As the calendar turns to 2018, all the players in our document imaging universe—the dealers, VARs, OEMs, managed service specialists, various product and solution providers, suppliers, etc.—are reminded that the only constant is change. The universe is shrinking through consolidation, while disruptive technology has the tendency to shake the tree and cause all of the decaying fruit to fall by the wayside.
This is not an attempt to scare, but an opportunity to remind that change is not for the faint of heart and should be viewed as an opportunity to seize the chance to ride the waves of change rather than be sucked into the undercurrent. The past year provided many highlights that foreshadow trends destined to make an even greater impact in 2018 and beyond. There are lasting ramifications for all players within the document imaging ecosystem.
We’ve rounded up a large sample size of industry heavyweights to shed some light on what variables will play a role in influencing how 2018 will play out, along with their predictions of what we can expect to see throughout the year.
The Internet of Everything
Patrick Flesch,
Gordon Flesch Co
With the increased movement toward connectivity, one of the biggest trends of 2018 will be the Internet of Things, notes Patrick Flesch, vice president of sales for the western region at Gordon Flesch Co. The increase in WiFi-enabled devices and the desire to connect to MFPs has reached a point of standardization, and Flesch believes it creates opportunities for dealers in the realm of security.
“In the document imaging community, the IoT magnifies the opportunity and chance for a security slip-up,” he said. “Clients will need help protecting their business and becoming more secure in multiple areas to include IT, print, and content management. We need to capitalize on this and are positioned to do so from many different angles.”
Clients will need help protecting their business and becoming more secure in multiple areas to include IT, print, and content management. We need to capitalize on this and are positioned to do so from many different angles.
Patrick Flesch, Gordon Flesch Co
Darren Cassidy, Xerox
Speaking of device enablement and opportunities, the growing world of app-enhanced MFPs is certain to gain momentum during 2018, according to Darren Cassidy, president, U.S. Channels Unit at Xerox. The manufacturer did its part to usher along that era with the 2017 release of its AltaLink and VersaLink lines, which include an open API architecture to foster app enhancements.
“There’s a strong opportunity for 2018 in meeting client needs for more device integration to streamline workflows unique to their businesses,” Cassidy said. “More and more channel partners will meet this need by building applications for their customer’s multifunction printers, an emerging trend that will grow exponentially in the coming year.”
Cassidy added that dealers should partner with OEMs who provide training and ongoing assistance with building, pricing and marketing custom apps for MFPs, including help getting started and in using hardware and software tools to efficiently create apps for customers.
The Solution Next Door
Mike Marusic,
Sharp Electronics
While many dealers will continue to focus on the hardware aspect of their business, as it is the meat and potatoes of their offerings, the movement toward pursuing adjacent markets will continue in 2018, according to Mike Marusic, COO of Sharp Electronics Corp. As such, Marusic feels that focus should encompass the exchange of information—be it through paper, digital conveyance or meetings.
Sharp is banking on end users integrating meeting spaces into document sharing and overall information management for companies. Its AQUOS BOARD products are an example of adjacencies dealers look to pursue, which can also provide a gateway for related areas such as video conferencing. Regardless of the format used for information sharing, Marusic feels it is incumbent upon dealers to help end users augment existing solutions.
Given the formidable opportunities that exist in adjacent industries, copier dealers need to be flexible and open to change.
Mike Marusic, Sharp Electronics
“Given the formidable opportunities that exist in adjacent industries, copier dealers need to be flexible and open to change,” Marusic said. “They should be able to expand their product focus without diverting from the traditional hardware business model, which we believe is still very strong. The challenge will be disrupting the metrics that have governed our business model. New areas may not tie to how we measure the business today and new models will emerge. This willingness to change how they measure their business model will be the key differentiator for those dealers that see future success.”
Workflow Automation
Hiro Imamura, Canon
On the subject of moving-forward technologies and the Office of the Future, enterprises will aim to streamline their daily workflow operations. Hiro Imamura, senior vice president and general manager for Canon U.S.A.’s Business Imaging Solutions Group, feels that as more connected office products enter the workforce, the expectation will be that all solutions can effectively communicate with one another to help promote efficiency, creativity and collaboration among clients. As an example, he points to Canon’s integration with Box Inc., which expanded its solutions portfolio in regards to capture and information management to enable inter-office collaboration for an increasingly mobile workforce.
“The document imaging community will need to make conscious efforts to deliver solutions to its channel partners and customers that incorporate the next-generation technologies of the Office of the Future, such as cybersecurity components,” Imamura said. “It will be imperative that MFP manufacturers look to incorporate features that can safeguard an enterprise’s confidential information as more connected devices claim their stake in the document workflow process.”
As the year progresses, Imamura believes the document imaging industry should seek to use predictive maintenance to enhance its service and support capabilities, anticipating process-disruption problems before machines malfunction. Canon dealers can avail themselves of the manufacturer’s new Customer Solutions Center, which can handle integrated platform support across software, devices, workflow solutions and networks.
Secure Solutions
Brian Sampietro, TGI Office Automation
TGI Office Automation experienced a 15 percent increase in solutions sales in 2017, and one of the key drivers in its solutions menu is security. Brian Sampietro, CIO for the Brooklyn, NY-based company, points to the recent wave of headlining security breaches, including the Equifax identity theft and the WannaCry ransomware attack, as evidence of the continued need to provide clients with security across networks, printing and scanning infrastructures.
“We help them with vulnerability testing and provide professional services and software to monitor and manage their network security holistically,” Sampietro remarked. “This includes fleet management, network monitoring, print management software and card readers for authentication to secure the access employees and guests have to print and scan.”
Eric Crump, Ringdale
Indeed, dealers and manufacturers alike recognized the impact that security breaches have visited upon business in general. Eric Crump, director of Strategic Alliances for FollowMe by Ringdale in the United Kingdom, believes the NSA data leak and the high-profile HP marketing campaign that featured actor Christian Slater will continue to draw attention to a growing security concern that sees the average cost per lost or stolen record rising.
Ringdale’s FollowMe product garnered a 2017 “Pick Award” from Buyers Laboratory for Outstanding Data Loss Prevention solution.
“Dealers will have to align their strategies to meet the changing security and compliance needs of customers, especially as most are not ready to consult around compliance matters,” Crump noted.
“Printer vendors will focus much of their efforts on ensuring their output devices meet similar security standards as other vendors claim to already have the highest security.”
Getting SaaS-y with Clients
Jennie Fisher,
GreatAmerica
The growing As-a-Service phenomenon is truly beginning to take flight. Jennie Fisher, SVP and GM for the Office Equipment Group at GreatAmerica Financial Services, noted how DocuWare matched Gartner’s 2016 prediction that SaaS would represent 50 percent of new application purchases. In addition, she feels dealers have demonstrated renewed interest in managed IT. In GreatAmerica’s OEG Annual Dealer Survey, 50 percent of dealers reported they were offering managed IT services, up from 46 percent two years ago.
MPS contracts are now including aspects of IT hardware and services, which impacts upfront hardware revenues and allows for more recurring revenue in other service areas.
Jennie Fisher, GreatAmerica
“MPS contracts are now including aspects of IT hardware and services, which impacts upfront hardware revenues and allows for more recurring revenue in other service areas,” Fisher said. “This ultimately helps capture a higher percentage of the customer relationship. Depending on how the programs are built, we can be in a good position to help our Dealers navigate this new territory; helping protect their interests while growing with these trends.”
Fred Carollo, EverBank
Fred Carollo, vice president of originations, Office Technology at EverBank, believes the movement will continue toward selling everything-as-a-service (XaaS), along with the desire to have all-inclusive agreements to document those solutions (hardware, licenses, services and consumables).
“Dealers will need to address their capabilities and offerings to be able to compete in our changing market to stay relevant,” Carollo said. “This is a complicated transition for a dealer. In addition, lessors will have to adapt and there are inherent risks for them in these types of contracts. Upcoming accounting changes, namely FASB, will also have an impact on the structure or reporting of these inclusive type of transactions.”
Changing Channels
Luke Goldberg, Clover Imaging Group (CIG)
The expansion of services is not just a BTA thing. Luke Goldberg, executive vice president, sales and marketing for Clover Imaging Group (CIG), sees a strict delineation between the transactional versus the contractual channels: The transactional channels being office product dealers, resellers and office product wholesalers, and the traditional contract stationer channels. The traditional transactional players are facing tremendous pressure from companies like Amazon and are seeing their margins declining, while retailers like Office Depot and Staples are looking at adding services.
“All of them recognize that they need to become more strategic with their customers and need to invest in services in the same manner that the traditional BTA channel has,” Goldberg observed.
“In the BTA, where it already has embraced services, you’ll see an expansion of services into areas that might not only be print adjacent but might be outside of the realm of print.
“It’s the old adage that with the end customer, it’s all about having one throat to choke. The more services that a dealer can provide, the more strategic and more valuable they are, and the less transactional that relationship becomes. I think you’re going to see an acceleration of that trend in channels where it already existed, and the beginning of that services, services, services mantra in channels that have been traditionally more transactional in nature.”
Customer Overload
John Henze, EFI
With several OEMs readjusting their distribution tactic, transferring direct or partner-owned customer accounts into the dealer channel, led to some dealers inheriting dozens of new accounts, notes John Henze, EFI’s vice president of marketing for the Fiery business. This adds implications to the dealer channel in terms of the ability to not only manage the slew of new accounts, but in some cases provides a foray into foreign territories such as light production printing.
“This requires a whole new set of skills, different capabilities and knowledge, along with a new way in which the product is sold and supported,” Henze said. “For many with just an office focus, this now requires an ability to call on businesses such as in-plants, print for pay or smaller commercial printers. It requires a shift in focus, skill development, education and becoming competent in areas they weren’t previously, such as color management and job automation. Dealers will need to be able to lean on partners like EFI to build their knowledge base and capability.”
The ABCs of M&A
Sure, one can thumb through the pages of this publication’s annual forecast issue for the past few years and find a redundant theme: Consolidation is changing the way we do business. That M&A is increasing won’t lift any eyebrows in amazement. But as the ecosystem becomes less fragmented, both from an OEM and dealer perspective, and there are fewer players addressing market needs, it changes the narrative from a product, service and geography standpoint. It creates more downward pressure on the medium and smaller players struggling to maintain profitability and further underscores the need to incorporate managed services and contractual work as opposed to a pure hardware play and transactional business.
Bill Melo, Toshiba
“It’s scary for the small business that have been in the industry for a while and don’t want to go to the effort of reinventing themselves,” noted Bill Melo, chief marketing executive for Toshiba America Business Solutions (TABS) and Toshiba Global Commerce Solutions (TGCS). “Others that may see the need to diversify as requiring investment dollars that they may or may not have. There’s also an aging issue where a lot of small businesses in our industry were founded by people in their 30s in the 1980s, and now they’re graying and may not have another path to choose. All of those contribute to the supply side of the equation. The strong are continuing to get stronger by picking up the companies that are in need of capital.”
Thus, the talking point at hand becomes less about who’s buying whom and more about the need to diversify revenue streams. When Johnny’s Copier and Office Supplies around the corner gets annexed by a larger dealer and becomes endowed with that dealer’s capabilities, suddenly Johnny’s is no longer an insignificant competitor in your market.
Doug Johnson, LMI Solutions
Doug Johnson, chief strategy officer for LMI Solutions, feels one of the more compelling storylines in the M&A saga is the drastic influx in private equity investments, which he feels changes the dynamics and position power of the channel players versus OEMs versus distributors. Fortified companies like DEX Imaging and Visual Edge Technology pursue companies with agnostic product lines, which provides them a stronger bargaining position to negotiate with OEMs who want access into their ever-growing customer base.
The private equity interest is a positive indicator for the dealer universe as a whole. “It’s definitely an indication of the value that this industry still offers,” he said. “If there wasn’t money to be made in this industry, the private equity people wouldn’t be interested. On the flip side, if you’re an independent dealer, you have to choose your partnerships carefully to compete against these regionally-based rollups.”
Hunter McCarty,
RJ Young
Hunter McCarty, chief operating officer for Nashville, TN-based RJ Young, believes the pace of acquisitions will quicken in 2018, with dealers absorbing other dealers and IT services companies. Manufacturers, he noted, will use acquisitions to either protect market share or gain a bigger slice of the pie through conversion of brands.
On the whole, McCarty sees dealer growth opportunities falling under three categories: acquisition, providing additional products and offering new services.
The dealers are in a good position if they make the correct choices, because they are close to their customers, have access to the network and have built relationships.
Hunter McCarty, RJ Young
“Production for the dealers will continue to play a big part of continued growth,” he said. “Some dealers that are not active in production will move in that direction, realizing that to sustain growth and capture customers, they must offer a complete product line. Additionally, as dealers begin to move into IT services and learn how to develop a model that works and provides profitability, they will expand their offerings.
“The dealers are in a good position if they make the correct choices, because they are close to their customers, have access to the network and have built relationships,” McCarty added. “The key is to provide added value and make sure the customer sees the dealer as a relevant and trusted advisor, not just a commodity provider. This requires a higher sales skill and a more professional level of interaction with the customer.”
Value of Relationships
Danielle Wolowitz, KYOCERA
Finally, one of the driving factors at the heart of 2018 is the role relationships will play in the value chain between manufacturers and suppliers, dealers and the end user. Danielle Wolowitz, vice president of the Corporate Marketing Group at KYOCERA Document Solutions America, notes that while technology continues to be the backbone of the industry, the true value is in explaining how that technology helps clients run more efficiently and simplifies everyday tasks, with a cost that is well offset by its contribution to their bottom line.
“This new reality will create significant challenges and enormous opportunities for individuals and organizations in our industry,” she said. “It really depends on the mindset. For those willing to dig in, those determined to learn about their customers’ operational needs and issues, those willing to embrace the idea that the sale is always ongoing, 2018 is going to be extremely rewarding.”
