Following breaking news that Beta Distribution has gone into administration, Shaun Wilkinson Managing Director, UTAX, explains why a transactional-based sales model is not sustainable long-term and why IT resellers should look to switch to MPS Prior to Beta Distribution’s demise, UTAX had begun to work with the distributor, supporting its resellers to break into the managed print market. “Beta approached us a while back as they wanted to get into managed print. It’s well known that margins in distribution are eroding and Beta recognised that the transactional business they were involved in was shrinking. More business is done online, the web makes it easier for people to shop around and get a better deal. You’ve almost got this race to the bottom,” Wilkinson explained.
Wilkinson argues that distribution companies need to move away from transactional business to business that gives them recurring revenue. “Our traditional route to market is though managed print and copier resellers and they get that,” he said, adding: “The cost of getting the business in the frst place is higher because it still has to be person led. You can’t buy a managed print service over the internet because you need to be engaged with the business and understand what it is trying to do, how far along it is with digital transformation etc. It’s not just about providing hardware and service now, it’s about integrating yourself into a customers’ business making you a trusted partner.”
Whilst this approach means the reseller incurs a higher cost to get the sale, Wilkinson reasons that once the deal is signed, the reseller wins a three to five year contract. “Also, long-term, if you do your job right you’ve got a contract for ten even twenty years. The alternative is you could spend some money today getting some business of a customer, then tomorrow they could go somewhere else, so every morning you’ve got to start again from zero,” he said.
A shift in mind-set
Distribution has historically adopted a ‘pile it high sell it cheap’ approach. Wilkinson acknowledges that MPS is a different concept and requires a shift in mind-set for the traditional distie particularly with consumables business. “They have all this business coming in and they don’t want to rock the boat but those that are switched on know that particular business is in danger, and unless they take action they may well have it now but they perhaps won’t in a year’s time. The way to protect that revenue is to try and convert consumables customers to managed print customers, then you’ve got a recurring contracted revenue stream.”
He added: “Partnering with UTAX or indeed any manufacturer that already has MPS expertise can help. We can help them make the transition and successfully put managed print and digital transformation solutions in place with their customers.”
The relationship with Beta isn’t the first time UTAX has worked within the distribution channel. The company engaged with Northamber a few years ago, but Wilkinson said that that didn’t really take off the way it expected. With Beta now in administration, you could argue that no further progress will be made.
That, says Wilkinson is not necessarily the case. “Some of Beta’s resellers have approached us direct to work with them and that’s what we will continue to do,” he said. Explaining how it will work Wilkinson said: “Our infrastructure becomes their infrastructure, we have the ability to engage with the customer, understand their business and how managed print and digital transformation will help them. That support removes the fear factor for the reseller. They may not have that expertise or may only have a part of it and when they engage with a customer and sell a solution, if there is any issue, they have got us for back-up.”
UTAX’s support is wholly ﬂexible. “It’s a menu system, resellers can either do everything themselves or we can do it all – or anywhere in between the two. They can buy say a service or solution from us, sell on to a customer and simply add their own margin, or they can ask us to go in and we will operate on a profit share arrangement. It really depends on how they see it ftting in within their business, and they will also benefit on an ongoing basis from our expertise and nationwide service,” Wilkinson explained.
UTAX is also in the process of transforming its own business. “The market is tight and that’s not just because of Brexit,” he said. “We have to be more efficient in how we go to market, so we’re introducing more cloud-based solutions and we have the ability to do more remotely in terms of fixing machines for example.” UTAX Fleet Services (U.FS) is one such solution that been adopted by its partners. U.FS provides partners with the ability to perform key maintenance tasks and remotely troubleshoot issues on UTAX devices as well as perform firmware upgrades and setting adjustments.
“Our partners recognise that a technician in a car is costly and not very efficient especially in the greater London area where traffic is a constraint, so if you can fix a customers’ problem within minutes rather than hours, then you have a much happier customer and a more efficient way of keeping the hardware in check,” Wilkinson explained.
Encourage more resellers to engage
IT resellers traditionally have a good relationship with their customers which paves the way for them to offer more. “The barrier has always been whether or not they have the expertise to expand into print – can they get an engineer onsite to fix something? And the answer was probably no, whereas now by partnering with us, they can go to their customers and confidently say ‘we can now provide the printing infrastructure as well as other IT services’, knowing they can deliver the right service levels,” Wilkinson said.
He continued: “It’s been a long slow process, but we are seeing success with IT companies with long standing customer relationships who are looking to offer other services.” In terms of the distribution channel, Wilkinson says UTAX is open to conversations. “From our perspective, if a distie is focussed and wants to take this seriously, then it will work. It does need a real change of mind-set to move from selling a box to selling a solution, but continuing to lose consumables business to MPS isn’t good in the long-term,” he concluded.