Nothing left to lose or everything to gain?
The managed print market is expanding but is it really benefiting VARs?
Managed print services (MPS) have been punted to high heaven by vendors, but resellers are seeing mixed results among the growth.
Louella Fernandes, principal analyst at Quocirca, said its research shows that businesses are benefiting from reduced costs, improved efficiency and productivity.
"Around 20 per cent of enterprises are using MPS, so it is still a huge opportunity. There is much lower penetration in SMBs, although increased availability of basic MPS from channel vendors is going to increase this," she added.
In her experience, VARs are benefiting from the trend.
"They can capture ongoing revenue opportunities from supplies revenue as traditional transactional purchasing means consumables may be from different suppliers," she claimed. "With MPS, supplies are built into the contract as well as servicing. This also improves relationships with customers."
How well VARs do depends on variables such as the vendor programme and how the resellers get paid. Cost-per-page contracts are typical, with customer cost based on predicted print volumes, she said.
She noted that some are delivering channel-only MPS while others are going direct or indirect in different business segments. Some deliver certain elements direct - such as hardware and consumables - using partners to service the contract.
"Vendors are not cutting out the channel, as it is an important route to market for SMBs, and they are developing channel programmes such as HP QuickPage and Xerox Partner Print Services," said Fernandes.
"Resellers need to move to MPS because of the ongoing revenue opportunities, longer customer relationships, and more. Multi-brand resellers should look at solutions that enable a multi-brand fleet."
She said MPS requires resourcefulness as well as a change of mind-set and infrastructure, with VARs often requiring the help of vendor programmes offering a hosted infrastructure - such as those of HP or Xerox - that minimise their spend. What can be achieved depends on individual circumstances.
Reseller experiences may vary. James Kight, managing director of Printerland, said MPS is profitable, but perhaps not as much as the manufacturers expected.
"The demand for it is still not there at the moment, especially in the SMB market. People do not want to be tied into a contract," he said. "I do not think that anybody has got [MPS] quite right yet."
SMBs make up 80 to 90 per cent of the Cheshire reseller's customer base. Kight said that being locked into a contract holds little appeal, especially for a non-core service.
"They want to pay as they go," he said. "Xerox has done things such as [cost-per-copy] PagePack and that is a better option."
He added that its MPS business has grown by 300 to 400 per cent in the past year from a tiny base. Xerox's MPS offering is proving a customer favourite, with its other vendors more or less jostling for second place.
Abroad, vendors have competed directly with VARs on MPS - swooping in on customers before partners can close a deal. But Kight said he had not heard of that happening in the UK - at least not with SMBs.
Alex Cook, sales director at Copylogic, said it has been providing MPS for about five years. "We were really pushing it in A4, particularly on the managed desktop," he said.
Cook suggested that economies of scale can help firms opt for MPS. Copylogic serves verticals including manufacturing and financial services, with a third of its business in education. Customers are hearing the message, "although they do not necessarily understand it," added Cook.
"However, our [MPS] is quite broad, and there is a really good conversion rate. We can usually promise cost savings."
MPS requires minimal "running around" from Copylogic once the customer is set up, and the margins are definitely there, he said.
"As a business, we have grown 46 per cent by revenue in the previous year, ending 31 March 2011, and 70 per cent of that is down to MPS," said Cook. "We are recruiting heavily for people who can help this push into new business opportunities."
Vendors are certainly interested in profiting from a broader print revenue stream. Xerox has even been buying resellers.
Paul Gaiser, channel MPS programme and business development manager for Xerox's European Channels Group, said that when Xerox goes direct, it is often because the customer demands it.
"Xerox has direct sales for a number of large enterprises," said Gaiser. "Competition with Xerox or multiple Xerox partners may happen at that level. The specific added value of each bidder will be a differentiator."
Outside the large organisation segment, Xerox sticks to indirect sales and delivery for MPS through alliance and channel partners including CSC and Computacenter, he said.