by Doug Johnson | 2/9/16
In this final installment of my three–part series, I’ll cover the “second fork in the road”—the outsourced services business model. In the last blog, I discussed the first fork in the Yogiism “When you come to a fork in the road, take it”—transactional selling. Ubiquitous access to data and information has created near perfect knowledge in the market, accelerating the commoditization of transactional selling in our market, and businesses at each step of the value chain must align their assets and competencies to the realities of commodity selling in a flat or declining imaging and printing market.
Just as the Internet (and its impact on data and information access) has affected the buying behaviors for transactional buying, the shift to outsourced services among businesses of all sizes has created opportunities for outsourced services related to print. A growing percentage of businesses are outsourcing many functions, workflow, and processes that are critical to their success.
Today’s conversation in business about outsourcing services that involve the management of physical assets highlights three key trends that are enabling this outsourcing — the Internet of Things (IoT), the cloud, and big data analytics (BDA). The IoT enables assets to reveal data and information on the asset’s status and performance. The cloud provides the ability to gather and store this data and information coming out of the environment in a secure and scalable way. And BDA can provide unique insights into the data and information, resulting in proactive and even predictive services to keep the assets maintained, optimized, and available to users within the outsourced environment.
While the noise on these trends and their impact on the ability to outsource services has increased dramatically in the last three or four years, Managed Print Services (MPS) was really an early adopter of these trends. The assets (printers, copiers, MFDs) are connected and provide data and information. Device and end user data collection software gather that data and push it up to the cloud for storage and access. And, BDA has enabled a wide range of services in the reseller’s MPS offering, from auto fulfillment of toner to predictive break/fix service.
MPS was (is) just another outsourced service—from an IoT, cloud, and BDA perspective.
While MPS offered a higher revenue and margin opportunity than the increasingly commoditized transactional sales of hardware, supplies, and the rest, the reality of MPS has often looked more like transactional sales — competing at the fourth decimal on RFQs for MPS engagements. I believe this is because most participants in MPS throughout the value chain have tried to leverage historic transactional selling and business model methods to an outsourced services model, generating a “transactional” result: low margins and similar customer retention.
An outsourced services business model requires a largely different set of assets and competencies than transactional selling, beginning with the initial customer contact. The decision maker in an outsourced services model such as MPS is a financial decision maker, with oversight of ALL of the costs associated with the current “insourcing” of the management of document output costs.
The selling approach is very different as well. It is a consultative sell. The MPS sales specialist won’t/can’t/shouldn’t attempt to sell anything until they uncover the current issues and challenges with the customer’s current document output strategy. Only then do they know what the appropriate solution is to solve or mitigate those issues and challenges. It’s like having a doctor prescribe before knowing the patient’s ailments.
This is where most MPS engagements fail — not getting to the right level in the customer’s environment and not understanding their issues and challenges prior to prescribing a solution. A successful approach requires competencies in selling to the C-level (often the CFO), effectively and efficiently gathering information from the environment to determine issues and challenges, and skills to create solutions that mitigate or solve them. Necessary assets often include a CRM/sales funnel management tool to manage a longer, more complex sales cycle, as well as tools to analyze customer data and create customized solutions based on these analytics.
The operational side of outsourced services model also requires a different set of assets and competencies for success. For example, the process of remotely managing the customer’s document output devices should focus on proactive, even predictive competencies that ensure the devices are available on demand. In addition to fulfillment of consumables and break/fix service, providers need to have the assets and competencies to maintain the optimization of the fleet — from both the customer and their own perspectives.
The customer needs an optimized fleet that provides the most efficient document output workflow at the lowest cost. And, while the implementation of the solution may initially meet this need, businesses are in constant flux, and rarely does the configuration of document output devices remain stable throughout the contract. For the provider, the cost of maintaining the devices changes over time as well, often reducing the margins over time if devices are not properly managed (moved, removed, replaced).
To ensure both the customer and provider needs are met and maintained, the provider should track changes in use and utilization of devices, and identify proposed changes to discuss with the customer during quarterly business reviews. They should also have tools and competencies to know the profitability of every device — at the page level. This identifies devices that should be moved, removed, or replaced in order to lower the cost of maintaining the fleet—a benefit to both the provider in terms of margin and to the customer in terms of long term cost containment.
Looking forward in the world of outsourced services for document output, the reality is software that improves and optimizes document workflow in the customer’s environment will become an even more important component to the outsourced service—requiring the provider to have additional assets and competencies to remain competitive in their solution offering. And, billing models will continue to evolve beyond page-base models to user or seat-based billing. Either one of these topics are worthy of their own, more in depth review.
That’s it … thanks for reading. Oh, and the final “Yogiism?” Be wary of this one: "We made too many wrong mistakes."
Doug Johnson is a highly respected business owner, thought leader, and expert with over 30 years technology experience; 15 of those years specific to managed print. He is currently the founder and president of RedSage Group.