Hardware Takes a Holiday: Supply Chain Speeds Up Trend Toward Diversification

As the sands continue to slip through the hourglass, we’re often reminded that the things we could once count on as givens have become fewer and less reliable—a not-so-gentle reminder that change, no matter how welcome (or even frightening) it may be, is perhaps the lone assurance.

In our little world of office technology, that point was driven home repeatedly in 2021. For many dealers, hardware sales are stuck in dry dock. Millions of dollars in written (but unfulfilled) orders hang in limbo, impacting dealer profitability, sales commissions, end-user capital expenditure plans and untold other victims of the supply chain headaches wracking the industry’s many servants. And with so many variables impacting the chain, it’s fruitless to point fingers and attach blame to any one entity—it’s a hassle for all to reconcile.

Yes, the pandemic continues to fester in numerous, indirect fashions, dragging on incessantly like a Little Feat musical jam. The multitude of ships waiting offshore for the opportunity to offload cargo adds a fitting visual to the frustrations hammering away at commerce. There’s little solace in the knowledge that this is a shared phenomenon, but history may see 2021 as the year of transition. Whether it’s the Great Resignation and the mass exodus of employees in search of a better work life, or companies recognizing a bona fide turning point in the need to readdress how they approach the market, the American business landscape spent many hours in deep contemplation, reaching the same conclusion: it’s time for change.

It’s time for diversification.

Some of the adverse effects might be offset by increased margins for the equipment sold—if the dealer is savvy—since the new costs to the business will be compared to the prior costs for more equipment.

– Mark DeNicola, Centriworks

Our annual State of the Industry report on trends and predictions aggregates more than 20 viewpoints from across the industry spectrum. We begin on the trends side, with an equally compelling look at what our colleagues are forecasting, which can be found on page 20. We have no doubt that you’ve entertained many of these considerations during long periods of reflection and are preparing (if not already implemented) many significant changes in your 2022 business plans. If nothing else, these insights will provide motivation, or at least reinforcement, to the belief that regardless of whether the changes brought about by the pandemic are temporary or permanent in nature, they stand to be with us throughout the foreseeable future and thus can’t be ignored.

Addressing Print Volumes

There’s little doubt that the trend toward declining print volumes will continue, notes Mark DeNicola, CFO/CSO for Centriworks of Knoxville, Tennessee. The tumble will see aftermarket revenue decrease and have a downward impact on the bottom line for dealers, manufacturers and suppliers. MFP box sales will decrease as businesses consolidate printing to centralized devices, affecting top-line revenue and bottom-line profit.

“Some of the adverse effects might be offset by increased margins for the equipment sold—if the dealer is savvy—since the new costs to the business will be compared to the prior costs for more equipment,” DeNicola pointed out. “The statistics for the calendar year may look good if they don’t adjust the volume for the equipment sold in the last six months of 2021, but delivered and billed in 2022.”

The industry will continue to be confronted with aftermarket challenges associated with the decline in clicks and printing. Given the evolution of the hybrid office and the changing nature of how business is conducted, that impact will continue to be felt among dealers, notes Brad Cates, president and CEO of Cincinnati-based Prosource.

Hopefully, the supply issue will improve, so that by Q2, we can get back to some normalcy.

– Van Seretis, Premium Digital Office Solutions

“The companies best positioned to absorb that impact are those that are finding new ways to grow by adding new customers, capturing clicks and growing market share, but also by adding new, problem-solving solutions—whether that’s managed IT, managed cybersecurity, telephony, cloud-based solutions, and so on,” Cates related. “The best-positioned companies are those that are strategic and aggressive about delivering services and solutions focused on solving the problems their customers are facing both now and in the future.”

When a manufacturer can’t supply toner to support the client needs of larger segment copiers, that leaves it upon the dealer to furnish end-users with a different copier until the supplies become available. That’s the tight spot Premium Digital Office Solutions of Parsippany, New Jersey, currently finds itself in, according to Van Seretis, a partner in the firm.

“We can’t have the client down with no supplies,” Seretis said. “It’s the equivalent of having a car with no gas. (The manufacturer) has dropped the ball on many of us here. The question is, do we support our clients with (the OEM’s) units in the field if they don’t support us with supplies? Hopefully, the supply issue will improve, so that by Q2, we can get back to some normalcy.”

Product Diversification

Mike Marusic, president and CEO of Sharp Imaging and Information Company of America, notes a strong movement toward dealers diversifying their product and service portfolios. Many of the OEM’s resellers expanded their offerings in areas such as displays and Dynabook laptops, which helped offset lower print volume by adding millions of dollars in revenue.

“By offering a broad lineup of complementary products, Sharp dealers were able to gain entry into new accounts that they can later leverage to obtain print business,” Marusic said. “We’ve seen many dealers become exceptionally successful with that strategy and anticipate that this will continue into 2022.”

As Impact Networking of Lake Forest, Illinois, continues to solidify its standing as an IT thought leader, the organization is adding emphasis to tools centered on cybersecurity. The influence of artificial intelligence (AI) as a key component in product and service offerings also can’t be ignored, according to Frank Cucco, Impact’s CEO. He believes the time is now for dealers to gravitate toward AI.

“Most dealers are working in the SMB market, and this is the front end of that wave,” he said. “Learning more about AI will pay huge dividends down the road. We use a managed recurring revenue model, which has been a highly successful strategy in the IT world. This is an expansion of that, a diversification to get in on the ground floor of the SMB market.”

Learning more about AI will pay huge dividends down the road.

– Frank Cucco, Impact Networking

As dealers seek out other avenues for growth, Larry White—president and CEO of Toshiba America Business Solutions—believes the hunt will extend beyond managed network services or solutions. This entails leveraging a multitude of resources at the dealer’s disposal to identify product and service offerings that dovetail with client needs.

“I think there will be more investigation into what’s out there and we’ll see groups in the industry, such as BTA and The Consortium group, taking a greater role in that,” he said. “There are plenty of opportunities out there and technology is changing quickly, so I think we’ll see a lot of emphasis on that during the next 12 months.”

Supply Chain Dysfunction

Supply chain issues have played havoc with many industries, and it’s a development that Joe Contreras, commercial marketing executive, Office Solutions for Epson America, expects will continue to produce delays, shortages and price uncertainties throughout 2022. Epson, however, seems to have a pretty good handle on its own situation.

“In the U.S., Epson has been fortunate in that our A3 business inkjet has been relatively unaffected compared to other printer/MFP vendors,” Contreras remarked. “Through careful planning and continued communication, Epson has been able to support dealers’ demands for help with avoiding missed A3 sales opportunities.”

However, that isn’t the case across all manufacturer lines, and Roland Tolan—the COO/partner of United Office Technologies Group in Irvine, California—believes the dysfunction supply chain snafus caused throughout the channel is reminiscent of the headaches caused by the Great Recession of 2007-2009. But he believes the financial turmoil it caused pales in comparison to the pandemic.

Through careful planning and continued communication, Epson has been able to support dealers’ demands for help with avoiding missed A3 sales opportunities.

– Joseph Contreras, Epson

“The impact will be drastic in terms of revenues and profitability for all channels,” he said. “The costs are going to increase due to the offset of the extra logistics to get product to the dealers and direct branches. Inflation is a major factor as well. Despite the continued performance of the stock market, I truly believe (the economy) is ready to turn into a recession by the end of 2022 and into fiscal 2023.”

Issues stemming from supply chain backups will prompt dealers to closely monitor their vendors’ levels throughout the year, according to Chip Miceli, president and CEO for Pulse Technology of Schaumburg, Illinois. That makes it incumbent upon both parties to maintain consistent and thorough contact to assess the evolving situation.

“The supply chain issues will continue, and forward-thinking dealers will be making arrangements to build up their inventory so this issue doesn’t negatively impact their customers,” he added.

Deb Dellaposta, president and CEO of Doing Better Business in Altoona, Pennsylvania, worries that the continuation of several negative trends could have a deleterious impact moving forward. The sooner the pandemic skips town, the quicker business can settle into a rhythm.

The supply chain issues will continue, and forward-thinking dealers will be making arrangements to build up their inventory so this issue doesn’t negatively impact their customers.

– Chip Miceli, Pulse Technology

“Unfortunately the biggest trend for 2022 is lack of product due to the shipping crisis,” she said. “We also have to continue to watch COVID, as our economy can’t withstand another shutdown.”

While acknowledging that supply chain woes could be confronting dealers into 2023, Erik Crane, president and CEO of Springfield, Missouri-based CPI Technologies, believes employee retention and IT proliferation are major talking points for the dealer community.

“Finding, hiring and retaining talent will continue to be a frustrating endeavor for the foreseeable future, and the continued expansion into the IT space by legacy MFP dealers will continue and perhaps even quicken,” he said.

Document Management

The pandemic continues to wield influence over many universal buying trends within the industry the past two years, and perhaps one of the clearest examples is the need for document management tools. With end-users needing to accomplish more with fewer employees (decentralized workers, at that), document management took center stage for remote workers to have the ability to access files from home, notes Chris Falzett, vice president of sales and marketing for TOPP Business Solutions of Scranton, Pennsylvania.

“We’ve definitely seen an uptick in working with our clients to digitize their documents for easy storage and retrieval,” Falzett said. “Most of these engagements seem to be cloud-based due to the need for flexibility in accessing them without needing to be in the office and on the server. This has been particularly true for school district engagements, made possible by some of the COVID funding they’ve been able to access.”

Finding, hiring and retaining talent will continue to be a frustrating endeavor for the foreseeable future, and the continued expansion into the IT space by legacy MFP dealers will continue and perhaps even quicken.

– Erik Crane, CPI Technologies

Remote Possibilities

With the work from home needs of clients an ongoing consideration, organizations such as Cincinnati-based Modern Office Methods must balance serving the technology needs of a home office while maintaining optimal device security levels, notes Ken Staubitz, COO.

“This trend is a potential opportunity and a threat as companies try to navigate the hybrid work environment and determine the changes required in order to operate efficiently with their printing needs,” Staubitz said.

The decentralized workforce will certainly provide ample opportunities for service providers to help stamp out fraud, according to Adam Field, senior vice president of technology strategy and experience for Kofax. Investments in document fraud detection will continue to rise in tandem with the growth in remotely automated processes, which opens the door for bad actors to take advantage.

(Work from home) is a potential opportunity and a threat as companies try to navigate the hybrid work environment and determine the changes required in order to operate efficiently with their printing needs.

– Ken Staubitz, Modern Office Methods

“With a hot housing market, an automobile industry seeing unprecedented supply chain shortages resulting in higher prices, and telehealth expanding, some will seek an opportunity to defraud lenders and payers,” Field said. “But with technological advancements, these ne’er-do-wells can be sniffed out.”

Given the hybrid office has settled in as a likely permanent fixture, the home office requires the same level of security, workflow and processes as the traditional on premise office, notes Bob Burnett, director of B2B solutions deployment and planning for Brother International. To that end, he believes its incumbent upon dealers to adopt A4 letter lineups to replace the traditional A3 ledger devices in channels dominated by copier-based systems.

“We will continue to see businesses extend their corporate managed print services to accommodate workforce decentralization and address new security and service requirements to meet the new mobile world’s demands,” Burnett offered. “(Dealers) should be offering solutions that reduce contact, enhance efficiency, and strengthen their distributed document workflow. Such solutions to help organizations thrive in a post-pandemic world include, but are not limited to, secure document management solutions and A4 lineups.”

The growing hybrid/remote work trend continues to proliferate across the business landscape. As such, ponders AJ Baggott, COO for RJ Young of Nashville, Tennessee, how does the industry adapt to less populated workplaces producing less print volume?

“I think the innovative dealers and manufacturers that can diversify in a way that takes advantage of this trend will end up stronger in the long run,” Baggott noted.

The growth in A4 product demand is the most pronounced example of serving the needs of a distributed workforce. Jose Estebanez, vice president, corporate marketing group for Kyocera Document Solutions America, believes the A4 proliferation will continue to build off its 2021 momentum.

I think the innovative dealers and manufacturers that can diversify in a way that takes advantage of this trend will end up stronger in the long run.

– AJ Baggott, RJ Young

“Many people are still working from home, while others continue to work between the office and remote locations. Many businesses are opting to equip smaller workgroups with more personal devices as opposed to one or two centralized floor printers,” he said. “In 2020 and 2021, we saw companies adopting remote or hybrid working as a short-term fix, but in 2022 that will see further investment as it becomes a long-term strategy. Moreover, digital transformation continues to accelerate at a breathtaking speed, and this will see a surge in demand for software solutions that give organizations greater flexibility, mobility and security.”

Many trends are closely tied to the “work culture” changes imposed by the pandemic, notes Felipe Godoy, vice president, business development and sales engineering for RingByName. But there are a wealth of solutions beyond the A4 device, including remote desktop and collaboration tools such as video conferencing.

“They will also expand to allow for access to company resources such as telephones, software and remote file storage for personnel who no longer come into the office full time,” he said. “Device-as-a-service will take a foothold in SMBs. Access to hardware such as telephones, desktop printers and scanners—particularly in the SMB space and WFH enterprises—will grow as customers look to access resources without long-term commitments and leases.”

Access to hardware such as telephones, desktop printers and scanners—particularly in the SMB space and WFH enterprises—will grow as customers look to access resources without long-term commitments and leases.

– Felipe Godoy, RingByName

Digital Transformation

The rapid acceleration of digital transformation also brings into focus the need to address the hybrid work model and supporting a dynamic, safe workplace, contends Todd Croteau, president of All Covered, the IT services division of Konica Minolta. As such, he believes dealers and manufacturers need to redefine work and the role of technology to enable their workforces.

“User experience needs to be seamless and consistent from one work environment to another,” Croteau noted. “Secondly, as the workplace evolves, a workforce augmented by software, robots, crowds and artificial intelligence offers more flexibility and efficiency. Data-led decision-making and automation is becoming commonplace. Robotic process automation will continue to grow in demand, and task-based automation will increasingly be replaced with process-based automation, both of which will have a major impact on the industry. Businesses need to augment the knowledge worker so they can focus on being more creative and innovative.”

Additionally, as more companies support a hybrid work model and utilize data across the entire business, the demand for security will continue to grow. “As data points are more interconnected and systems start talking to each other, security attacks will naturally increase. Businesses must respond to this to ensure business continuity and avoid data breaches,” Croteau added.

With work environments becoming increasingly distributed, the emphasis on cloud, remote print management solutions and security should be prioritized by businesses and channel partners, as they represent key growth areas in 2022, notes Clark Bugg, director of North America channel sales for Lexmark International. He feels security-by-default is becoming a must-have for businesses.

“As organizations increasingly realize that their applications and automation are only as secure as the foundational blocks on which they’re built, they’ll continue to demand built-in security options without paying an additional fee to acquire them,” Bugg said.

As organizations increasingly realize that their applications and automation are only as secure as the foundational blocks on which they’re built, they’ll continue to demand built-in security options without paying an additional fee to acquire them.

– Clark Bugg, Lexmark

Jim Coriddi, vice president, dealer division for Ricoh USA, echoes the growing influence of digital transformation. As dealers expanded their role with clients to become a source for overall information management, business discussions evolved to focus on providing workflow solutions and addressing the pain points of the customer’s clients.

“As dealers consider how the business environment is changing and how to help customers embrace digitization to lay the groundwork for success, what we’re going to see is a shift in approach,” Coriddi said. “Alongside our dealers, we’re moving into an investment mindset in the customer experience that goes well beyond the sale to foster long-term alliances that evolve alongside business needs.”

E-commerce Movement

One trend noted by Matteo Recanatini, marketing director for Gainesville, Virginia-based Offix, is digital acceleration, the increase in digital advertising and personalized content. Be it websites, email, third-party properties, out-of-home personalized messaging or social media content, these vehicles—at one time relegated to B2C circles—have witnessed a dramatic increase in B2B spending.

The access to easy-to-use platforms and the amount of time B2B decision makers spend working through online platforms are making the tools vital to success. “Adapt or become extinct,” Recanatini observed. “Any dealer or B2B manufacturer who doesn’t evolve beyond having a basic website will become progressively less relevant to a content-hungry market.”

Any dealer or B2B manufacturer who doesn’t evolve beyond having a basic website will become progressively less relevant to a content-hungry market.

– Matteo Recanatini, Offix

The growing acceptance of e-commerce’s role in the dealer space is indeed a factor many dealers can’t ignore, notes Jennie Fisher, senior vice president and general manager, Office Equipment Group, at GreatAmerica Financial Services. She expects to see more dealers forge ahead with online purchasing capabilities.

“The pandemic has likely permanently altered the habits and preferences of buyers – and even within our high-touch, high-value channel, more consumers expect to make their purchases online,” Fisher said. “Dealers will come to the realization that they need a strategy, one way or another, and begin making considerations around how they’ll approach pricing, present products and descriptions, emulate a highly personalized experience digitally, and embed ecommerce alongside their current sales processes.”

M&A Uptick

With the downward pressures on business, dealers that are not well-positioned to make changes to ensure profitable sales will be seeking to divest or join forces with larger competitors, according to Ray Belanger, president of Bay Copy in Rockland, Massachusetts.

“Our industry will probably continue to consolidate, so the smaller dealers will face a different playing field,” he said. “However, with the consolidation, there will also be less competition, particularly in the mid-market. There are many good customers that are being orphaned by their vendors.”

Our industry will probably continue to consolidate, so the smaller dealers will face a different playing field.

– Ray Belanger, Bay Copy