Lexmark’s Mike Johnson schools press and analysts at a press and analyst briefing in Lexington.
Leave it to Lexmark to leave nothing on the table after last week’s press and analyst briefing in Lexington. If I’ve learned anything from attendance at past events it’s that Lexmark is adept at putting together a complete agenda that leaves no one leaving Lexington wondering about what wasn’t said, or why this or that segment of the business wasn’t covered. Everything gets covered and covered well, except of course the news that broke on October 23 that revealed Lexmark is looking into strategic alternatives, including a possible sale of the company as a result of declining share prices.
With so much ground covered during the briefing, I’m going to identify my 10 key take homes based on what was covered at the briefing not the news that revenues are down and 500 jobs are on the chopping block. I will say that the latest bombshell could have a dramatic impact on what we learned at the briefing, but until any of those early predictions come to pass…
Think of Lexmark as a solutions company, not a hardware company. Here’s the thing, if you’re ignoring the obvious—the many software company acquisitions that Lexmark has made over the past few years—then you probably don’t realize that even though Lexmark’s roots are in hardware, the big differentiator today is the software. Lexmark has acquired 15 separate software companies, including this year’s big buy, Kofax. It has also invested more than $2 billion to drive its transformation from a hardware provider into a solutions company. That’s something that Lexmark executives feel its dealer channel should be able to leverage. As Mike Johnson, vice president of North American Business Channels & SMB, pointed out, the hope is for channel partners who may have a number one line ahead of Lexmark to lead with, “We are a Lexmark solutions dealer.”
Lexmark is still shopping. Any company serious about transforming from a hardware company into a solutions company isn’t going to stop with the Kofax acquisition. Although Lexmark currently has a strong mix of solutions, Brock Saladin, vice president & general manager Global Channel Sales & Marketing, revealed that Lexmark will continue to make acquisitions. Look for Lexmark to fill gaps in back-office solutions as well as industry specific solutions. “The back office is a big play for us and we’ll continue to look for the pain points customers have in the back office and for the solutions we need to add to the portfolio to solve those problems,” observed Saladin.
Lexmark’s primary strategic initiatives are focused on growing revenue and profitability. This is hardly a surprise and pretty much stating the obvious, particularly since there’s not a vendor out there whose strategic initiatives aren’t focused on those two things. But if you’re wondering how Lexmark is going to do that it’s by increasing its focus through segmentation, better aligning incentives with goals, and improving its solutions and color mix.
Lexmark’s loves Accounts Payable. You don’t hear too many other OEMs wooing Accounts Payable the way Lexmark has been. The company views that business segment as a goldmine, especially since it represents an opportunity within every business and every vertical market. Lexmark executives contend it’s one of the biggest issues Lexmark customers face on a daily basis. According to numbers shared in the briefing, 170 billion transactions are processed on a yearly basis with each invoice costing about $10 to process. Lexmark’s solutions to automate that process include AccuRead Automate for SMB customers, ReadSoft for the mid-market customer, and Perceptive Capture for the enterprise customer. “We believe we have a deep bench of offerings from an AP perspective,” emphasized Johnson. “And our goal is to sign partners to make this part of their practice going forward.” While Saladin added, “We believe Lexmark is positioned to be worldwide leader in AP solutions.”
Smart A4 MFPs are where it’s at. If you listen to Lexmark and you track the numbers from IDC, the high growth segments in the document imaging space through 2019 are Smart A4 MFPs (11%), BPM software (7%), ECM (10%), and mid-market MPS engagements (12%). “The great news is that Lexmark’s portfolio aligns with this in a good way,” says Greg Chavers, director, Value Channel. While Lexmark is positioning itself as a solutions company, smart A4 MFPs have a distinct place in this environment. In case you’re wondering, Lexmark’s definition of a Smart A4 MFP is a device above $1,000 that outputs at 20-90-ppm mono or color with embedded solutions capabilities and that can be leveraged as an on and off ramp for information.
More traditional A4 color models on the horizon. Expect to see plenty of A4 machines funneling out of Lexmark to its dealer channel in the months ahead.
Brock Saladin, Lexmark’s vice president & general manager Global Channel Sales & Marketing, talks about the company’s acquisition strategy.
Lexmark is engaging dealers along a solutions maturity curve. This is Lexmark’s software channel strategy. Lexmark has a history of combining traditional device-based software for the channel, but now wants to add channel friendly software offerings that provide a broad portfolio to channel partners and allows them to differentiate and bring a broader value to what they’ve traditionally done. To make that happen Lexmark is assessing the capabilities of dealers when it comes to software. “We want to engage them along a solutions maturity curve because Lexmark knows some are just starting and others more advanced,” said Saladin. “We can meet them wherever they are.”
Lexmark separates its dealers into buckets, Level 1, Level 2, and Level 3, as far as expertise in selling software. The biggest bucket is Level 1. This is the simplest of the three where most dealers are selling MPS, opportunities are more device based, and their software selling strategy is more of an add on strategy. “They need an easy value prop for their sales reps who aren’t software specialists,” says Saladin.
Inside Lexmark’s Customer Engagement Center with Sean Endicott in Lexington.
The next level is the heart of Lexmark’s solutions program for the channel. Acknowledging that there are fewer dealers with capability to sell these solutions, Saladin notes that these dealers have expertise in scanning, are already selling some of these solutions, have invested in a software specialist or multiple software specialists, and selling accounts payable solutions as well as print management. The Level 3 bucket encompasses everything Lexmark has in ES portfolio and focuses on partners with the sophistication to sell these solutions. These dealers would typically have an ECM or capture practice in existence for two to three years, special services staff, and an infrastructure and practice that can drive a solution sale and handle the integration.
Lexmark’s Customer Engagement Center (CEC) is an impressive 10,000-square foot space and even includes a robot named Lexi. Now I know what $8½ million will buy you. The original budget for the CEC was $1 million so it’s not a stretch to say that Lexmark went a little over budget on this initiative. It’s an impressive showroom, demo, and briefing space for its dealers to bring customers and offers a well-conceived layout for presenting vertical market solutions and engaging customers.
I know something you don’t. I’m not allowed to write or say anything about a new product scheduled for introduction early next year since I’m under NDA, however, what I can say is that the Lexmark team is excited about this thing and it’s a good bet its dealers, whose input was instrumental in its design, will be as well.
