The office equipment dealer (OED) channel has had a rough go these last two years, and that’s putting it mildly. Volumes were already in a slow decline and the pandemic accelerated this bad pattern at warp speed. Some say volumes will come back to 80% pre-pandemic levels while others say it will be more like 56% to 60%. Yikes.
No matter whose numbers are correct, double-digit declines in page volumes mean our channel has to diversify to grow. You already get that. Question is, what to diversify into? Managed IT like everybody else? Maybe not. You already know lots of dealers chasing managed IT, yes, but there are some key reasons why it may not work for your dealership:
- Different customers. The OED channel built itself on simplifying complexity for mid-size to large customers. The more MFDs and printers a customer had, the better option they were for fleet replacement, consolidation, and managed print options. Small customers weren’t a good fit because they didn’t have a lot of things that printed. Managed IT customers are an entirely different animal. They are usually small companies without their own IT manager. Offering to take care of their IT assets fills a hole in their capabilities. We all know it’s much more cost-effective and easier to sell new services to existing customers than it is to chase new customers. If managed IT isn’t a good fit for our existing customer base, do we have the knowledge and guts to chase an entirely new type of customer with entirely different needs than those we built our businesses on serving?
- Shift to Cloud EVERYTHING: First things first, as the definition of “managed IT” means different things to different people. For the purpose of this article, we’re talking about managed physical assets. There are plenty of businesses that define Managed IT to include virtual assets, but that’s not what we are talking about here. So let’s carry on…The other problem with managed IT isn’t much different than what we’re seeing with printers and copiers: People aren’t buying technology assets like they used to as they migrate as much as possible to the cloud. Servers and desktop printers are fast disappearing as virtual options become more prevalent. With the proliferation and attractiveness of remote work to many workers (sorry Elon, it’s not going away anytime soon), office infrastructure needs are far fewer than they used to be. Like Wayne Gretzky once said, you become great not by going to where the puck is, but to where the puck is going to be. Entering a diminishing channel with literally thousands upon thousands of established players may not be the soundest avenue to seek growth. On-prem-based technology models are fast becoming “tech debt” anchors and old-fashioned. By diversifying our offerings, we should be looking to the future, not the past.
- Complexity & Challenges: Many of you reading this may have already tried to establish a managed IT practice and failed. Managed IT is hard. It requires completely different skill sets compared to those our people already have. We sell, fix and supply “things.” Managed IT providers don’t ever turn a screwdriver or wrench. There are no consumables built into the business model. There is simply no adjacency to what we built our businesses on up to this point. And there are new challenges. When a printer breaks, it’s inconvenient and the customer can simply use another one. When a server or desktop is hacked, it’s a matter of life or death for the company targeted. Are you ready for that?
There are other diversification options available that may be a better investment for the growth and development of your business. I’ll share three of them, but there are a TON of options and directions. The diversification options below meet the following criteria:
- Can be sold to existing customer base: You have the customers; solutions should help you get more wallet share.
- Are adjacent to current business model: You sell, service and supply things. With these options, that doesn’t change.
- Are persistent needs or poised for growth: The three options below aren’t going away anytime soon.
The criteria above aren’t necessarily complete, and you may have a few of your own to add. The point is, by doing so, the options you end up with for growth will better align with you AND your existing customers. So, for your consideration, three diversification paths that could be a great fit for your business:
- Infrastructure Services: Think water purification. Think coffee services. Think EV charging stations. Think physical alarm and security. All of these things require provisioning, service and consumables. Stone’s Office Equipment is making a big push forward with their “Pure Water” option for customers. ACDI has invested heavily in EV charging options for their customers, and Pulse Technology has done the same. I’m certain you know other dealers who are branching out in this way. At first, these options seem “far out,” but notice that they meet all three of the decision criteria above.
- Pro A/V: Hats off to Pulse Technologies for inspiration on this one. They saw an opportunity for interior LED wall panel solutions for displays. These aren’t TVs; far from it. They are a connected system of LED panels that can cover entire walls. Because it’s modular, those panels will require servicing-wrench turning. Unlike server or desktop management, “The Cloud” can’t replace their value: they are displays, need to be on-prem, and are part of a relatively untapped market, unlike exterior display solutions. And that’s just one thing. With the rise of Zoom life, offices will require upgrades to their conference rooms to make it easier and more equitable for all in meetings. A/V is not new, but it’s evolving and persistent.
- Cloud Solution Management and Cybersecurity: This one (two I guess) only meets two out of three of the criteria above, but both channels are growing faster than any other in the technology world. How is it adjacent? Because it’s information, same as we help customers with on paper today. The medium has changed from paper pulp to digital bits and bites, but both are information-sharing technologies. I’m of the belief that you can’t touch the data without protecting the data (thanks to Matt Lee at Pax8 for shifting my mind in this direction!), so the two really go well together. Security and Cloud have complexity, which your existing customer will want some help with. Bendix Imaging is now Bendix Technologies thanks to diversifying in this direction, and they have grown an incredible amount thanks to cybersecurity as an offering. It’s not easy to deliver, it’s ever-evolving and it’s the future.
No matter how you decide to diversify, make sure it’s something that suits your current business model and customer base. Once you start diversifying in this way and winning, you can investigate fewer adjacent options in the future. The key is to make sure you build a diversification criteria and yardstick, so you don’t chase the wrong carrot, even if everybody else is.
If you’d like to know more about different channel revenue and growth opportunities, reach out to me via email to get the latest edition of the Tigerpaw Managed Services Guide to New Vertical Growth. It’s filled with the financials and real-world advice from those in the different channels you may decide to pursue. We’ve worked with these channels for over 35 years and can introduce you to folks that may be able to help as well. As you look to grow your business into the future, it is my sincere hope that this article has helped you in some small way. Keep winning, keep growing, keep leading the way!
