings to take on the world. Going through that probably hurts like hell but who said anything worthwhile was easy?

In both scenarios change has occurred but the results are entirely different. I know a few people who think the zombie apocalypse would be the coolest thing ever. Most people, I think it is fair to say, would rather see a world filled with monarchs fluttering their way around the garden. I don’t have any stats on this but I’m feeling pretty confident here.

What do zombies and butterflies have to do with the managed print services space? Let me flesh that out a little. At the ITEX Show this year I hosted a debate on whether or not cost-per-seat billing could replace cost-per-page billing. I wasn’t really sure how attendance would be as it is a fairly new topic and one wrought with opinions on both sides of the fence. As it turns out I needn’t have worried: The presentation was standing room only! People were lined up at the back of the space to get a piece of the action. The question is, why? I don’t think it was my name on the billing, although the thought of that makes me grin. I think the session was a blockbuster because dealer principals are getting serious about expanding what their businesses offer. I think that dealers are looking at ways to bolster their businesses for growth in the next five to 10 years. I believe that whether they are doing it deliberately or not they are looking for ways to transform what they do for their customers. I think they are looking at diversification and they are looking to do so in the very near future.

What evidence is there that channel transformation is upon us? Plenty. I’ve heard secondhand stories of some very prominent OEMs offering “per-seat billing” for managed print to their enterprise and direct customers. At ITEX I saw a ton of software vendors on the floor that had nothing to do with managed print. I have firsthand experience with dealers that are either investigating or implementing some form of managed services offering. Channel diversification is happening whether we want it to or not. 

Why transform at all? Because the managed print services space is in the middle stages of commoditization. Doubtful? Pages per user are in slow decline according to both Photizo and InfoTrends. Paper mills are closing all over the country. Margins are increasingly under pressure. Customers are demanding “three quotes” no matter how we try to frame out the competition.  If you haven’t seen these facts for yourself I commend you and your managed print practice. No need to listen to me. If, however, you have witnessed many of these things yourselves I think we can agree that the commoditization of managed print is well in hand. With commoditization comes low margins and increased competitive pressures. If we plan to grow our managed print businesses or to sell them in the next few years we need to ensure that people view what we have as a growth opportunity. 

What are the benefits of transforming early? There will be a land grab for taking a larger piece of the customer pie in new and broader ways. The bad thing about being a pioneer is that you can get a lot of arrows in your back. The good thing is the land is cheap. Yes it will require effort, but the rewards have the potential of mirroring those of the early years of managed print services.

What kinds of things should I be looking at if I decide to transform my business? This one is really hard to answer. Some think it might be enough to just transform how you offer your managed print services to customers. A dealer could do this by just billing per-seat instead of per page. I think doing this simple thing would lead to a lot more diversification into things like document management, managed IT services and other customer-centric offerings. Once you start billing by seat or user the world of things you can sell opens up dramatically.

Who will help me to do this? Some of your existing partners may already be doing some of the heavy lifting. Print Audit, the company I work for, has developed an entire program built around training dealers to offer per-seat billing to their customers. Great America has diversified into managed IT services with their Collabrance offering. Supplies Network has taken their proven logistics management for printer supplies and expanded it into Distribution Management (DM) for all kinds of products. Digitek and Synnex both offer a full line of computing products outside of print related items. MWAi has developed an entirely new ERP called FORZA based on SAP’s Business One platform. Many OEMs like Xerox, HP, Lexmark, Ricoh, Kyocera and a host of others have partnered with leading solution providers for document management options. You may have already partnered with some of these folks or others on the things I have touched on. All that’s left is for you to reach out and ask them what they are doing beyond managed print and see what they come at you with.

To really get ready for the future I think we will need to look at providers of services and products that we have yet to even think about. What are they? Telephony, VOIP, 3D printing, digital display technologies, and  connected “Internet of Everything” management systems are just a few that come to mind.

Who are the new competitors? It’s not who you might think. The managed services and managed IT services channels are experiencing the same kind of pressures we are and they are eyeing up managed print services as a diversification strategy. I personally have worked with software companies like ConnectWise that are developing integration with managed print software providers for meter collection and other monitoring capabilities. I have spoken with managed service providers directly who have partnered with managed print vendors already. We are selling into the same customer base every day. We walk by each other in the corridors, smile politely, and get on with our business. Meanwhile they are looking to take our business! We’ve seen this before in the early days of managed print when A3 and A4 providers serviced printers and copiers separately. As we all know too well those days are long gone and we fight for every given page, no matter what kind of device produces it.

What are the risks of channel diversification? The risks are enormous! Your business could get caught in a dangerous cycle of “shiny new object chasing” which could take your eye off the ball where it counts today. You could experiment with some offerings that lead to a dead end. You could decide that no matter what you do it simply isn’t worth the effort. The reality of “risk” has always been there, including when we got into MPS in the first place. Many did not survive the transition to MPS and many businesses we know today won’t survive the changes required to grow into the future. We know that there will be risk, but without risk there is no potential for great reward. I think we just need to decide how much appetite we have left for “yet another transformation” and get on with it one way or the other. We should also ask ourselves this very important question: What are the risks of doing nothing at all?

For those that commit to the need for channel diversification it is going to involve a good deal of sweat and risk. What will determine those of us that become brain eaters versus those that take wing and conquer the skies? I think it all boils down to the amount of directed effort. The amount of energy that could turn a managed print business into a zombie will be fairly light. Just cruise along doing things the way we always have for the last 10 to 15 years. Becoming the butterfly will require some Herculean effort. I know we have it in us to do this right and to reap the benefits of our efforts. The only questions left to ask are, when do we get started and which diversification strategies do we pursue? Be the butterfly.  

This article originally appeared in the April 2015 issue of The Imaging Channel

West McDonald

West McDonald

West McDonald is VP of Business Development, Tigerpaw Software.