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Changing business’ purchasing decisions

The latest edition of the Subscription Economy Index from Zuora revealed that subscription economy companies in Europe are growing at least six times faster than the companies represented by the FTSE (London), CAC (Paris) and DAX (Berlin). PrintIT Reseller asked a panel of industry veterans to explore the impact of the ‘everything-as-a-service’ trend on the traditional print market

PrintIT Reseller: The ability to purchase products and services for a monthly fee and realise efficiency and scalability benefits is undoubtedly impacting business’ purchasing decisions. To what extent is the way technology is ‘purchased’ disrupting the traditional print industry and in turn your business?

John Gifford
John Gifford

John Gifford, Founder & Managing Director, Fiducia Strategic Consultancy: “From the print industry perspective I am not convinced it is hugely disruptive, but the channel will need to adapt in order to take advantage of an opportunity. In some ways it could be said that it is similar to a traditional lease and MPS set-up, with both hardware and services being paid for on a monthly or quarterly basis by the client, focusing on operational expenditure as opposed to capital expenditure.

“The reality is of course that it is a very different method of bundling the two together. I do believe that it is the responsibility of the OEMs to help support and structure a way for channel partners to embrace the ‘as a service’ offering, especially for those traditional print resellers who are far more used to the transactional methods.

“Given that Fiducia is a services only organisation where we do not supply hardware or software, the impact is minimal to us. Although we provide day rate based consultancy as part of our structure, we also provide short- to midterm contractual offerings where clients are able to pay a recurring fee for the specific set of services they require.”

Phil Jones, Managing Director, Brother UK: “We’re seeing a shift in how the overall channel dynamics work. Traditional box + invoice resellers are being marginalised in favour of service orientated players. This impacts everything from the traditional wholesaler/distributor supply chain and where the trade buys, the role of consumable only distributors and manufacturers taking more of the lead on larger opportunities provided. The landscape is shifting significantly and we are continually having to track and keep pace with these changing dynamics commercially and from how we provide sales and support resource.”

Jeremy Spencer, Marketing Director, Toshiba Tec UK: “We recognise customers’ requirements and have changed the way we take products and solutions to market. Purchasing services by monthly fee is impacting on the way we deliver software particularly as a lot of software can be cloud-based which allows it to be available on a subscription basis. Process optimisation and business efficiencies are a key part of this, all of which can be offered on-premise or as a cloud solution and purchased as a subscription model.

“Change that delivers positive results is something to be embraced and that is what the shift to on-demand services delivers. It is bringing about new and innovative platforms and delivery methods that the industry must take notice of”.

Shaun Wilkinson
Shaun Wilkinson

Shaun Wilkinson, Managing Director, UTAX (UK): “In my opinion it’s not made much of an impact on the print industry yet as this was already an established concept with service contracts etc. Alongside the car and telephony services one could argue that the industry created the concept. The disruption we may face is the way this is expanded upon and how this is further applied to add-on services.”

Carlo Longhi, Director and General Manager, Indirect channels UK and Ireland, Xerox: “As businesses can now procure other technologies on a subscription basis, matching the experience they are used to at home, they are now driven to ask why they are unable to procure print in the same manner. In the print industry, many businesses now seek to procure a scalable volume of pages per user per month, rather than having to purchase or lease equipment and then pay for toner or service outright. Suppliers haven’t yet worked out how to achieve this in the most economically viable way, despite the spike in demand for this.”

Phil Madders, Managing Director, PAE Business: “I don’t think it has really started yet. It is gaining traction but very slowly. We have had this model available for nearly seven years and it is only now with services such as Offce 365 that it is becoming more widely accepted. Our Seat Based Billing Programme is already disrupting the market in North America and we will be launching it here in 2019. So we will be part of the disruption rather than the disrupted.”

Tony Milford, Managing Director, Vantage Computing: “As a cloud/SaaS software provider to the channel, we’re seeing some of our clients really embrace the new models and others who are struggling with the concept. From a dealers’ perspective it needs a complete change of attitude from salespeople in particular and they in turn, quite rightly, need to see their management putting in place the resources and compensation structures that encourage this pivot in attitude and approach. As long as we ourselves continue to deliver the tools necessary to profitably administer all selling and purchasing models then the impact upon Vantage will be nothing but positive.”

James Turner, Regional Sales Manager, Y Soft: “With vendors and their partners offering more products and services to customers, they need to be more flexible. Gone are the days where organisations purchase devices, and fxed leasing deals are rigid and don’t really allow for variance in fleet and other services. Customers these days like the fact they can use multiple solutions from a trusted supplier, so it makes perfect sense to allow flexible payments to incorporate change, and for suppliers they can market themselves as a one-stop-shop, and perhaps more importantly, a strategic partner.”

Darren Bird, Head of Technology, Xeretec: “Unsurprisingly, these days very few technology purchases are made using cash and most are made on credit, via convenient monthly repayments. The ‘everything-as-a-service’ (XaaS) model doesn’t so much introduce a new method of paying for products, but a better model for procuring new products and services on a more regular and timely basis.

“That’s why the XaaS model has generated so much interest from our customers, while the transparent monthly payments make financial forecasting even easier for them. In short, it makes the latest print products and related services – which have been engineered for efficiency – much more accessible for our customers, which boosts their efficiency while lowering their overall print costs. I believe that the XaaS model will become the norm for customers, and those vendors that don’t have a similar offering may find that they are left behind.”

PrintIT Reseller: How big a step-change is it to move from a product-based mind-set to a more customer-centric as a service mind-set?

John Gifford: “From a mind-set perspective I genuinely do not envisage issues for most channel partners, certainly not when selling. The greater challenge will be from a back-office, operational and financial structure point of view as it is imperative this is set-up correctly and efficiently to mitigate risk of both financial loss and customer retention loss too. Some OEMs may also find this structural change challenging, especially those used to more traditional transaction methods.”

Phil Jones: “It’s bigger than you may think as it involves skills, systems, resources (financial plus other) and competent salespeople. This means investment if you want to move from a traditional box-moving style of operation and may take some time to grapple with the transition. Distributors are providing more platforms to ease the transition, that’s clear. Thinking of our own business, it meant significant investment in people, process and systems to be able to provide the platform to transact the business before we could even process our first order. That took some time and also cash as we had to invest upfront, with a mid-term return expectation. It was a strategic move so timescales and expectations were set accordingly.”

Jeremy Spencer, Marketing Director
Jeremy Spencer, Marketing Director

Jeremy Spencer: “Subscribing to a service is still a bit alien to some of the more traditional business owners – despite the fact that at home they are probably subscribing to all sorts of services, like Spotify, Amazon Prime etc. These are now available on a month by month basis allowing us flexibility and choice and this is now the same for business services such as Office 365, IT services, cloud storage etc.

“So whilst it is still seen by some as a radical departure from the more traditional commercial arrangements, I believe it’s not so much a revolution as an evolution!”

Shaun Wilkinson: “The traditional print providers are finding the change to be somewhat daunting. At UTAX we already follow a ‘customer-centric’ mind-set through promoting our services, solutions and hardware as an ‘all-encompassing solution’ rather than just as products.

“The traditional providers need to realise that they are already touching on the ‘as a service’ sell through the traditional three- or five-year contract basis. The big step change is the move to the easy in easy out monthly contract. This is quite an easy sell for the customer and focuses the mind-set of suppliers to ensure great support is constant. The difficulty for the supplier is financing all the products with no guarantee of payback.”

Carlo Longhi: “As a mind-set it is not hard to grasp the customer-centric ‘as a service’ concept, as most people are accustomed to the model outside of work even though the divide between product and service is slightly blurred. However, to transition on a global level from the manufacturing and supply of hardware and related components on a transactional level to this type of model will prove more difficult.”

Phil Madders
Phil Madders

Phil Madders: “This is a real challenge for all parts of the sales channel. The dealers have the challenge of providing a solution in the form of a service. Some are already doing it and reaping the rewards, some are on the way and will succeed, while others are never going to make it on their own so will work more closely with suppliers or merge with other companies who already have the capability.

“It is an expensive move as well as you need the resources to provide the service. Subscription revenues are generally lower than the traditional acquisition methods in the short-term. Of course in the long-term services provide a fantastic basis for any business to thrive. Our Premier programme is designed expressly to help with this step-change.”

Tony Milford: “There’s no doubt it requires effort, but firstly it requires a chance in attitude. It needs manufacturers, distributors, finance companies, technology partners and dealers to work collaboratively to design programs that support this model. I think there is little doubt though that anyone who sticks their head in the sand over this is going to find it more difficult to play catch-up when the tipping point is reached.”

James Turner: “SaaS should always mean less hassle, less overhead cost and less maintenance for any product, but customers need to trust the supplier with data, support and the quality of its products. As mentioned above, the more services available for the right price from a single supplier, the better. However, this is a major change for organisations as their internal business processes are not agile enough to adapt to a new way of paying suppliers and recognising assets. In addition, commercially, marketing and sales teams have to evolve their messaging – it’s a complete shift (whilst also keeping the traditional channels open for those who don’t want to move) and keeping in mind the fact that a supplier should always be easy to do business with, whatever that means to the customer (who we know is always right!).”

Darren Bird
Darren Bird

Darren Bird: “I think many customers have been in the situation where they have made considerable investments in IT hardware, only for it to be close to obsolete and near worthless after 24 months. This former model puts an enormous strain on finances, but only delivers a short-term benefit. No business wants – or can afford – to be lumbered with expensive and inefficient technology, given that the digital economy has intensified competition and cyber criminals are becoming ever more sophisticated in their attempts to sabotage businesses or steal their data.

“Therefore, the concept and benefits of selling hardware and software as a cost-effectively renewable XaaS, has been well received – not least because it streamlines the upgrade process while delivering a predictable, per-device cost – but also because new products are more secure.”

Mark Bamford: “It can be a huge step in terms of mind-set to move away the reliance of monthly gross profit on product sales approach traditionally used across the industry. It also requires wholesale changes to internal processes. Regarding the sales process, there are relatively few changes required. Now the focus is on asking what print is currently costing, then presenting an end-to-end solution that includes all hardware, software, consumables and ongoing support. Same sales process but a complete solution instead of just a product-based sale.”

Alastair Adams
Alastair Adams

Alastair Adams, Director, Commercial Group: “Our focus, and our success, depends on our ability to understand our customers’ business requirement, rather than being just about products. This means we can offer relevant advice, help them to evolve, and put them in a stronger position than they were before. Unless we can look at the customer need holistically, we are not going to be able to identify their business requirement. Selling a product has no value on its own: the advice and service we provide need to be recognised by our clients as valuable, otherwise they may well feel they just need to go online and purchase ‘products’ independently. The way we educate, train and reward our teams needs to reflect this priority and enable us to work consultatively, in the long term interests of our clients.”

PrintIT Reseller: What do you see the business value-add to providing subscription-based products/services? Does it help secure an additional revenue stream, increase customer satisfaction or enjoy higher customer retention for example?

John Gifford: “I do believe all of these positive elements actually apply when implementing a subscription- based offering, but where the focus really must be too is on the end customer. A subscription-based model often provides a ‘softer’ route to purchasing for an end customer, reduces capital expenditure and provides greater flexibility for procurement teams. These are key aspects and should be marketed accordingly to maximise success for channel partners and OEMs.”

Phil Jones: “From our side the benefits are significant. Customer relationships are deeper and more partner oriented meaning they are less open to predatory attack by someone discounting to meet their short-term targets. We retain original consumables with the supply agreement which provides greater uptime fgures for fleets and we can really get to know how their supply chain works, providing a slick and seamless service in the background. Our retention rate for customers on a managed agreement is 90 per cent, so clearly when you can move to that longer-term relationship which supply agreements bring, it increases satisfaction and loyalty.”

Jeremy Spencer: “The ability to provide customers with a service that allows flexibility and agility rather than tying them in to a contract is a positive thing for both parties.

“It means that our customers can easily scale up or scale down on a month-by-month basis, according to their requirements. In turn, this helps to promote long lasting relationships based on trust and that customer retention is where we see the real benefits.”

Shaun Wilkinson: “For the early adopters, it will help to secure additional revenue streams as this is a much more enticing purchase for the customer. It will also increase customer satisfaction and retention because if the service level dips, it’s easy to change supplier.”

Carlo Longhi
Carlo Longhi

Carlo Longhi: “Just on the core aspects alone, providing subscription-based products/services are not seen solely as an additional or new revenue stream, but just a different way of selling what we currently do whilst allowing organisations to capture new business from new customers.

“It may help slow down the decline in traditional print, as it meets the demand of the buyer and how they want to procure and therefore attracts more customers in the interim. Once the model is established it would then open opportunities for new or additional revenues above and beyond office print. It would allow for a more modular offering where customers could add or remove different components from a series of different services. For example, after being able to procure print on a per user usage basis as a subscription (e.g. 500 pages a month per person), you could then add 100 outbound letters through a hybrid mail service, or 100 workflow transactions for accounts payable automation services.

“This offers the biggest value-add opportunity, allowing true service providers who seek to offer services above and beyond office print (print room, mail room, fling and archiving, workflow automation, business process outsourcing) the opportunity to include these as simple add-ons to the core offering and therefore provide significant differentiation versus those that have no additional service capability.”

Phil Madders: “I would say all of the above. Additional revenue streams as you add complementary services to the core agreement without having to create a new vehicle for the acquisition. As an example, adding movies to a Sky package or Netflix – they are easy acquisitions to make as they have a perceived low monthly cost – but you have them for a long time. The sale moves from a transaction to a true partnership where you create solutions for your customers – with your customers. The pressure to close a deal by month end goes away as all you are focussed is creating more subscription revenues. Of course, to do this you have to have happy customers – and happy customers stay with you.”

Tony Milford
Tony Milford

Tony Milford: “It’s a double-edged sword in many cases. There is no doubt that it gives people the opportunity to secure additional revenue, remove barriers from the sales process and to make customers more ‘sticky’. But on the flip-side, it requires levels of service to be first-class and for the customer to be satisfied that the vendor is providing real-value, because the potential downside is that it makes it easier in many cases for the client to change providers if service delivery is poor.”

James Turner: “All of them, you could interpret the examples in different ways – it will be different for each customer but retention is key. A customer is much easier to sell to than a prospect, and providing flexible solutions to customers allows them to be flexible to their customers. The tech world is rapidly changing so flexible services and payments are crucial to achieve and sustain longer partnerships.”

Darren Bird: “XaaS ensures a consistent revenue stream as well as an additional one. Customers are satisfied inasmuch as they are assured that the equipment they have is up to date – which gives them a competitive advantage – and that it is as secure as it can be.

“By their nature, subscription-based services also open up a more regular communication channel with customers, as the product refresh rate is determined by the agreement they have signed up to. That ensures there’s a more regular dialogue between vendor and customer, and that dialogue is more valuable. We can spend more time discussing mapping their business needs to new products or services, so the conversation is now based much more around business planning than just product selling. That dynamic adds more value, and should foster even stronger client relations.”

Mark Bamford
Mark Bamford

Mark Bamford: “In terms of the benefits of subscription sales, in addition to the regular recurring revenues, it allows resellers to deliver higher margin services and develop a closer relationship with customers as a ‘trusted supplier’. Customers buy into the concept of the reseller taking care of everything, freeing them up to focus on achieving their ongoing business strategies. This can significantly impact on the level of customer satisfaction and retention. For example, Hollis achieves over 99 per cent customer retention as a direct result of being an early adopter of the subscription model.”

Alastair Adams: “A subscription service should be an opportunity and provide business value to both suppliers and customers. By avoiding the need for large, upfront capital investments and taking advantage of infrastructure based in ‘the cloud’, it makes adopting a new service easier. It is also easier to connect additional services in the future for the same reasons.

“The ‘rules’ around ownership are changing: as consumers we expect to be able to have what we want, when we want it. Therefore the nature of contracts could change, and an interesting point is whether a subscription service could mean a shorter and/or more flexible contract which gives the customer more control. This in turn raises a challenge about funding, but would really refocus resellers’ attention on service levels.”

www.fiduciaconsultancy.co.uk
www.brother.co.uk
www.toshibatec.co.uk
www.xerox.com
www.utaxuk.co.uk
www.vantagecomputing.co.uk
www.ysoft.com
www.paebusiness.com
www.hollistechnology.co.uk
www.commercial.co.uk
www.xeretec.co.uk

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