As we delve into our state of the industry subject of selling everything as a service (XaaS) and the elements it entails, we will begin with a look at the question of device- or seat-based billing in an industry that has long relied on meter readings to provide precise billing on customer usage.
The argument in favor of a device- or seat-based billing method is that it fully delivers on the promise of a subscription-type, flat-rate fee that provides cost certainty to the client. You pay x-amount per month regardless of usage, based upon a formula devised by the dealer that takes into account historical data, peaks and valleys, and pegs a figure much in the same vein as budget billing that a utility company would employ. It comes, however, with a host of caveats that opponents argue could impact either the dealer or the end-user customer in a negative fashion.
Kelly Moran, vice president of sales and marketing for The Gordon Flesch Company (GFC) in Madison, Wisconsin, notes that the concept around seat-based billing has been kicked around at MPS conferences and dealer events for four years. Moran adds that GFC has had many internal conversations on the subject, but he feels it hasn’t gained much traction.
“Whatever cost structure you’re going to build does still, to some extent, rely upon on volume to determine how you set the expense for that user that’s based upon per seat, as in per user,” he said. “Sometimes, if the volume assumptions are off when you establish pricing, I think you’ll see it can be unnecessarily high or low.
“However, we have built something that’s a little bit in the middle – per device, per month-based regardless of what the volume is. But we typically only put those fixed per-month pricing models on low-end A4s where we know that they’re not going to be doing as much, maybe 200 images a month. So the risk of going 15-20% more than that doesn’t move the needle.”
Moran adds that in many cases, the low-end printers weren’t on a monthly program but were instead part of the time and materials, labor, break/fix model with supplies ordered as needed. “Putting them on a monthly program as a value, or trying to do it on a meter reading is tough, because if they’re only doing a few images per month, it becomes a pain,” he said. “We’re trying to find solutions to this, and I get why people are looking to seat-based. But it can’t be devoid of any knowledge of volume.”
Some dealers are wary of the impact it could have on dealers who don’t know their clients’ volume as extensively as needed. Chip Miceli, CEO of Pulse Technology in Carol Stream, Illinois, cautions fellow dealers to stick with incumbent clients with a substantial track history if they plan on leveraging a seat-based model.
“I don’t want to see smaller dealers going into this with their eyes closed, thinking that’s the only way to go to be successful,” he said. “But we’re getting more and more involved in it. We’ll do what the customer wants. The accounts we have on seat-based billing are because we went up against (dealer directs) and had to play the game to keep the customer, so that’s what we did. So far, we’ve only made one mistake. I know some of the independent dealers are selling it; I’ve seen the contracts. More companies are doing it than we realize.”
There’s no doubt that the seat-based billing method still has a long way to go before reaching mainstream acceptance. West McDonald, founder, West McDonald Co. and SBB’s biggest evangelist, knows he has his work cut out for him.
“I’m going to spend time working with dealers to help build these programs,” he said. “The idea’s been floated out there but no one’s really been there to build a program. NEXERA is there to help them with the profitability part of it, but what about sales, what about marketing, what about business modeling? That excites me; now I’m going to have some time to help dealers do that. They need help and they need guidance.”
Some have taken an agnostic approach, believing that there is value in embracing either the seat-based model or the device-based billing method. Kim Louden, vice president of sales, Office Equipment Group for GreatAmerica Financial Services, believes the topic is somewhat similar to the early days of managed print services, where there was no uniformity in what constituted MPS.
“An unlimited printing model is almost better in an imaging-only environment, where I see seat-based being a better fit if they’re also in the IT space,” she said. “In an IT environment, typically those are sold per users as licenses, so the contract may be set up as a user-based environment. Now you want to go in imaging, so you want to set that up so your denominator – the thing that you’re dividing by – is the same. It’s the numbers of users in that environment.
“If another employee comes in, the CFO knows he has to get another license for Microsoft or for document management. Then they’ll pay another $30 a month for imaging. So I know that it’s going to cost me $110 dollars more to hire an employee with my office equipment dealer because they’re providing everything on a user- or seat-based basis cost. Flat rate is the starting base, with seat-based being for that more robust, sophisticated dealer that wants to wrap everything together.”
