One could certainly argue that any substantive conversation regarding the genesis of managed print services (MPS) has to include Bill Melo, Toshiba America Business Solutions’ vice president of marketing and the unofficial dean/godfather of MPS. After all, Melo was at the foreground of the company’s Encompass platform at the beginning of the century, representing the industry’s first earnest effort to develop a meat-and-potatoes program that the manufacturer, its direct operations and dealer partners could take to market.
Business Solutions
While others may stake a claim to the idea and putting efforts into motion, we’re content on making Melo the face of MPS, much the same way that Alexander Cartwright (and not Abner Doubleday) introduced baseball, as we know it, to the nation. (OK, please forgive the baseball analogy—after all, our nation’s pastime returned this month.)
But fully understanding and appreciating where MPS started and where it is today—particularly as the business world slowly exits the pandemic—involves a bit of historic overview. Truth be known, as MPS approaches adulthood, there is still tremendous opportunity for dealer proliferation and growth. Pitching MPS now smacks of trying to sell kites during a nor’easter, but as is the case with any offering, the opportunity is usually a future proposition that requires planning.
From idea to execution of concept, Melo walks us through the difficult MPS journey and the many forks in the road that led some dealers to success and others in a different direction. And now, perhaps during MPS’ greatest struggle, he offers clarity for the path to those who are committed to taking the most direct approach.
You’re considered one of the architects of the modern MPS program. Can you talk a little about its evolution and some of the more critical changes that have taken place in recent years?
Melo: We were very much at the front end of MPS. In our case, it was an organic development process. When we started the journey back in 2002, we created Encompass, a cloud-based application developed before the term cloud was even coined. We developed this application to document the customers’ current document imaging environment and develop a recommendation/proposal. This was a determined and systematic effort to catalog everything a customer has and how much was being spent on each of these devices. It soon became clear to us that customers, even those solely utilizing Toshiba multifunction printers (MFPs), were producing less than half the average print volume and about a third of the typical spend on our devices. That was largely due to customers having an 8:1 or 10:1 ratio of printers to MFPs. That revealed an immense opportunity, not only for Toshiba revenue but also the chance to marry opportunity for the provider with the corresponding value it offers the customer. We could prove customers had a headache, and they knew they had one as well, but had no idea how big it was.
Our initial efforts evolved around convincing customers of the scale of their issues because frankly, larger enterprises had no idea how many printers they had. We would do an inventory—take pictures, document how many units were offline and the ones that were used. We developed a use case around fixing that problem. Toshiba, as a relatively nimble company in the space, has always been innovative.
We didn’t have our own A4 product line at that point. But we felt, from a customer perspective, it was as much about services—optimizing the current investment in products that the customer had in place—as much as it was an opportunity to sell new products. If there was a big divergence in the industry about how to approach MPS, it was taking a services approach. For a lot of manufacturers, they saw it as primarily an MFP replacement vehicle.
If there was a big divergence in the industry about how to approach MPS, it was taking a services approach. For a lot of manufacturers, they saw it as primarily an MFP replacement vehicle.
– Bill Melo, Toshiba America Business Solutions
We took the services approach from day one to help clients optimize and keep the best of what they had and augment it with our equipment, as necessary. That was the basis for how we built our practices and infrastructure. Our relationships with Supplies Network, Parts Depot (since acquired by Clover Imaging), various training organizations and third-party break/fix organizations were all around supporting a heterogeneous fleet of devices. The biggest difference from manufacturer to manufacturer, and provider to provider, is whether they follow a fleet optimization approach or employ a rip-and-replace philosophy. We at Toshiba maintained our approach to best capture significant print volume and share of wallet while creating stickiness for our brand. Our focus was to build an infrastructure that would serve the internal and direct sales teams, along with our dealers. We devised a fulfillment approach to support a fleet of Toshiba and non-Toshiba devices.
Back in 2003-2004, we partnered with Supplies Network for fulfillment and direct drop-shipping products to customers. We then provided that service to Toshiba dealers. Believe it or not, it was a somewhat controversial topic for dealers at the time. They, as well as Toshiba internally, couldn’t wrap their heads around the fact that we would be supporting products we didn’t even sell. That was a foreign concept. But the economic case was very compelling. We provided a lot of help with the infrastructure and operational processes to produce success. Dealer by dealer, we started building a channel for MPS that could rival large direct operations in terms of delivery and quality of service.
In those early years, from 2002 until the end of that decade, many customers were moving from a transactional approach to a contract-driven one. There was an enormous opportunity to not only save the customer money but for us to profit as well. Sometimes, it meant making tons of mistakes, but there was enough margin in that first decade to withstand any missteps. As the number of MPS providers grew, it resulted in two things: an increase in commoditization, and the need to differentiate from competitors who devised PowerPoint presentations that made them appear to offer the same level of service. That second phase of MPS involved advanced toolsets and bringing other sorts of services into the mix. It was no longer just looking at fleet optimization; it now entailed workflow, document management and other offerings that spoke to a more holistic approach. Some have found the execution of it to be more challenging, while it’s been fruitful for others. Interestingly, even after two decades, most of our accounts still don’t have MPS agreements. I would assume that’s true for most providers as well. We have, at least in our direct operations, more third-party devices under management than Toshiba devices, which makes sense given the printer-to-MFP ratio. There’s still a great opportunity to penetrate that business.
How have security and sustainability permeated your MPS offering?
Melo: Security and sustainability are two elements we’ve woven into our offering and which dealers are looking at as well. We were pretty progressive in the security space then as we are now. Back in 2010, we launched a security assessment program, and it was a matter of looking at devices and how users interact with machines. Security has taken a pretty prominent role in reminding customers that MFPs are essentially network peripherals that are potential gateways to entry.
For an MPS provider, incorporating a security optimization element within your offering is important. At Toshiba, we see our job as raising awareness of it. It’s one of the main areas dealers should look at in terms of their MPS offering.
About 10 years ago, we created the Encompass Green Report. We leveraged our broad device database to look at electrical consumption at the product level. We can see how electricity is produced by the state; where the device is located; whether it’s carbon-based, wind or solar-based, or nuclear; and look at the CO2 emissions. From that, we can work up an environmental printing profile for customers. We’re also increasingly effective in providing remote diagnostics, repair and remediation of device fleets. Remote services and data analytics are probably the next areas of growth for MPS offerings. We’re providing customers with a dashboard and on-demand reporting insight into their performance or service level agreement (SLA) compliance.
This has been a challenging period for MPS providers. Account reviews have illustrated the obvious, that some end-users are seeing significantly reduced volume activity. How do dealers walk that fine line to ensure end-user needs are met while maintaining profitability?
Melo: Much of it centers on the degree to which employees come back into the office. The knowledge workers, primarily, had the luxury of working from home, and those are the people who print for the most part. It will be interesting to see what percentage will return. I’m hearing quotes of anywhere between 15% and 30% of the population not returning to the office on a full-time basis. So the challenge for any MPS provider becomes how you deal with those work-from-home employees and the volume that is no longer being produced in the office. We’re developing programs to address providing services to those work-from-home employees, whether it’s providing toner or services, and extending the client’s print infrastructure into the cloud.
Dealers must take a holistic approach. Clients will make decisions based on your ability to service their entire population. It’s not enough for dealers to only focus on the physical office. Dealers will be in danger of losing an account altogether if there’s a competitor who will address that entire workforce, regardless of where they operate. Many of us have experienced a year of working from home, and many have enjoyed success and greater productivity than they had in the office. I think there are a lot of people who won’t want to go back, even when their office opens up. The trend is real. In the next 12 months, we’ll get a clearer picture of what toll work from home will have on the office space and the extent to which we will need to address it. If you’re an MPS provider and you’re not thinking about that, you’re going to be vulnerable.
Given the pandemic challenges, what are some best practices or variables dealers should keep in mind when performing fleet assessments for new clients?
Melo: If you take samples now over a certain period, you’re not going to get good insight. You have to ask the customer about their plans relative to people returning to the office. The reality is not great news for any of us, but we’re seeing larger customers, in particular, sending out RFPs—those fleets that are due for renewal—and they’re actively looking to reduce their footprint by at least a half. And that stems from the anticipation of their need. Their best bet is to talk to the customer, find out what their plans are, evaluate those pre-COVID usage levels and collaborate on a needs-based plan going forward. One thing I’ve been discussing with customers is, do your next five years look like your last five? No one who’s managing or contemplating plans for their office says yes to that.
The last time they may have evaluated their fleet was 2016. I guarantee you when they projected what their office would look like in 2016, it would look nothing like it will in 2026. And that’s both an opportunity and a threat.
Some dealers have taken a hybrid approach that incorporates at-home device management and flat-rate pricing. At a time when historic data can be skewed, do you think this could be a successful approach?
Melo: Having fees for services is a solid approach if your customer will sign off on it. You can show them the value of what you’re providing so that the agreement is not entirely volume dependent. That’s a major plus because no one knows what their volume is going to look like. Dealers have a relatively fixed cost of providing service and maintaining an infrastructure to provide it. During this past year, we’ve seen the fallout from being entirely volume dependent. If dealers can do break/fix for some number of services, whether it’s remote or some premium, non-traditional service, they can certainly add value and gain an edge over their competitors.
In your opinion, why are some dealers coming up short in their overall approach to MPS?
Melo: The sales motion/value proposition is fairly well known or at least it was pre-COVID. I think the operational aspect may trip up dealers. There are a lot of moving parts; an MFP dealer might have 20 models to sell, and of those 20, there are probably five or six different engines. An MPS provider is likely supporting hundreds of different models, and therefore pricing, supply chain, etc. is an order of magnitude more complex. So just having the operational wherewithal to order the right toner for the device, the right parts, and the ability to optimize and remove those high fixed-cost-per-page devices from the fleet—that’s the difference between profitability and non-profitability.
Where do you see the evolution of MPS leading dealers in the post-pandemic period?
Melo: It’s collaborating with work-from-home employees and optimizing a cloud infrastructure for printing. It’s managing, in all likelihood, a lower-volume workplace environment. It’s talking security and sustainability as well as savings. Most SMBs still don’t have their printers tied to a contract with a service provider. That’s a fact. I think that’s a boon for MPS providers. If your MFP volume is down, one of the easiest ways for them to survive is to pick up that volume from the customer’s fleet of printers. This is an opportune area in which to capitalize.
