Wes McArtor, BEI Services
In the August issue of ENX Magazine, the State of the Industry profile explored offering everything-as-a-service (XaaS). In the same article, Steve Gau alluded to the fact that Marco has been testing a monthly subscription-based billing system for printing devices on a small scale. We’re now at liberty to divulge that the St. Cloud-based dealership has been working with BEI Services to beta test its imaging-device-as-a-service (iDaaS) formula. BEI is tentatively scheduled to roll out its product to customers at the end of September, according to Wes McArtor, BEI president.
Could this spell the end of meter readings? It’s too early to tell, but the BEI tool, much like Konica Minolta’s quoting of print on a per-device basis, has the potential to be a game changer.
BEI Services’ iDaaS Quote Builder allows dealers to furnish their customers with an all-inclusive monthly rate for printing devices that encompasses supplies, services and parts. The software tool also enables dealers to factor in their profit margin percentage, which creates a buffer in an era of dwindling print volume. The end user, meanwhile, benefits from cost certainty in budgeting for their print needs.
The iDaaS Model
“When this idea started picking up steam, and because we have the data to do it, I started modeling what iDaaS would look like if you put it in the imaging space,” said McArtor. “It’s understanding that volume drives cost. One of the problems is that in any DaaS model, you have to understand the variable of page volume because it dictates consumption of most of the consumable components in the device, as well as toner. Using the dealers’ data along with our Worldstats database, I was able to create a model that in any given volume environment, you can calculate exactly what you’re going to have to charge per month for parts, labor and supplies, and to get to a margin number. The Worldstats database adds a layer of protection, adding a checksum method ensuring the dealers pricing is accurate.
“With our tool, we allow you to set the profit margin expectation. You can put in whatever supply cost you want and override our estimated cost because a large dealer might be able to negotiate a better toner rate or may be using aftermarket toner instead of OEM toner. Users can put in whatever their toner rates are, what type of machine it is, make and model. With any specific volume, we can tell them what it’s going to cost—parts, labor and supplies—to reach that profit margin.”
The tool is not ideal for a production print environment, which needs to be kept on a cost-per-page leash due to the potential for user abuse, according to McArtor. But in non-production environments, BEI doesn’t believe end users print specifically based on how they are billed, thus transitioning them to a different billing model isn’t going to markedly change their behaviors.
But in an industry that offers document management solutions geared toward reducing print, the BEI formula brings a degree of sanity to a dwindling cpp world.
Breaking it Down
McArtor began work on this formula last October, using their Worldstats database as a catalyst for measure and comparison. BEI pioneered the concept of volume distribution and has examined page volume’s impact on costs for 25 years. Using an Excel spreadsheet, he went about devising a method that would incorporate labor and parts expense, along with supply costs, to arrive at a monthly billing number. A key variable was the impact supplies had on the final number.
“Dealers look at supplies as a small percentage of their overall profit, but when you examine the cost per device, it doesn’t matter what volume environment you look at,” he said. “If you study all the products that are running, say, 2,000 pages per month, and look at the cost differentiation between the lowest and highest cost model, it’s dramatic and almost completely driven by supplies.”
Marco was chosen by BEI to test its model because of the dealer’s extensive experience with managed IT, and these practitioners generally have a strong understanding of costs, know all the variables inside the space and are adept at allocating resources specifically to control costs. BEI wanted to explore how to model it; perhaps bundling imaging with IT, as seat-based or user-based billing, or perhaps as an additional charge.
“I wanted to make sure we understood exactly how it fit in the imaging channel with dealers before we, carte blanche, started running it out,” McArtor explained. “Plus, we’ve been working together to make modifications and make the tool more functional.”
With Konica Minolta now and BEI soon to roll out its pricing tool, McArtor notes that other dealers will be faced with competing against these analytics-driven calculations. Some dealers currently bill higher minimum volumes than their customers run, which provides the profit margin. But as the volumes continue to decline, it will further the need for a plan B.
McArtor has consulted with GreatAmerica on the financing aspect, which he says is an easy piece to build into a pact. Instead of a base volume amount and click charges, the billing is changed to a flat rate for service and supplies.
Controlling Costs
In the final analysis, according to McArtor, comes down to dealers knowing what their costs are and having the ability to control them. “The second you put them on a fixed rate model, everything you do to cut costs ends up in profit,” he said. “You really have to put the emphasis on cost control because then you have the opportunity to keep the customer at a fixed rate while you reduce costs. With the current model, you’re in a situation where revenue actually declines as their volume declines. If you teach them how to print less, you impact your own revenue. What customers like about iDaaS is that no one is pestering them for meter reads, they just get a single bill every month that they can budget. Dealers will tell you that the customer’s No. 1 complaint is billing. And it’s because of meters. If you eliminate that, automatically the customers are happier. In addition, you reduce all the costs associated with collecting and billing meters.
“As dealers start to think about it, my goal is to get them to use our tool in the hopes that they do a better job than just guessing at it. We’re going to be making this tool available to all of our customers as we start rolling this out to get them ahead of the curve.”
