Greg Dixon
Earlier this year I was talking to Ed McLaughlin, president & CEO of Valderus, about the industry’s difference makers. During our conversation he mentioned a distributor named ScanSource, noting the inroads they’d been making as a distributor of 3D printers. Whenever anyone in the industry hears “3D printing” of late their eyes light up so the mention of ScanSource in this context captured my attention. In fact ScanSource does a lot more than distribute 3D printing technology and has only been distributing 3D printers for a couple of years.
With my interest about ScanSource piqued I finally had the opportunity to interview Greg Dixon, ScanSource’s chief technology officer, last week to gain a better understanding of what ScanSource does and what they’re doing in 3D printing.
Figuring that some of my readers aren’t familiar with ScanSource, who is ScanSource?
Dixon: ScanSource is a distributor. We buy products from the manufacturer, put them in a giant warehouse near Memphis, TN and we ship them out and service North America from there. We sell those products only to resellers. We never sell anything to end users. We have resellers in various categories and never compete with the reseller and never compete with the manufacturer.
Tell me about your distribution model?
Dixon: We’re not a distributor of one type of thing, we’re a distributor of many types of things and we stay true to that model. We started our business around the data collection business, the bar code if you will. Because the bar coding business, what we call AI/DC (Automated Identification/Data Collection), that’s what you do when you scan a barcode, and so the barcode business needed a little more from a distributor than say a PC.
In the ‘80s, early ‘90s, PCs and computing had become commoditized and the distributors of those products were making less money. We were in that business at one time and understood it intimately, but then we asked ourselves, “Are there technology industries or categories that need more of a value add? Can we add some special value to a particular marketplace that needs it and charge more money for that and not be limited to two, three, four points of profit, but 10, 12, 14 points of profit?”
Bar coding was a good candidate for that. We got into it in 1992 and were the world’s first barcode distributor. Crazy thing about that is we don’t distribute barcodes; we distribute printers that print labels that have barcodes on them. We distribute barcode printers, barcode scanners, and special portable computers that read or automatically identify something and have a barcode scanner in them.
It’s the kind of industry that needed our type of distribution, which is very narrow and deep as opposed to broad line distributors who are very wide. They distribute thousands of products across thousands of vendors. But you can’t do that and go very deep. Barcoding allowed us to do that.
Point of sale was the next option as [that industry] had a lot of the same vendors involved because you read a barcode at the POS. It also needed narrow and deep distribution. Deep means your sales rep knows intimately the product set and your tech support person is very deep, so there is a lot of special values we can bring to those marketplaces.
Then we went to telephone systems, then voice solutions and video conferencing, then physical security (access control and cameras), so we’ve grown our business a number of ways. We continue to add new business models that benefit from our kind of distribution. The latest is 3D printing.
That’s how we’ve grown the business. But you also grow geographically so we discovered if you need to do this in North America you need to do this in Europe as well, and we discovered similar kinds of needs and opportunities there and created a European operation and a Latin American operation.
Why do resellers choose ScanSource?
Dixon: Resellers that sell the solutions [we distribute] are looking for a distributor who can support them. That’s how we differentiate ourselves. They might choose us because we have product in stock. We’re primarily the first and largest distributor in almost all of those categories. So we can afford to have more products on our shelves when the reseller needs it. The worst thing is to call the distributor and say, “I need 50 of these” and they say, “We only have eight or don’t have any and it’s going to be four weeks before we have any.”
We’re a publicly traded company, we’re well financed and as a result we can have lots of product on our warehouse shelf so when you need it, we’ve got it and we can get it to you the day after tomorrow or tomorrow very easily. That’s the reason someone would do business with ScanSource.
We have a deep inventory to make sure we have what you want. Also, if you need help when there’s five different products from five different vendors in this category and you’re wondering what’s the right product, our technical team can help you choose the right one. There are all sorts of resources within ScanSource that we tend to do better than anybody else.
3D printing is probably one of the product categories that our readers are most interested in, how long ago did ScanSource see the potential there?
Dixon: My job is to watch the horizon so to speak. When something is new I’m supposed to know about it. We watched 3D printing for a year or two and what got our attention was that one of the key patents on a particular type of 3D printing had expired. When it expired all of a sudden anybody could make one of these things and they began to get smaller and cheaper, smaller and cheaper. Instead of being a $500,000 thing, it became a $50,000 thing, and then the $50,000 thing became a $5,000 thing and then a $500 thing.
We watched that carefully and chose our timing carefully as to when we would enter that market. That was three years ago. We’re still watching this develop and trying to figure out how to earn our place in the market. There’s maybe seven different 3D printing technologies you can choose from and we chose two or three that we thought were the most likely for resellers to participate in.
A number of our resellers focus on manufacturing and most 3D printers go into manufacturing for rapid prototyping. Our resellers that sell barcode systems, printers or something to the manufacturer, they’d ask “Do you do prototyping and how do you do that?” Now they can come back to us because they trust us and buy their bar coding products from us or their networking stuff from us, so we can help them get into the 3D market. We can educate them, provide tech support, resources, business development reps, free samples—give them all the things they need to be successful at selling that first 3D system.
Why 3D Systems?
Dixon: There really are only two major 3D manufacturers. It sounds crazy but 3D Systems’ headquarters are only an hour and 15 minute drive from our headquarters. The fact they were close by was more happenstance than part of the decision. As we looked at their business model, we saw tons of opportunity for us to add value. Logistics, getting the product and materials in the hands of the people that need it in a reasonable time, that’s what we’re good at.
How have you seen the 3D printer market evolve since the early days?
Dixon: It’s still the early days. It’s a slow developing marketplace. If this is a train you jump on, some trains run fast and some trains run slow and this one runs slow. We have to be patient with this market as it develops. We’re in it for the long haul, we want it to be successful, and we intend to do everything we possibly can to make it successful. We’ve signed some related vendors around it, mostly scanner and software vendors.
How can you help a reseller be successful selling 3D printers?
Dixon: Looking back at how copiers became MPS, nowadays you don’t buy a copier, paper, and toner, instead you pay for it as a service. It’s really razors and razor blades, so the copier is put in there to consume the consumables. 3D printers are exactly the same. They devour consumables. If I were a well established MPS provider and had the financial resources and the sales resources to manage a business like that I would want to look at 3D printers as a service. You have to be well financed to do this or need a leasing partner who is well financed to do it, but I would be thinking about how do I sell rapid prototyping as a service where you pay by the prototype or buy the consumables as you need them. It’s a market that lends itself to an as-a-service approach.
What does the future look like for ScanSource?
Dixon: We’re going to spend our efforts protecting the channel we live in. We advocate for the channel continuously. I tell people we’re your best advocate. We’ll constantly be creating new programs for cloud delivery, Managed Services delivery–there’s the Internet of Things (IOT). I’m always watching that but it’s not a brand new thing. Every computer or cell phone is on the IOT. Our job is to make smart things smarter on the Internet of Things so we’re developing a whole new strategy around IOT. To be honest, within our marketplace, it’s still 2-3 years before the market served by IOT becomes our market. Everybody wants to talk about it and I’m the guy that talks about it around here.
