Want to Get More from Managed Print Services? Focus on the “Manage” Part

Some dealers are becoming disillusioned about managed print services (MPS), and it’s easy to see why. Page counts are declining, and competition is driving down fees and margins. A few dealers are questioning whether MPS will remain a viable offering for them in the future.

Yet other dealers and MPS providers are painting a much more positive picture of the MPS market. They are seeing consistent growth in terms of net-new clients and expanding existing accounts. In some cases, these providers are leveraging MPS as a gateway to providing other services using a similar template.

Why does there seem to be two realities for MPS providers? ENX spoke with dealers, pure-play MPS providers and MPS infrastructure providers to learn what it takes to be successful in the market. Two themes emerged. First, understand what it means to actually manage a customer’s print operations and workflows. Second, use the data you collect while managing a customer’s printer and copier fleet to continuously fine-tune their operations and yours.

The goal is to keep adding value for the customer, even if that means reducing spending on consumables. Finding efficiencies for the customer often lowers the provider’s costs as well. More important, adding real and measurable value increases customer loyalty and makes them more open to buying other services and products.

“We see a lot of resellers starting to hit the reset button on their MPS programs in the last two or three years,” said Doug Johnson, chief strategy officer at MPS infrastructure provider LMI Solutions. “The market has commoditized. Resellers are competing at the fourth decimal. MPS is certainly the main growing area within the imaging industry, but a lot of resellers didn’t treat MPS for what it is: a services-based business model.”

Putting the “Managed” Back in Managed Print Services

MPS should be more than just delivering consumables or performing break/fix under a contract. It should include things like fleet and workflow optimization, and that requires constant monitoring and management.

“End users and resellers are becoming more educated about what MPS truly means, and that’s been really good for the Supplies Networks program,” said Sarah Custer, director of services and solutions at Supplies Network, which offers services infrastructure to dealers. “In the early days, a lot of folks would just change their billing mechanism but not the underlying infrastructure of how a customer is receiving value from its [MPS] reseller. Now, end users know that there should be automation and workflow efficiencies in an MPS engagement.”

Supplies Network, like most other services-infrastructure providers, sells consumables and equipment, and of course they want to sell as much of them as possible. However, the company saw the writing on the wall about 10 years ago and decided to offer MPS services. If you can’t count on increasing print volumes, then you have to find other ways to add value to grow revenue. “Back then we were educating resellers on why they would want to be engaged in managed print. Now we’re supporting those who really understand it and bringing a backbone to provide them with operational efficiencies,” said Custer.

Today, Custer estimates that about one-third of Supplies Network’s business is done through its contracted MPS program. And that number doesn’t even count business from dealers who are not resellers of Supplies Networks’ service, but are buying product to support their own MPS programs instead.

Successful MPS providers believe that users are a key part of the equation. A smart MPS provider will analyze users’ print habits—volume, type of printing, content source, etc.—to learn what they are printing and why. With that information, a provider can help a customer develop user rules to make device utilization more efficient and prevent printing of unauthorized material.

“You’re really only doing the first level of MPS if you’re just managing devices,” said Luke Goldberg, executive vice president of sales and marketing at Clover Imaging Group (CIG). At the first level, Goldberg says, “companies are managing the output of those devices. They are doing a little bit in the way of optimization, and they are doing fleet management. But they are not managing the users.”

CIG’s Axess MPS provides dealers with a suite of software and services to deliver MPS to their customers, and it recently partnered with Print Audit to enhance its ability to manage users. “At some point there has to be a user intervention to change printing behavior,” said Goldberg. Tools like Axess MPS identify and document that behavior in a way that facilitates changing it.

User management could be a key differentiator in the MPS market. “Very few dealers are getting into user management,” said Goldberg. “Once you understand users’ behaviors, you can begin to modify those behaviors.” Documenting certain actions—like printing for personal purposes or excessive numbers of copies—creates opportunities to save money for the customer. A dealer could then charge for another layer of service that creates user rules for printing that it then monitors and manages.

Understanding user behavior can provide a foundation for offering additional services— workflows and business process optimization (BPO), for example. “There’s no real way you can get into a business like BPO or workflows unless you understand what the user is doing,” said Goldberg. “What are they printing that could be digitally stored in the cloud. How are they archiving or saving. How are they scanning?”

Goldberg believes that the data provided by the printers is still important and much under-utilized. “Eventually, we’ll be able to look at those vast datasets we’re creating off the devices being managed and be able to do things like predictive service, where we look at patterns and create actions based on them,” he said.

“The tools [to manage print and user data] have gotten better, but the number of people we’ve seen who actually use those tools are few and far between,” said Kevin Morris, CEO of pure-play MPS provider OneDOC. “It’s become a differentiation maker for us. If we didn’t do a good job of providing differentiation, then it comes down to cost, and we have competitors who just give crap away.”

One danger of having access to so much data is failing to analyze it properly. “More important than all the data we have at our fingertips is how we help resellers understand and present that [data] in an actionable solution set to the end user,” said Custer. “For example, we have a really nice quarterly business review that resellers can present to their end users.” Supplies Networks also makes its solutions team available to dealers to help them better understand the data and apply it appropriately to their customers’ environments.

MPS provider QualPath has a detailed list of data points it tracks through its ERP system, including device operating efficiency (to control break/fix costs), parts usage and toner cartridge defect rates. “All of these things need to be evaluated in your contract profitability reviews so you can manage customer and vendor behaviors,” said Kevin DeYoung, president and CEO of QualPath and the current president of the Managed Print Services Association (MPSA).

“You have to look at it as ‘Am I really optimizing my fleet, or are my costs growing too high?’ Margin is a blend of proper targeting of who your clients are, and mindfulness of the ongoing profitability of the contract,” added DeYoung.

That mindfulness is critical as you help customers become more efficient, which usually means printing less. Then, you also have to focus on retention. Toshiba America Business Solutions (TABS) offers an MPS program that promises customers they will pay only for what they print, and that they will print less. “We are very active deploying methods and teaching end users how to produce less output, which seems counter-intuitive,” said Bill Melo, chief marketing executive.

“Culturally, that took awhile to gain root. But we found that when you genuinely serve the customer’s best interests, they don’t leave. Our average MPS customer is on multiple renewals of their agreement. The greater the degree that a customer perceives value from you, the more likely you can earn a premium and be considered favorably as opportunities arise to provide other solutions like workflow or security,” said Melo.

Periodic formal reviews are important, but so is ongoing transparency with customers. They need to know what they are getting from the MPS program. TABS gives its MPS customers a Global Services Portal that shows fleet composition, print volume, billing, service calls, consumables shipments, and more. The data is down to the machine level. “It takes the mystery out of the value of what you are providing,” said Melo.

Outsource or In-House?

MPS providers who have used a more transactional model are starting to rethink their approach as margins decline. Some are moving to a services-based model with the help of an MPS infrastructure partner. “Dealers are saying, ‘I’m not making the money I thought I would,’ and so they are rethinking how they leverage the value chain to meet their customer needs without them necessarily having to do all of it,” said Johnson.

“They are saying, ‘Maybe I’ll buy the page from you and you bundle this stuff together and take some of the risk,’” said Johnson. He added that dealers are asking themselves what they are really good at, where they need to maintain their own assets and competencies and where they partner. “The more variable their revenue model, the more likely they can control costs and manage profitability.”

LMI Solutions offers a broad services portfolio. “We look at the market holistically and think about what it takes to deliver various levels of MPS,” said Johnson. “MPS can be as simple as a walk-in and takeover of an existing fleet up to a complete, comprehensive reframing of the existing fleet.” By choosing an outsourcing partner that offers multiple levels of services (and most do), a dealer can start moving to a full service-based MPS offering in steps, depending on its success and comfort level.

Supplies Network works with its MPS resellers to avoid the worst pitfalls of the transactional model, such as over-ordering supplies. The company will match resellers with programs that align with their capabilities. “We help them take it to the next level and drive out cost and manual processes,” said Custer. Supplies Network can also help resellers sort out manufacturer programs or ways to layer services to get better pricing. “We try to bring together all the moving pieces for the reseller and help them get the best offering that they can.”

Some manufacturers have their own MPS programs that their channel partners can resell. TABS, for instance, has MPS reseller programs, and its brand-agnostic approach may be appealing to dealers who sell MPS outside of their hardware customer base. TABS also offers flexibility as to how a dealer might build its MPS program. “We provide education, access to our tools, and all of the individual products so the dealer can construct its own program,” said Melo. Dealers also have the option of a turn-key service called Page Smart where TABS provides a wholesale price for the service that the dealer can mark up.

“The great thing about [the turn-key option] for the dealer is that the most complex and riskiest part of providing MPS is knowing how to price,” said Melo. “If you have a fleet of 100 machines, you could have 30 or 40 different models, each of which have a different cost per page. The customer is looking for a single price, and that’s a complicated algorithm.” Melo said the Page Smart program is growing in high double-digits every year. He estimates that more than 100 of its 200-plus dealers resell TABS MPS programs.

Outsourcing minimizes risk, but at the expense of flexibility and control. Dealers who want to ensure that they can precisely meet customer needs—and provide the same level of service across all offerings—will want to invest in their own MPS capabilities.

QualPath has its own MPS resources, but sees value in the outsource model. “The argument for using an infrastructure provider is a very sound one because of the risk mitigation that occurs. It’s a great fit for many dealers,” said DeYoung. “We feel we have a higher degree of flexibility in doing it ourselves, and we can do more than the infrastructure providers because they’re going to have cutoff points on what they will and won’t do. We feel we have an advantage because we’re not being pigeon-holed by an infrastructure provider.” QualPath occasionally uses an infrastructure provider for some customers when they can better fulfill a specific need.

Should You Consider Seat-Based Billing (SBB)?

Nearly all MPS accounts are billed on a page count basis, but the concept of SBB, where the account is charged for the number of users, is getting more attention. SBB’s advantages include stability in accounts where page counts are dropping and the ability to include scanning, which is often not counted in traditional MPS contracts.

“The dealer community is starting to feel the pain of cost per page,” said West McDonald, vice president of business development at Print Audit and a leading SBB proponent. “If you have an honest conversation with a dealer, both their cost per page rates and service portion are all under huge pressure.”

That pressure has encouraged MPS providers to look more closely at alternative models like SBB. McDonald sees MPS following the trend of moving to a user-based, subscription-based model similar to cloud-based storage or Microsoft Office 365. “In the managed print world, we’ve moved beyond the theoretical of SBB to go-time,” he said. “We’ve spent the last five years refining and being able to build a functional model, and we’ve worked with partners on all aspects of the model to make sure that it works.”

McDonald added that a few other pieces of the SBB puzzle have fallen into place. GreatAmerica now offers a financing vehicle for SBB, and MPS tool providers like Print Audit offer the capability to monitor and manage users in a way that’s appropriate for SBB. “You’ve got to be able to understand what that user print behavior looks like and, more importantly, how to control it to stabilize and improve the profit levels in those accounts,” he said. “SBB is not just billing. It’s user monitoring and management.”

“The SBB value proposition is focused on workflow,” said McDonald. “It’s focused on what kinds of documents people are printing and whether they need to print them. With SBB, you’re not just billing by the seat, you’re analyzing print production by the seat and finding ways to make them more effective and efficient. [SBB] is the only way that a dealer is willing to have that conversation because they can save the customer money while improving their overall account profitability.”

McDonald outlines a scenario where a dealer might start by promising 20 percent savings on print by installing monitoring software. The next year, the dealer promises more savings by implementing a document management program for another $5 per seat. “Each time the dealer [adds a service], they are building complexity into the seat price, which makes it impossible for a competitor to come in and say, ‘I’ll beat that price by 10 percent,’” he said.

All the MPS infrastructure providers we spoke with are considering an SBB option, but CIG is the first to actually offer SBB pricing to its partners. “With SBB, you can layer services on top of it to add more value to MPS,” said Goldberg. “Part of that is to look at other things that are direct adjacencies to print [like user rules and print security] that they can add. When you charge per page, there’s nothing you can do to add to that. It’s finite.”

Goldberg thinks that SBB makes more sense as providers focus on user as well as device data. “A big part of the next step for MPS providers is to start looking at user management and user tools, which is where SBB and a lot of the tools we offer from Print Audit come into play. SBB brings a model that is palatable and acceptable for a lot of end users, which are used to paying for services by the seat,” he said. “That could go a long way toward de-commoditizing this [traditional] MPS model that has become highly commoditized.”

“[SBB’s] ultimate value for the dealer is to bring more value, more stickiness to the customer relationship, so that they keep signing those contracts period after period,” he said. “The initial outcome might be that the margin is higher because there is an element of mystery and it can’t be compared to something else.”

DeYoung sees a potential sticking point for SBB with accounts that operate 24-7. “At hospitals, you have three shifts of people where you have three people sitting at the same seat over the 24 hours,” he said. “That’s where some providers have said they haven’t figured out a way to make money at [SBB].”

McDonald believes that SBB will be more widely adopted as dealers learn more about it. “You hear, ‘If it’s just managed print, why bother [with SBB]?’ Well you need to bother because pages per user are in decline, you’re losing revenue, and something needs to be done,” he said. “If you’re good at managed print today, become good at doing it in a seat-based fashion. When it becomes time to look at other options for your business, then at least your platform is level.”

Interest in SBB is on the upswing. McDonald is currently doing five mentorship programs with dealers who have committed to it. Over a 12- to 18-week period, the program helps dealers understand how SBB affects their operations, from sales methodology to contracts. The goal is to get them to a point where they can get and deliver on an SBB contract. “It was literally from zero to five programs, and we continue to get request tools and sign up dealers for user management tools,” he said. “It’s shifted almost overnight.”

Selling MPS to Tough Customers

Even though MPS has been around for decades, a lot of businesses, especially in the SMB space, still have no idea what it is. Some companies that had purchased MPS contracts in the past had bad experiences and are reluctant to use it again. That presents a sales and marketing challenge for MPS providers. “A lot of customers are a little more jaded and cautious, and they are asking a lot more questions than they were 10 years ago because of the different levels of execution quality they’ve been getting,” said Johnson.

Meeting that challenge requires that providers first fully understand each customer’s printing environment and needs. With that understanding, it’s a matter of carefully educating the customer on what the MPS program offers and how it can benefit them specifically.

OneDOC hasn’t shied away from disgruntled prospects. “A lot of companies have gone away from MPS because they didn’t enjoy the experience,” said Morris. When OneDOC asks a prospect what kind of service they got under an old MPS contract, it typically learns that those companies simply received consumables and service when needed. “It’s called ‘managed print services’ for a reason,” said Morris. “When you ask, ‘What did they manage for you?’ they get this dumbfounded look on their faces, because the [previous MPS provider] didn’t really manage anything.”

At that point, the door opens to other questions like, “Do you have any idea what your users are printing on a monthly basis? Where are they printing from? Who are your biggest users? How much color are you using?”

If you have happy customers willing to act as references, use them to help win over skeptical prospects. “If we’re trying to get into an account that has had a bad experience, the best thing we can do is have them talk to our customers that have had an experience that is very positive,” said Melo.

Selling to any customer is easier if you have a well-defined scope of your market and have a clear idea of who the decision makers are within it. OneDOC focuses on the SMB market. “We focus on calling only CFOs. Making it a financial transaction works better for us, plus we don’t have anywhere near the competition because most of our competitors don’t have the capability to call on the CFO,” said Morris. “They don’t understand it or have the sales talent to do so.”

Johnson agrees with the idea of calling on the CFO. “When you talk to the CFO, it’s a financial discussion. The CFO is above all the budgets that are affected, and you need someone who can and will sponsor you and who can sign an agreement,” he said, adding that mid-level managers may be able to sign an agreement for a year or two, but not the three to five years you want for an MPS contract.

By defining its market, OneDOC avoids the trap of being all things to all people, but that doesn’t mean it restricts its scope by geography or brands serviced. The company works nationally and has a brand-agnostic approach, and it can do so by outsourcing consumables-fulfillment and service. “My company is strictly sales people and an admin team. It’s a little different setup than most people have,” said Morris. OneDOC uses many outsourcing partners including LMI Solutions, Supplies Network and CIG.

OneDOC’s model seems to be working. Morris claims steady growth year after year, while maintaining margins. “We provide something that other people typically don’t, and since we’re talking to the CFO, that allows us to guarantee our future a little more,” he said. “I don’t have a lot of stuff that keeps me awake at night.”

DeYoung believes that if you know who you are as a provider, it’s easier to find the right customers. “Who are you? Who are you not? What’s your signature? What is your target market? Your margin is preserved if you are targeting properly because you’re speaking to a prospective client base that values what you do.

Your ability to tailor your solution can be a huge differentiator. “Your model is a unique opportunity to put your own signature on the solution. It’s not off-the-shelf. It’s not off the assembly line. It is the value and signature and character that your organization brings to the solution,” said DeYoung. “Our solution is going to be fingerprinted to every single account.” That attention to the customer’s unique needs increases your chances of upselling other services in the future.

Still Lots of Opportunity

The MPS community believes that there is still plenty of opportunity with good margin. If you want to stick with a pure MPS offering, then monitor your operations closely and use the tools that are available to maximize efficiency. Make sure you execute well, too. Customers are more savvy and less patient with providers who don’t meet expectations. “Because customers are asking the right questions, it will eventually fade out the poorer performing players,” said Johnson. “The cream should rise to the top.”

The same goes for those willing to explore ways to expand the MPS model.

“If print is declining, then dealers have to look at ways to make money outside of the activity of pressing print,” said Goldberg. He believes that in the next three to five years dealers need to be looking at ways to charge customers for services like managing users and workflows, BPO, scanning, and print security. “If print is declining due to circumstances beyond our control, then we’ve got to figure out how to make money based on prevailing trends and not against the wind.”