The marketplace for office technology is changing at a rapid pace. Gone are the days when being a dealer in the office technology space meant simply supplying copiers and printers. While that is still a core part of the business, office technology now offers much more than that. As print volumes remain flat, many copier and printer dealers have started to harness new sources of revenue by expanding into the digital space, providing software along with their equipment. Even beyond that, equipment dealers are now working to integrate IT services into their offerings. Some copier dealers have gone as far as taking over a company’s entire IT department as they expand their IT offerings.
Fred Carollo,
EverBank Commercial Finance
This shift in services not only impacts the dealers in this space but the lessors that provide financing as well. Finance providers are adapting their own offerings to meet changing dealer needs. For example, some lessors have begun developing all-inclusive contracts that reflect the more comprehensive packages being offered by dealers. This requires coordination among all parties involved, and the industry overall is still refining how to best execute on these packages.
As new systems emerge to offer true managed network services, this is an exciting time for the office technology industry. There are both benefits and risks to this new trend.
Among the benefits, those who can offer a package that includes hardware, software and professional services can gain a competitive edge by offering the most ease and convenience to the client. There are fewer agreements to be signed and one bill to pay. Additionally, instead of having to look around for each of these services, clients can have a one stop shop for everything they need.
However, there are also risks to these packages. As contracts move away from simply including hardware, the more services that are added, the more risk is taken on. In general, dealers have gone about expanding their digital services in three different ways: building up internal capabilities, purchasing an IT company, or partnering with a third party. Each of these methods comes with their own set of risks, which are important for lessors to keep in mind when deciding which dealers to work with. Lessors also must carefully consider the legal risks of providing such comprehensive financing packages to lessees.
For dealers looking to build up new capabilities internally by developing their own IT component, one major risk is extending too far beyond the core business and falling short on client service across the board. At times, when dealers over-commit and expand their offerings beyond their areas of expertise, they risk losing not only their new lines of business but the original offering as well. For example, a long-standing client may be entirely satisfied with a dealer’s copier services, but if they have a poor experience with a new IT offering, the dealer may lose the business in its entirety. Therefore, it’s imperative that dealers have a sound strategy when moving into a new field and successfully invest in building their expertise.
The most popular path towards expanding one’s services is purchasing an IT company. This option often makes sense due to the relatively short time it requires to implement, though it may be more expensive than investing in an internal team. As with any acquisition, there is always a risk of unexpected costs or service pitfalls. Dealers need to protect themselves and know what to look for when purchasing an outside company.
Alternatively, dealers may consider working with third-parties to provide a new suite of services such as IT services. While this may be the most cost effective, outsourcing services comes with its own set of risks. Above all, the performance of those offering outsourced services now affects the reputation of those providing the hardware. And with a third party, the dealer has much less control over the service quality. For example, a hardware dealer may engage an IT vendor who has an unresponsive Help Desk. Even though this service isn’t provided by the dealer, their reputation is tied to that of the IT vendor because of their joint contract. This opens up new areas where the client could potentially challenge the contract.
In order for dealers to find the right firm to acquire or partner with, there are a few key things to keep in mind. First, reputation is everything. It’s important to look for firms with solid experience and a strong track record of servicing the end user. This can be found by reviewing credentials, staff and client feedback on previous projects. Those partnering should also have complementary areas of expertise and professionals who together can drive synergy. Finally, all parties should set expectations for how their partnership will work.
Though this process can be complicated, lessors can be invaluable resources when looking to form these types of business combinations. Since lessors conduct their own due diligence on all parts of a contract – from the vendor to the manufacturer to the product itself – they may be able to share extensive research and expertise on the best way for vendors to go about product expansion.
As the industry changes, dealers will have to weigh the risks and rewards of this new approach. There are dealers at every stage – from those who are going full force to those who are considering their first foray into managed network services. It will be interesting to see how to future unfolds for office technology.
