Industry Mobilizes with Multitude of Changes to Address Uncertain Future
One of the most popular memes around mid-2020 featured a time traveler who journeyed from the future but was unaware of the exact period in time in which he had arrived. He encountered a present-day person, introduced himself as being from the future and inquired about the current date. When told, the time traveler replied, “Oh, so this is the first year of the pandemic.” Subsequent panels showed close-ups of the present-day person with a look of horror in his eyes, as if the thought of a multi-year pandemic was simply too much to fathom.
Certainly, our worst fears have been realized. Not only did the pandemic cast a pall over 2020 and 2021, but it promises to stretch into the coming year, impacting our personal lives, health and the ability to conduct business while also delaying the full recovery period in the process. Globally, nearly five million people have died from COVID-19, according to the World Health Organization (WHO), with more than 246 million people contracting the disease. The total includes 45 million confirmed cases in the United States and nearly 740,000 deaths.
2021 will be remembered as the year of the vaccine, with seven billion doses issued globally, including 422 million to more than 192 million people in the United States as of Nov. 1. That represents 58% of the population. Unfortunately, 2021 will also be remembered for the events of Jan. 6 in Washington, D.C., a less-than-peaceful presidential transfer of power, partisan politics and an inelegant exit from the war in Afghanistan.
Amid the ongoing divisiveness, one thing is certain. The fallout from the pandemic continues to demonstrate and impart major changes on the way business is conducted, and the ramifications promise to be long lasting and, in some cases, permanent. As we continue to take stock of the future of business, we offer a look at 10 of the most compelling industry storylines from 2021, in no particular order.
COVID AND THE GREAT RESIGNATION. The ability to mobilize and take advantage of government support programs for businesses, including the Paycheck Protection Program, may have had a greater long-term benefit for the dealer community than was initially realized. As businesses slowly made their way back on premise, many entities took notice of a drastic decline in the availability of workers—particularly those in the service sectors—which has severely crippled their ability to provide goods and services. Stimulus payments and extended unemployment benefits fortified many in lower-paying occupations, but the dwindling pool of qualified candidates across businesses that called for more advanced skill sets was also palpable.
Still, this wasn’t an issue just impacting positions requiring more basic skills. Four million employees voluntarily left their jobs in April, and slightly fewer than that gave notice to employers in June, in what has been casually termed “The Great Resignation.” As many pundits have observed, when employees were forced onto public assistance or remote offices, they used the pandemic period to reevaluate their careers and take steps to change jobs or professions. U.S. News & World Report, citing a study by Adobe, noted the trend was driven by Generation Z and, to a lesser extent, millennials. Those earning lower wages, were unhappy with their professions (or both) decided to seek another path.
Many dealers kept their workers gainfully employed by using downtime to brush up on skills, knowledge base and other resources to improve their value to the organization. In doing so, they immunized themselves from what continues to be an HR nightmare for many companies in need of qualified employees.
ANSWERING THE CALL FOR NEW PRODUCTS. In light of the pandemic, it didn’t take long for dealers to realize that A3 sales wouldn’t be as robust and clicks would suffer, particularly with many clients operating from home or in a hybrid fashion. While providing temperature-scanning devices proved to be a transitory solution and A4 units an essential ingredient for work-from-home packages, dealers also looked elsewhere to supplement lost revenue.
A majority of ancillary offerings centered on monthly recurring revenue opportunities. While not necessarily new, many dealers saw significant growth for phone systems in rolling out unified communications-as-a-service (UCaaS). Cybersecurity solutions and managed security experienced a significant uptick among dealers growing their managed IT portfolio. Security applications of the physical variety were also in high demand, as evidenced by dealer growth in security cameras and entry/access systems.
CERTIFIED SUCCESS STORIES. At the onset of the pandemic, many dealers encouraged their sales, technical service and admin departments to leverage down time by becoming more proficient through online training courses offered by third-party and manufacturer organizations. The idea was to become more informed about the products dealers offer, gain marketing and selling strategies, and improve overall processes throughout the organization.
This year’s Elite Dealer class demonstrated that online training represents more than an opportunity to improve skills and knowledge. A number of dealers racked up mounds of professional certifications, providing a significant point of differentiation that can tip the scales in competitive business scenarios. Here’s a small sampling of what dealers accomplished over the past 18-20 months:
- PERRY proTECH tallied 373 new technical service certifications.
- Modern Office Methods saw its service techs record some of the nation’s highest scores in obtaining Ricoh and Canon certifications.
- Advanced Office garnered service and IT solutions certifications from DocuWare and EFI, among others.
- General sales training skyrocketed across the board. Definitive Technology Solutions recorded 150-plus hours of training, and many others have followed suit.
Increasing employee versatility through cross-training, providing a path for employee growth and enhancing the company’s ability to remotely diagnose and repair customer equipment without dispatching a tech—these factors only scratch the surface of the value dealers derived.
BLOCKBUSTER DEAL NIXED. A year after Xerox suspended its much-celebrated and concerted attempt to acquire HP, Staples employed a much more subdued tactic back in January by offering $2 billion to acquire Office Depot. In the end, Staples’ $40-per-share offer didn’t move the needle on a potential deal, though the reasoning was entirely different.
In rejecting the offer, Joseph Vassalluzzo, the chairman for ODP (parent company of Office Depot) wrote a letter to Stefan Kaluzny, managing director of Sycamore Partners (Staples’ private equity owner) noting that ODP preferred to pursue a value-driving strategy that didn’t involve regulatory risks. Staples had attempted to acquire Office Depot back in 2016 for $6.2 billion, a deal that didn’t pass antitrust scrutiny.
In June, Staples returned with a new $1 billion office for Office Depot’s consumer business, including the OfficeMax stores. That came on the heels of Office Depot’s announced spinoff to separate its consumer business and B2B operations, allowing it to take advantage of future strategic opportunities. Once the spinoff is completed in the first half of 2022, could the acquisition by Staples’ consumer business be far behind?
IT DISTRIBUTION COMBO PREVAILS. OK, so not all mammoth deals fall by the wayside. In late March, IT distribution heavyweights Synnex Corp and Tech Data joined forces in a merger that’s valued at a crisp $8.3 billion. The entity, now called TD Synnex, created the world’s largest IT distribution company on the planet.
How big is TD Synnex? It boasts combined revenues of $57 billion, with 22,000 employees and 150,000 clients across the globe, according to MSN, with headquarters in Fremont, California and Clearwater, Florida. The next-largest competitor is Ingram Micro, at $47 billion.
The transaction combines each company’s core growth platforms to establish a differentiated end-to-end solutions portfolio and best-in-class product offerings in some of the largest, highest growth product segments, including cloud, data centers, security, Internet of Things (IoT), services, 5G and intelligent edge.
CHINKS IN THE SUPPLY CHAIN. One of the industry’s greatest challenges is being felt around the world: the global breakdown in the supply chain. Endless rows of empty shelves have frustrated consumers and businesses alike. Dozens of ships are anchored off the West Coast, waiting for trucks and drivers to unload cargo, but a shortage of both (not to mention chassis) created a bottleneck that’s stymied the nation’s commerce engine. Demand and the aforementioned labor supply shortages only scratch the surface of a festering problem, with no apparent resolution in sight.
Computer chips, used in the manufacture of just about every technology, from laptops to MFPs, are seeing a sharp decline in availability. There are delays in product shipments from manufacturer partners, with many dealers sitting on millions of dollars in deals waiting to be fulfilled. Anecdotally, many observers see this issue continuing until the middle of 2022. The upshot: a premium is being placed on used and refurbished equipment as a stopgap solution, although it won’t be long until second-hand hardware is also difficult to source.
SIGNIFICANT LEADERSHIP CHANGES FOR DEALERS, OEMS. The industry bid farewell to one of the most popular dealer executives in March when it was announced that Jeff Gau was retiring after 37 years with Marco, the last 15 spent as both president and CEO. Gau’s replacement was Doug Albregts, the former Sharp exec who was hired as president of the Madison, Wisconsin-based dealer in 2019.
Early spring proved to be a time of transitions for the industry, with several top executive changes at both the dealer and manufacturer level. James Loffler became president of Loffler Companies, joining his father, Jim, at the helm of the Bloomington, Minnesota, firm. Three of the industry’s leading OEMs also saw changes at the top: Patrick Banno became president and CEO of Konica Minolta after Rick Taylor stepped down (he would later start RK Taylor Consulting), Carsten Bruhn took over as the president and CEO of Ricoh North America, while early in the summer, Larry White succeeded Scott Maccabe as president and CEO of Toshiba America Business Solutions.
A late-year transition saw Chelsey Bode buy out her father and partner, Mike Kelly, to become the sole owner of Pearson-Kelly Technology in Springfield, Missouri.
M&A ACTIVITY RAMPS UP SIGNIFICANTLY. Judging by the information we were able to obtain, and having no benchmarks for comparison other than the previous year’s reporting by our magazine, the industry witnessed about a 40% increase in deals completed. Unofficial though our information may be, it still paints a picture of the substantial uptick in transactional activity year over year, and clearly demonstrates that dealers, OEMs and solutions providers alike have positioned themselves for growth on the back side of the pandemic.
UBEO Business Services of San Antonio is the undisputed 2021 M&A king, pulling off no fewer than five acquisitions—Rainmaker Document Technology, United Reprographic Supply, Business Copy Associates, James B. Schwab Company and Digitech Office Machines. Nashville, Tennessee-based Novatech scored three deals, obtaining United Laser, Pahoda Imaging Products and Digital Office Solutions. Marco was also busy, acquiring West Central Shredding, All/Pro Office Technology and Wisconsin Imaging Solutions.
Donnellon McCarthy Enterprises picked up T&I Office Equipment and American Business Machines. Applied Imaging acquired Lasers Resource and The Polack Corp., bringing its pandemic-era total to five. Doceo added Copy Doctors and Eakes Office Solutions obtained Schwarz Paper. All Copy Products struck a deal with Time Business Systems and Impact Networking onboarded Quality Assured Office Machines. Mason Smith obtained MTS Office from its original owners. TOPP Business Solutions added Technic IT Group and Higher Information Group brought on Office Equipment Source. The Golden Ruler added The Business Centre.
Access Systems acquired Elite Business Systems and Datamax obtained Bull’s Office Systems. Meritech onboarded American Copier Solutions and M&S Technology Group acquired The Circle. Offix obtained Eastern Shore Business Machines and GoodSuite reeled in Select Business Systems. imageOne picked up Quantum Technologies and Ford Business Machines added Kubinski Business Systems. Visual Edge netted Brayton Associates and Proven IT acquired Think Tank NTG. Fraser Advanced Information Systems added Aaxios Technologies and Fruth Group acquired Yuma Office Equipment. Systel Business Equipment obtained Baker Office Solutions.
Xerox set the pace among industry manufacturers with dealer and technology additions: CareAR, Groupe CT, Document Systems and Competitive Computing. Canon added Redlen Technologies. ConnectWise and Service Leadership joined forces while Kofax acquired PSIGEN. On the reman side, Tech Systems added Unitone Imaging Supply while ARMOR Group and International Imaging Materials united in the thermal transfer space.
ORGANIC OFFICE GROWTH. The dealer community also enjoyed brisk activity in spreading its geographic footprint during 2021. Texas proved to be a popular destination for Impact Networking, which opened a sales and technology showroom in Houston. Novatech expanded into San Antonio in conjunction with its United Laser acquisition, and United Laser opened a new facility in Greenville–Spartanburg, South Carolina. The dealer also opened a location in Virginia Beach that serves as a sales office, product warehouse and client support facility.
Blue Technologies bolstered its Ohio coverage with new offices in Toledo, Mansfield and Youngstown. RJ Young welcomed a new distribution center in Memphis, Tennessee, and Centric Business Systems cut the ribbon on a new King of Prussia, Pennsylvania, office. Gordon Flesch Company ushered in new offices in Appleton, Wisconsin, while Access Systems opened a new office in Sioux Falls, South Dakota.
KONICA MINOLTA DIVESTS CERTAIN DIRECTS. It was a year of transition for Konica Minolta Business Solutions, led by Banno’s ascension to president/CEO. Another was the OEM’s strategic move to sell at least 15 direct operations to three of its top dealer partners: DEX Imaging, Pacific Office Automation (POA) and All Copy Products (ACP). Most of the 10 branches obtained by DEX Imaging were located in the Southeast (65 Konica Minolta employees were included in the deal). POA picked up branches in Nevada, Utah and New Mexico, while ACP gained or buffered holdings in Colorado, Wyoming, Arizona and Nebraska.
Konica Minolta, which still has oversight of more than 100 direct branches, said the asset transfer ensures a more balanced coverage model. The move enables the OEM to focus on its four key growth areas: enterprise and global enablement, vertical market insights, managed IT services and enterprise content management, and commercial and industrial print.
