Recently, someone told me the print industry is a phoenix rising from the ashes. I don’t believe that phrase accurately describes the channel, though, because it implies that its flame had already burned out completely. That isn’t the case — although growth may have slowed in some areas, the flame still burns and the industry lives. It is more accurate to say we are at the beginning of a renaissance. New technology will drive new ways of thinking, and that is going to change everything, from how and where your customers work to what you sell and how you sell it.
In the short term, COVID-19 dictates all
COVID-19 is impacting some segments of the industry more than others. The dealers, to their credit, have managed. I cannot imagine a bigger test anywhere, any time in the 90-plus-year history of this business. But the community as a whole didn’t make it through completely unscathed. There are losses, and many have seen their valuations decline.
The OEMs, on the other hand, are struggling to get through COVID-19. Many of the big players experienced double-digit losses. Sure, some can still show a profit, but those profits are based on revenues that are down $1 billion from last year. But forget about the numbers – COVID-19 is an accelerator for problems that existed before 2020.
Before COVID-19, print was in a slow and steady decline and businesses were taking their time with their digital transformation initiatives. But with the lockdown, volumes plummeted while digital transformation initiatives, accelerated to accommodate the need for hybrid or remote work environments, soared.
Surveys are showing that less than half of all workers are reporting to the office during the pandemic. The thought is that there will also be fewer workers in the office once the pandemic is over compared to the roughly 70% that worked in an office before this all began. This implies that it is unlikely that print volumes will recover to pre-COVID-19 levels any time soon (or ever).
Yes, a vaccine is now on the horizon. Will that bring us back to “normal”? The short answer is no. The data is indicating things have changed forever – and that’s a good thing!
In the long term, new technology drives new thinking
In the long term, dealers have a lot to be excited about, while the OEMs have some soul searching to do. I have spoken with more software companies in the last 90 days than I have in my entire life, and the products that they are bringing to market are next level. All the talk about things like artificial intelligence and machine learning, big data and analytics, and 5G and data processes? Well, that technology is already here, and it’s going to be the main driver for everything.
These next generation solutions will change the way we think about everything. We will have access to all types of useful data right at our fingertips, so we can engineer the best results possible. We will discover new metrics that guide dealers to smarter, data-driven decisions. We will be able to look more carefully at our employees, factoring in things like their health, training, emotional capabilities, and ability to handle additional work, so we can accomplish more with less. Now, compare that to what is in store for the future of print and copy. It’s pretty obvious that in the not-so-distant-future, anyone who makes a majority of their money selling print today, will be making a majority of their money selling something else in the future.
Traditionally, dealers looked to the OEMs for guidance. But I think those days are over, and it’s the rise of newer technologies that will be the driver. As dealers broaden their portfolios and those new segments out-earn print, the partners that provide the more profitable solution will become more influential. OEMs need to start addressing those problems now, looking for the next device, or even a transformation toward service provider, to drive them into the next generation, or they may lose their influence.
The attitudes of dealers are changing, and the community will happily welcome new data-driven technology as both users and as resellers. In fact, I believe that this will be the tip of the distribution spear. These products are a great fit with existing portfolios, as they target both existing customer profiles as well as new ones that might have escaped consideration in the past.
Dealers are going to integrate new technology into their portfolios, marrying their core competencies into a hybrid-VAR model. These aren’t the VARs of the past – this is a best of breed, blended dealer package. Historically, such a pivot has been a major challenge, since many dealers lack the technical resources and know-how to support the VAR model. But the developers of these solutions will build packages for dealers so they can look and act like VARs and distribute these products to the end user. There will be a shared revenue plan, and all will be handled over the cloud to make life easier for everyone.
No one will throw the baby out with the bathwater, but it’s clear that the old models aren’t going to be sustainable forever. Dealers need to leverage their core competencies now to build a sturdy foundation for the next generation of their business. Dealers have created incredible sales engines. If software developers can handle the technical components — like supporting and developing within the solution — then distributing through dealers would be an incredibly effective way of getting products into the hands of end users.
The next generation of dealers won’t be solely defined by the products they sell. They will also be defined by how they determine what to sell, and how products get into the hands of their customers. Today, not enough dealers study their customers in any meaningful way, asking questions like, “What do you really need? What are you buying from others? What do you want that you can’t get? What growth are you focusing on in the next five years?” But in the future, these kinds of inquiries will be made regularly. The next generation will collaborate more with their customers, be involved with their technology planning and growth.
Consolidation continues — in new ways
Even before the COVID-19 pandemic, it was clear that there were too many OEMs. Consolidation begins and ends at the manufacturing level. Looking forward, we are going to see the number of players correct itself. Some will fall by the wayside, while others will merge with or acquire the rest. When the dust settles, we will be left with three or four of the current core OEMs. Those three or four will partner with some fresh faces — companies with new products and solutions that complement the OEMs’ core business and can serve as a springboard to expand beyond print. What the next business is has yet to be determined, but it will be less focused on manufacturing and won’t require the inordinate costs and headcount. The future will require more from less.
On the channel side of things, predicting M&A activity is a bit trickier. The valuation of these businesses is going to have a tremendous impact on what this channel will look like in the future. It’s going to influence who is going to merge with/acquire whom, and whether or not a business will explore new products or pivot toward a managed IT service.
M&A activity in the dealer space will be driven mostly by finances. An unfortunate truth for dealers is that they’re not going to get the same valuation that they might have had in 2018, and it’ll take some time to build back that value. The private equity players are now locked up in deals that are no longer liquid, and a lot of capital is being held captive because of COVID, taxes, and political uncertainty.
The future is bright – bring your sunglasses
In spite of all this, I think that 2021 will be a year of tremendous opportunity. Recovering from the pandemic will take a lot of hard work and heavy lifting, and we’re going to have to use new technology and new ways of thinking to get there, but we will. Just as the 15th century Italian Renaissance was more accurately a resurgence than a rebirth, the 21st century imaging channel renaissance isn’t about bringing a dead industry back to life. Rather, innovation driven by necessity will simply burn off dead overgrowth, allowing new ideas and technologies to flourish.