Between Apex Consortium’s acquisition of Lexmark and its subsequent sale of Lexmark’s enterprise software business (Kofax, Readsoft and Perceptive Software) to Thomas Bravo, PrintIT Reseller caught up with Danny Molhoek, General Manager North West Europe, to discuss what impact Apex is having on Lexmark in the UK.
PITR: What does the Apex acquisition mean for your resellers and your customers? What impact has it had so far?
Danny Molhoek (DM): When the acquisition by the consortium led by Apex Technology was completed, we were in the middle of Q4. It was business as usual; we have customers to serve, partners to help, deals to close, so we just continued with that. I have to say it was the same in Q1 as well. We are a UK organisation, within the larger EMEA organisation, and all these things are between the US and China. We just kept on doing what we’re doing, so there were not many changes there.
But what was very clear from the guidance we got from our new CEO, David Reeder, was that he wanted Lexmark to grow over the next couple of years to become a large manufacturer in the printing industry. That is our aim, and I can tell you, without being able to share any numbers, that we’re off to a very good start in the UK.
We spoke a lot to our partners in the December and January time-frame, because they obviously had many questions about what the acquisition means for them, and the message we gave to all our partners is that the channel has historically been extremely important to us, it is extremely important to us today and it will continue to be so tomorrow.
The partners we spoke to in that period were all very excited, very enthusiastic. They see what we’re doing, they like it, they understand.
What we hope is that Apex Technology will give the wider Lexmark organisation a lot of additional capabilities going forward. One of the things that we see as a big opportunity, from a worldwide point of view, is the Chinese market. The Chinese market is huge and historically Lexmark has not been a big player in that market, at least not to the level that we would have liked.
We believe that being part of the Apex Consortium will enable us to do much more business than we’re doing today, and this will have a positive effect on the wider Lexmark organisation because we will have to increase our manufacturing capabilities, and one of the things that Apex is known for is its broad manufacturing capabilities. And in the next 12-18 months, will we see some additional lines being announced into the market place, some different types of product, so in general it is all good.
The motivation at our office is also extremely high, due to the fact that we have had a very good start to the year. The acquisition has helped us tremendously because it gives lot of confidence to our partners and our end users that we’re in the game to stay; we are here to stay, we want to grow, we want to win, and that’s the message we have been sending out.
PITR: You mentioned some of the new product lines you’ll be introducing over the next 12-18 months, will they feature Apex technology?
DM: With the capabilities Lexmark has, the R&D that it has done over the last 20-25 years, we’ve taken the lead on a lot of things. I can’t really tell you whether the products are going to be 100% Lexmark and 0% Apex or 90/10 or 80/20, but what I do know is that our R&D departments in Lexington are working around the clock. I’m pretty sure there’s going to be some kind of influences from Apex as well, because if you’re part of a larger consortium that has some other and maybe better capabilities, why not use that opportunity. But the roadmap we’re working on is the roadmap we had before within Lexmark. The one thing we are seeing, however, is that everything is going quicker than we originally anticipated, which could be due to the manufacturing capabilities that are now part of Lexmark.
PITR: Your strategy in the past was very much based upon acquisition of software solutions providers. Is that going to change?
DM: I don’t believe we’re going to acquire any additional software companies in the short or near term. We have gained a lot of knowledge and a lot of capabilities with our software products, but we also see that there are some excellent companies out there providing some very good products. Sometimes it’s better to have this knowledge in-house; sometimes it’s better to join a partnership. Software is absolutely a key item going forward, but I don’t expect us to acquire new companies in the short or near term.
PITR: You’ve got a lot to absorb already.
DM: Well, it’s been an interesting few years. And it’s been a very steep learning curve for us here at Lexmark, where software has been a key part of our strategy for the last 20 years. From when we announced Markvision, we’ve always been developing those kind of tools and products. What we have done over the past few years is to strengthen that proposition with software that you can’t develop from scratch. In certain cases you need to work together with other companies and in others it makes sense to buy these companies. In the last couple of years, the tendency has been more towards acquisition; I think the tendency today is to look for partnerships.
PITR: In the UK specifically, what are your big growth areas?
DM: Lexmark has always been vertically organised. We’ve always been very strong in the retail area; we’ve always been very focused on banking and manufacturing; and where we see a growth area for us going forward is in government and healthcare. From the acquisitions we’ve done in the past, we have developed some very good solutions, particularly in the healthcare space, so we’ve also been very busy over the last two years making sure that Lexmark is on government frameworks. That’s really working out for us at the moment.
We are also interested in the SMB space, and we have given our partners the ability to download certain software solutions that they can bring into the SMB space at the right price.
I’m not trying to be the cheapest in the marketplace; I know I can deliver certain value. There is a lot of demand in the government space and the healthcare space to tie things together, to print less, to look at security, all the usual things. We have great products, great solutions and great partners as well.
PITR: Is the proportion of your revenue that comes from hardware going down?
DM: We’re currently putting a lot of investment into our partners to try to get hardware out there, so hardware is growing rapidly. Having said that, I don’t really see a decline on the software side, because almost all the revenue that we make today is contractual business.
It depends a little bit on the type of deal or the customer requirements. A few months ago I did some analysis because I was very interested in how the pie split up. It is an extreme example, but in a worldwide deployment for a bank, 65% of the contract value related to software and 35% to hardware, consumables and break-fix services. This is not standard for the market, but as far as I can see, in every single deal there is an element of services and a lot of these services consist of software. So, I think that is growing within the marketplace and I don’t see it going down.
Of course, 65% is very high. Not every customer is ready for that, because at the end of the day these kinds of service come with a price.
PITR: Overall though, the transition appears to be happening quite slowly.
DM: I think it’s slower than a lot of people expected 10 years ago. Fifteen years ago the product was used to print, but today Lexmark and some competitors deliver so many value adds with those boxes that you don’t just use that box for print; you use it for many other things. It’s still an output device, but it’s also part of an IT infrastructure and part of a process.
A simple example is expenses. In the old days, I did my expenses in an Excel spreadsheet with all my receipts stapled to it. Today, we have apps on our devices; you go over to a device, you identify yourself with the same card you use to enter the building; you push the expenses app; you start throwing your invoices on there and all this cool stuff happens automatically; it is routed through the IT infrastructure and ends up with my boss who, with a little bit of luck, will approve my claim. This is a very simple thing. The opportunities we have to simplify processes and get rid of paper are endless.