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Panel discussion at Tech Live 2022

Print vendors are accelerating their transformation from sellers of print devices into providers of fully integrated IT solutions. At our recent Tech Live 2022 event, directors from three leading OEMs discussed what this means for the reseller community.
Here’s some edited highlights

How can resellers build on existing relationships to develop additional sources of revenue?

Rod Tonna-Barthet, President & CEO, KYOCERA Document Solutions (UK): “The print market does an incredibly good job of keeping really close relationships with its customers. I think the opportunity is for resellers to expand the services they’re providing and develop the relationships they have.

Rod Tonna-Barthet

“But the critical thing is to be really clear about what that expansion looks like. I see a lot of vendors just saying we want to talk to you about your IT strategy or about IT, and the first thing that the customer tends to say is: ‘that’s great, but what are your accreditations and what are your skills?’ And it’s knowing what those particular skills are that the print vendor really needs to be clear about. That quite often means either working with vendors like us, that can provide them with the services outside of their traditional core print capabilities or partnering with organisations that can talk about IT in specific aspects.

“It’s about focusing on the customer and then really thinking hard about what it is that they want to be able to do to expand the dialogue that they’re having with the customer. Because the customer is spending that money every day, they’re just not spending it necessarily with the print vendor. So, it’s a question of really homing in to where you want to go and identify opportunities.”

Francis Thornhill, Head of Customer & Solutions Marketing, Konica Minolta: “Clearly there’s a great opportunity for resellers to expand their service lines to add IT as an add-on to existing sales for new revenue streams, new recurring margins, and a greater share of wallet. There’s a great market out there – the total IT market is £60 billion in the UK and it’s resilient, even in these times. It’s growing about four per cent a year and beyond the niches that we’re all doing right now.

“Customers are looking to partners to outsource their non-core but critical tasks. They want to focus on their customers, not the IT and back-office tasks that are holding them back and they’re looking to partners to take that burden on for them.

“70 per cent of UK SMEs are already testing outsourcing. 30 per cent this year are looking to increase their use of outsourcing and 59 per cent of them are doing it because they want to remove costs. They want to get access to innovation and agility that their internal teams can’t do. And then around 30 per cent of them are doing it because they simply can’t access the skills that they need in-house. So, there’s a great opportunity for partners to grow and to capture this market opportunity.

“There are great opportunities here and people shouldn’t stay in their niche. But there are risks: number one – if vendors don’t go on the journey, they’ll leave the door open. Because the worlds of IT, information and print, they’re all converging. You can’t keep them separate anymore. And number two, for those that do go on the journey, delivering a great customer experience for these new business lines every single step – from initial inquiry, through to design, build, and support, is tough. So, partner with someone you trust and use them to fill the gaps. You don’t have to do all the initial investments upfront and partnering is really common in the IT world.”

Phil Jones,MBE, Managing Director, Brother UK: “We’re all in this game because fundamentally we are trying to earn money. A coin has two sides, right? The question is whether you see currency or whether you see value. Fundamentally, what we should have, is value. One side of that coin should be the lifetime value we deliver to our customer. That’s what we should be delivering, and services allows us to do that. We build value baking ourselves into an organisation, becoming part of them fundamentally in some of the things that we do. And the other side of that is the way your business is going to increase in terms of its own value if you do it.

Phil Jones, MBE, Managing Director, Brother UK:

“You will earn far more money on exit if you’ve got more recurring revenue in your overall business model than you will if you’re just a box mover. To put that in some context, if you’re just a box moving organisation and you’re doing £10m and making one mil on EBIT, you’ll probably get something like three times that – you’ve got no forward recurring revenue just literally a bunch of talented salespeople, hopefully smashing their targets every month. The more recurring revenue you can build whether it be hardware, or SaaS, then fundamentally, you can go anywhere between six and 15x depending on how big your business is.

“I think there’s a real incentive here to do the best for the customer. By becoming the go to person within the customer, you will get baked in, you’ll get more budget, you’ll get more certainty, etc. But fundamentally, if we start with baking the value into the customer through the provision of services, hardware, whatever that might be, and integrating it into their overall digital transformation journeys, then you can’t really go wrong and it’s a win win.”

Are resellers making the most of the opportunity?

Rod Tonna-Barthet: “According to Quocirca, 86 per cent of organisations will consider using a single provider for their MPS and IT services. The reality is the customer is demanding this, that creates a huge opportunity for the print organisations in this space to be able to expand those services. The customer is going to do it anyway, and that’s the risk, if you’re not having these conversations, the customer is moving along and doing this as a matter of course. So, I don’t think this is an option to consider whether you do it or not, it’s that you must do it. It’s more a question of how you do it and where do you do it.

“Customers are not expecting one provider to do everything and to have all the answers. But they are expecting one provider to be able to manage the relationship and to manage the partnerships for them. And if you do that well, then the customer will just grow and grow and grow with you.”

Phil Jones: “As OEMs we have partner programmes and we’re desperate for new partners, primarily ones who have the attributes to talk about digital transformation with the CIO, understand the relevancy of print, etc. But, in our experience, so far, the quality of some of those conversations isn’t good enough and people are not even on the journey yet.

“Entering this market space is very lucrative. But it takes some work and cash. We’re talking about everything from your systems, being able to handle recurring billing, salespeople, long life cycles, sales and financial reporting, cash flow etc.

“A Microsoft paper reported that if you want to be in the MSP space, fundamentally, you should be expecting to invest £1.3 million with a breakeven somewhere in the region of 15 months and turning into profitability at year two. So, to put that in some context, this isn’t just a quick: here’s a product, a price, get on the phones and sell it to your customer. It requires a complete structural review about how you do the business.

“Fundamentally, because of the way recurring revenues get booked on your P&L, you could write a deal for a few million and end up not booking a lot of it in your first year, which means there’s a big cash draw. I’ve got a specific example of this; we’ve recently taken all the printers (5,000 devices) out of a major supermarket and the reverse logistics alone on that was over £100,000. So, it takes a bit of cash and not every company can start the journey towards being a managed services reseller. It’s hard, and you need somebody to help you. We have people to help you, we’ve got programmes, resources, salespeople, assets, you name it, we can stand by your side when you’re going through that discussion with a customer. But you have to do that in a in a true partnership environment with each other.”

Francis Thornhill: “I think IT resellers and or non-print resellers and providers typically shy away from print, they’re not really interested in it. But what I would say is that it does leave the door open, and it is an important and recurring revenue stream. IT teams really do not like dealing with print challenges, they’re not set up to do it, the need is there and obviously the revenues are there, and if that need is not addressed the door is open and what you’re basically doing is introducing your competitors into your customer base.

“Our key focus is to help our partners cover the gaps, we provide any element of support right from generating demand through to sales enablement through to design, build and support and we can white label it as well. We’re here to stand by our partners and we go on the journey with them to close the gap and capture an additional revenue stream.”