The future of the office technology industry continues to be services. Industry pundits are touting managed IT services as the next big thing and without a doubt more office technology dealers are getting into that business whether they are ready or not.
“We’re seeing more BTA channel dealers interested in moving down the path of managed networked services,” reports Jennie Fisher, senior vice president and general manager, GreatAmerica Financial Services Corporation. “Everybody is talking about managed print becoming a commodity. Some might argue that, but I think the dealers that have implemented managed print are better candidates for moving into the managed network space.”
Jennie Fisher, Sr. VP& GM – GreatAmerica Financial Services
That may be true, but the underlying fact is that not every dealer is positioned to offer managed IT services. We spoke with four dealers who have tried, succeeded, and experienced some bumps along the way. Their stories offer a lesson or two along with a road map for when to expand and when not to expand into managed IT services.
Flexprint, a national managed print services provider, based in Phoenix, AZ began offering IT services a couple of years ago after learning all they could about the market. “It’s a far more crowded space than managed print and in our short time there we’ve found out there’s a ton of small players all over the country, but there is still a great need for it,” says Frank Gaspari, president of Flexprint. “I think there’s a huge
Gaspari did tons of research before getting into it. “I’ve been doing the same thing as an owner for the past 24 years, the only thing I’ve done is managed print so I’m not going to dive into something because people say it’s sexy and there’s opportunity.”
What he did was contract with a market research company that analyzed the space, identified the various players, and identified the target market. “We really examined why we were getting into this even as our core business continued to grow organically and in stunning ways,” notes Gaspari.
Frank Gaspari, CEO – Flexprint
For Gaspari it was important to have the right reason to get into that space. “We do have the right reason and it’s an offensive and defensive measure.”
To make it work Flexprint had to make sure they had the right people to go after these opportunities, meaning hiring people with skills that the current Flexprint sales reps didn’t possess, making sure they had the backup support plus the ability to deliver the same SLA’s that they deliver with their core business.
Now that he’s in the managed IT business, we asked Gaspari what kind of dealer shouldn’t make that transition.
“If they’re not absolutely committed to being successful or if you don’t have the desire to learn and reinvent yourself or your company,” responds Gaspari. “You also need to invest the capital to get the right people to deliver the SLA’s, and by the way, have the back-end infrastructure to deliver it. If you’re doing it because consultants in the industry are telling you to do it, don’t. That’s a recipe for failure.”
Larry Weiss, CEO – Atlantic, Tomorrow’s Office
Atlantic, Tomorrow’s Office in New York City is doing well with managed IT services, but it’s been a tough road with some false starts along the way. Things changed when President Larry Weiss hired a new manager to oversee this business nearly three years ago. What’s also helped was the acquisition of a $1-million IT company last July. That’s an option that can’t be underestimated by any dealer looking to enter the business.
“We’ve been able to add 20 percent growth to that business,” notes Weiss. “And we picked up the copier contract in every single one of those accounts where the leases have come to. It’s amazing. For years everybody says, you control the network, you control the devices. We’ve been in this IT space for awhile and that has never been the truth until recently.”
By being the IT provider and not a copier company, it’s much easier for Atlantic to convince new IT customers to give them their copier business as opposed to going in as a copier company and trying to get them to turn over their IT to them.
But make no mistake about it, Atlantic still sells hardware. They’re an $80-million company and $74-million is still copiers while a solid $6-million is IT. “Of that $6-million, 60-65 percent is recurring revenue and 30-35 percent is hardware sales,” says Weiss. “That’s an important mix because you can speak to people and they can tell you they do $15- or $16-million in IT, but if they’re doing $13-million in hardware, you’re just a hardware company, you’re not an IT company.”
When shouldn’t a dealership get involved in the IT business? “If a dealer owner is not truly committed to investing because it is an investment,” responds Weiss.
He also believes a dealer has to be truly committed to bringing on somebody to manage that business. “Let’s just begin with the fact that most of us don’t have the expertise to run that side of the business,” acknowledges Weiss, “whereas there’s no one better to run a copier business than most dealer owners.”
Besides a willingness to make an investment, he says you have to be willing to let that person running the IT business make decisions that you may not understand. “You may question, but you have to give that person a little more leeway than you might in another part of your business,” says Weiss. “If you’re not willing to do it, stay in the space you’re comfortable in—grow your copier business, stay strong in the solutions and leverage scanning and document management. I don’t personally think that a copier company has to go into the IT business.”
Jeff Boate, President – Perry proTECH
Jeff Boate is president, IT/Networking for Perry proTECH in Sidney, OH. He’s been with the company for eight years, initially running their solutions division. A few years ago realizing that all the devices were hanging off the network, Perry made the decision to take ownership of the network. A lot of traction came from the acquisition of a sizable IT company. That’s when Boate moved from the solutions division of Perry to become general manager of Perry’s new IT division before eventually becoming its president.
As someone who came from the IT side originally, he’s intrigued at how the copier industry views IT. “They look at this as purely meaning services,” says Boate. “That’s kind of where they spend their time talking, but it’s not as easy as that.”
It’s not and Perry learned that the hard way.
“We had these grand visions of selling IT to every imaging client we have, but it’s not that easy,” explains Boate. “Having a conversation about IT or someone’s network is very different than putting a commoditized device in their facility. I always say the worst thing that can happen in an imaging situation is we roll in a new device, plug it in [and it doesn’t work]. On the IT side if we take their network down there’s no data moving in out or around their organization and they can’t work. They’re at a standstill so the stakes are exponentially higher and to sell that is exponentially more difficult.”
Although he won’t say a dealer can’t grow their IT business organically, he finds doing it that way is challenging and fraught with pain. “They’re bringing a knife to a gunfight if they’re not going out and acquiring talent.”
He’s leery too about outsourcing IT services to one of the many organizations sprouting up across the landscape as well as having imaging reps selling IT services.
Jeff Bucher, Owner – Infincom
David Steele – Infincom
“There’s going to be times where the network doesn’t function as well as it should,” says Boate. “You have to educate imaging reps that this is a different type of service and things can and will go wrong.”
In his opinion the relationship between rep and client has to go much deeper than in the traditional hardware or solutions sale. “When things go wrong you have to have a strong enough relationship with that client so they will stand behind you as you repair it.”
He points out some organizations that have grown from the IT side into the imaging side in an organic way while legacy copier dealers continue to take the opposite approach. “That’s our biggest challenge, how do we take the best of imaging, the best of IT networking side, meaning services and selling, and take these technologies and wrap it all together in a single payment and take it to market efficiently?” asks Boate. “There are too many four-legged and six-legged sales calls, and when you’re comping all these different people, it drives down your profitability.”
For now Perry ProTECH still works from a specialist model even though they’re compensating imaging reps as necessary. For Boate this is the only way to go. “The market opportunity for us is massive if we get this right,” he says. “We think we’re close. Say an imaging rep is writing a $200 a month lease for a client, when you stack managed services on top of that you’ve taken that $200 payment and turned it into a $1,500 payment. If you want to take your company from $50-$100 million, it’s right there for you. That’s what we’re working toward. How do we stack into a single payment?”
While large, well-heeled dealerships are better positioned to make inroads into IT services, Infincom, a $10+ million dealership with about 44 employees in Tempe, Arizona, has shown that you don’t need to be overly large to do it and do it well. (At press time, Infincom was just acquired by Sacramento, CA-based Caltronics Business Systems. Under the new ownership Infincom will no longer offer IT services, however, the current owners, Jeff and Tiffany Bucher, who are now part of the Caltronics organization, have been given the green light to start a separate business not affiliated with Caltronics that will continue to offer IT services to Infincom customers. That organization, New Line IT Services, will employ some of the very same employees responsible for Infincom’s IT services business.)
Infincom originally entered the business by accident when Jeff Bucher met a prospect, David Steele, who didn’t become a customer, but eventually became an employee selling copiers for Infincom. Steele soon recognized there was an opportunity to provide those customers with IT services in addition to copiers. A business plan was crafted and at the end of 2011 Infincom was providing customers with IT services.
“We’re a start-up copier company, we’ve been paying all our bills with blood sweat, and tears for the last six years, and didn’t have a lot of money to invest in this, but we did have the money to invest in the personnel we would need to get this program rolling and that was a senior network engineer,” explains Bucher. “A company not rich on capital and resources has to take a methodical approach to go out in the field and talk to customers and prospects.”
At the end of the first year Infincom’s IT services division was turning a modest profit.
“We’ve got some customers onboard who are fully engaged with us and we’re managing their network remotely and have strengthened our relationships with these accounts,” says Bucher.
The IT services relationship has also helped them sell additional services along with copiers. “That’s one of the upsides to what we do,” states Steele. “One of the drivers behind this offering was to drive more copier sales and we feel once we have the IT relationship they’re going to come to us for copiers.”
IT services is right in the wheelhouse of Infincom’s customers whose biggest challenge is finding the resources to hire the full-time talent to handle their technology issues.
“The biggest benefit to the customer outsourcing IT services to Infincom is they get the same level of expertise that bigger organizations have at a fraction of the cost,” notes Steele.
What kind of dealer isn’t a good fit for IT services? “I don’t think it’s not right for anybody,” opines Steele. “The key for any copier dealer getting into this space is having the right people. Obviously, we were able to do it without a tremendous upfront investment. It’s not like you need hundreds of thousands of dollars to start a division like this within your copier company, but what you have to have is the right people with the right training to get into these accounts and provide answers to their questions.”
This is just the beginning and Bucher, who’s been in the business since 1980, sees this portion of his business exploding. “You get into some pretty good opportunities the further you get into this business and one of the things we haven’t talked about is when you’re out selling copiers, it couldn’t be a deader horse; people don’t want to hear about your copier, your copier, your copier or your company or services, but this is an emerging service in our industry. It’s a unique approach and it’s one that people are interested in hearing and learning about. It’s a big door opener.”
