There’s Gold in Selling Software Solutions, but You Have to Dig for It

Office equipment dealers, MPS providers, and VARs looking to diversify their businesses are warming to the idea of selling software solutions. They are a strategic fit with their current offerings. Selling software also provides a means to offer customers end-to-end solutions to their business problems, strengthening the customer relationship in the process.

That kind of opportunity does not come without a significant investment in time and money. It also requires careful research to find the right partners with the right products for your customer base. ENX spoke with a number of dealers and software companies, who shared their experiences and advice.

Why Sell Software?

For dealers who have already made the move into IT and managed services, selling software solutions is a natural next step in a progression that starts with selling hardware, then networked hardware, then managed services, and finally end-to-end solutions built around software. Each step expands and diversifies a dealer’s business and further entrenches itself with its customers, in turn generating more and recurring revenue from them.

“The market is in transformation,” said George Seymour, VP of Sales Enterprise Software Solutions at Nuance, which sells print management and document capture and conversion software.

“[Dealers are] moving from hardware to services.” He noted that services like MPS that had been profitable for dealers are becoming commoditized, driving down fees and margins. That trend is helping to drive interest in selling software solutions.

“Dealers are caught between a rock and a hard place,” said Joe Rubino, channel director Americas for print management software vendor Papercut. Those selling hardware and supplies are struggling in an extremely competitive market and need to make the move to solutions. He said that the end-user community is more educated than ever before, and they understand that they need to take a solutions focus for their pain points, and that’s often driving the hardware decision.

For dealer and service provider NovaCopy, the signal to consider software solutions came from their customers. “Businesses had questions about security, how to work with scanning options,” said Jason Levkulich, CMO at NovaCopy. “We worked hand-in-hand with them, making customer support [for hardware and software] an essential part of our strategic plan. This helps continue our overall goal of enriching the customer experience and providing a one-stop shop for each of them.”

“When you offer an end-to-end approach to managing [a customer’s] content, you will differentiate yourself from the competition,” said John Sutton, national solutions sales manager at NovaCopy.

Selling software solutions can benefit other parts of a dealer’s business. “The size of deals increases whenever we can insert solutions-related offerings,” said Sutton. “Profitability increases on anything related to solutions. We are winning deals we would have otherwise not won or had to walk away from.”

All the dealers we spoke with said that software solutions is the fastest or one of the fastest growing portions of their business. That growth is due in part to the relative newness of the offering, but all are also expecting continued growth in the future. Software sales at printer/copier dealer Executive Technologies is between 30 percent and 40 percent of total revenue, according to Jon Osborne, director of sales, and its goal is to reach 60 percent to 70 percent.

NovaCopy is seven months into a 36-month plan to make software solutions 10 percent of its total business, said Sutton. It’s already halfway there at 5 percent.

“Software solutions is growing at a higher percentage than other areas, although it’s larger percentage on a smaller number,” said Pat Haney, director of major accounts at business solutions provider Marco. “The majority of sales are major account transactions where software is a large part of the transaction.”

Software companies find office equipment and copier/printer dealers attractive partners. “Office equipment dealers have large sales teams and customer bases,” said Steve Behm, VP of sales Americas for document management software vendor Docuware. That infrastructure and customer relationships helps to open doors for the software provider.

Commitment and Focus

As with any new expansion, dealers need to understand the demand for software solutions within their customer bases as well as the investment in staff, training, and possibly delivery and support partners. A strong level of commitment goes hand-in-hand with carefully choosing which solutions to support. The more you take on, the less able you will be to adequately support. “It comes down to credibility,” said Osborne. You need to understand and be able to communicate exactly what a software package can do for a customer. Offering too many packages means you might not know some of them well enough to gain the customer’s confidence. “We don’t want to bite off more than we can chew, but we haven’t had to take baby steps.”

“The average office equipment dealer has 60 to 70 solutions that they support. It can be a struggle to stay on top of all that,” said Stephen Young, president and CEO at ECM software vendor Square 9 Softworks. Some of those are specific to the hardware products they carry, but his comment underscores the need to focus as much as possible.

“First you have to understand the clients’ needs,” said Haney. “Then you need to identify the viable products in the marketplace. There are many to go to market with, so look for those that are the most supportable internally.” He suggests picking a primary solution plus a secondary option and not going outside of them. “If a client has a need that we don’t have a solution for, we will not engage,” he added. Even with this policy, Marco constantly evaluates new products to judge their fit for its clients’ needs.

ECM software vendor M-Files looks at three factors when evaluating how successful a channel partner might be, says Scott Erickson, senior VP of worldwide channel sales. “First, do they have the organizational mindset in place to do consultative selling? Then we look at the technical team. Do they have the bandwidth, competency, and experience to implement our product for customers? Finally, do they understand how to effectively market themselves as a value-added partner?” The goal is confidence that M-Files can work with the partner to show them how to build value by integrating its product with the customer’s business processes.

Finding a niche and then proving yourself in it before expanding is the consensus advice for growing a software solutions offering. One source for this story was recently told by a client, “You guys do so much, I know you can’t do it all well.” While that firm has a wider offering than most dealers, what’s really behind that sentiment is doubt whether a copier company can consistently deliver on other services. The best way to combat that image is to build in stages, mastering each one before moving to the next.

Dealers often start with solutions that align well with document imaging such as document or content management. Once a dealer establishes a strong offering in those areas, it becomes easier to see opportunities for expanding the solutions offerings. “We are looking at other options like variable data, workflow, business intelligence, and forms processing,” said Sutton. “Those are areas we can achieve quite a bit of growth with.”

“The most important aspects to successfully adding complementary products and services to the MFP/business equipment world is to understand that the processes, procedures, and people are not the same for each solution,” said Greg Bryan, CTO of office technology provider KDI Office Technology. “There is some cross-over, but the respective personnel needs to focus on their technology and master that for success.”

Another option for dealers is to start with a niche product that aligns well with document imaging and the verticals they serve. ITC Systems, for example, sells print and copy management solutions for the education and government markets. “The verticals we serve can have financial challenges,” said Lisa Dzafic, VP of sales USA at ITC Systems. “We’ve become experts at identifying all the needs and breaking out a project into phases [to meet the customers’ financial requirements].”

Growth is also possible by taking an industry-specific approach. Sutton said NovaCopy is seeing an uptick in demand in legal and medical verticals, and said that both software and hardware companies are providing good support for targeting key industries. To support the push into verticals, NovaCopy has increased its marketing staff to generate digital content that helps sell its vertical offerings.

Nuance has products and solutions geared for SMB and big vertical markets such as healthcare, education, and government. “The messaging and technology set we provide them is precise, which helps dealers develop a model that successfully meets the needs of their customers,” said Seymour.

Software companies will pay attention to how their partners staff. Docuware prefers to see a Docuware-trained team of a solutions advisor to attract prospects, a sales engineer who consults with the customer and closes the sale, and a solutions consultant who can manage the implementation. “With sales people it’s difficult to ever have them purely dedicated [to Docuware],” said Behm.

“But the more dedicated the sales consultant, the better the results.”

Having a good business plan will also help build confidence with software companies. They will want to see a plan that covers target markets, the product mix sold to those markets, sales strategy, and what personnel is in place to support that strategy. Most software companies depend heavily on their partner channels, so seeing a plan is not just a vetting mechanism, it tells them where they might want to lend some assistance. “We sell indirect,” said Sean Morris, director of sales at ECM software provider Digitech. “If our partners don’t win, we don’t win.”

Dealers interested in selling software but are unable or unwilling to make the level of investment described above have other options. Some companies make their software available to the channel, but handle implementation and support themselves. Nuance offers two partner models: a low-touch option where dealers simply have the software available to sell, and an option where dealers make the investment to own the whole process. “The second model is more successful,” said George Seymour, VP of sales at Nuance.

A Different Type of Sale

For sales teams used to selling hardware, the switch to software solutions can be difficult. “The MFP industry is ingrained in hardware sales, service, and compensation models. That makes it difficult for dealers to make the shift to become successful solutions providers,” said Sutton. “Hardware reps are used to a 30-day sales cycle. Solutions don’t always fall in that timeframe.

Traditional reps are not always comfortable [with a longer sales cycle], so they don’t always pursue a solutions-based deal.”

For NovaCopy, getting the sales and manager teams focused on solutions selling meant a change in structure and culture. “Sometimes dealers assign traditional partner reps to the software solutions role, promote a connectivity tech or someone in service. Sometimes that doesn’t yield successful results.”

“[The sales team] needs the ability to sell on actual value-add in a market that’s been commoditized,” said Haney. He also noted that some sales reps have trouble adapting to the software sales cycle, and that it is a challenge finding the right sales talent.

The solutions sales team needs to take a more consultative approach focused on understanding and solving customer problems. “You have to understand the customer’s business model,” said Osborne. “You can’t have a one size fits all approach. It’s really important to solve the customer’s problem and not just sell a product.”

The consultative approach might start with a sales rep, but the conversation about the customer’s problems and possible solutions is typically done by someone with an IT background. The sales team is trained to identify a solutions opportunity and then qualify it prior to the handoff. “It’s really about spotting opportunity and then bringing in the experts,” said Osborne. The sales rep gets an appointment with the decision maker where the technology expert listens, asks questions, and starts the process of resolving the issue. “We have [experts] out in the field with our reps on a daily basis,” Osborne added.

Understanding the problem at the user level is key to solving the customer’s problem. “I always ask one question: Paint me a picture. Tell me what the user experience is and walk me through it so I can visualize it,” said Dzafic. “If you can’t regurgitate what you heard, you don’t understand the problem.”

It is important to have an expert drive the conversation about solving the customer’s problem, but that should not diminish the importance of the sales rep. “Frequently the MFP reps who produce the most IT sales are also some of our least technical,” said Bryan. “They have no idea what the customer bought, but they built the customer relationship.”

While dealers report that most customers are open to buying software from their hardware dealer, others might push back. “We’re not in the largest city,” said Osborne. “In rural markets, you get that ‘if it ain’t broke, don’t fix it’ attitude.”

When Marco sees resistance, it urges customers to vet them. “The first thing we do is provide them with references,” said Haney. This lets prospective customers see the value they’ve provided other businesses.

One aspect of the software sales cycle is indecision on the part of the customer. “Inaction to make a final decision is the biggest hurdle,” said Behm. “[Implementing the software] changes the business process. We try to understand the whole sales process. What is the pain? How do we solve the pain? What are the true benefits?”

Because of the consultative approach and longer sales cycles, dealers have to adjust the way they pay their sales reps. “Our biggest problem was coming up with a compensation plan that the organization was comfortable with,” said Bryan. “We didn’t cross-compensate until recently, and that helped a lot.”

Solutions providers can look to the software companies for help with training their sales and marketing teams. Digitech Systems provides marketing tools on its website. “They help identify the target market and show what’s important to the customer,” said Morris. “We work with resellers on how to use these tools.”

“[Nuance] has a massive sales force to support the reseller’s team on the ground,” said Seymour. Nuance also provides resources to help with sales and technical pre-sales that help with crafting responses to RFPs or creating proofs of concepts, for example. Those resources come in multiple forms, such as in-class training, videos, and online certification prep.

Software companies offer other services that are designed to integrate with the channel partners’ sales processes. Square 9, for example, regularly conducts product demos for its channel partners.

“The average channel rep might need to do a demo once a week or less,” said Young. “Our sales engineers do between three and five a day. Without repetition, the channel rep can’t be nearly as effective as we can so we encourage them to leverage our resources.”

That help is essential because of the nature of selling and implementing software solutions—customer requirements are typically diverse. “M-Files is not a commoditized product,” said Erickson.

“We’ve got a great platform that is highly configurable, but our daily focus is to ensure that our partners can deliver value quickly and efficiently for customers.” M-Files is addressing that challenge by creating more packaged solutions that deliver out-of-the-box capabilities to solve specific business process challenges. Additionally, they have prioritized open communication and feedback with and among partners to ensure they are focused on the right priorities for their channel. They do so through channel advisors, channel surveys, a Partner Portal and partner community forum, and annual channel partner events.

You can expect help from the software companies with sales leads as well. Most collect leads from their websites and then distribute to the appropriate channel partners. That might raise a concern about channel conflict, but software companies tend to have mechanisms in place to avoid that. “We have multiple resellers in Chicago,” said Rubino. “We do detailed pre-qualification about the prospect’s fleet, network infrastructure, and document workflow.” Based on the information they gather, the lead goes to the reseller best equipped to serve the customer.

Technical Know-How a Must, but Hard to Find

Let’s say you’ve decided to sell software solutions. You keep it simple with a couple of document management applications, a workflow solution, and maybe a forms package. Now all you have to worry about is making them work on the customers’ IT infrastructure. Some of them are built on Windows, others on Linux. All have other commercial or homegrown applications that your solutions need to tie into. And some use cloud applications that your solutions need to connect with.

That simple plan to offer a few manageable solutions doesn’t seem so simple anymore. This scenario underscores the need for skilled, experienced, and people-savvy IT professionals who know how to tie all the pieces together and communicate the benefits of what you are doing to the customer.

Finding people who fit that bill is a constant struggle for many dealers. The software companies know this and every one that we spoke with provides training support and other resources. All provide APIs that make integrating their products with other applications easier.

Software company also provide technical resources for partners’ in-house technical teams. Digitech Systems, for example, offers help with implementation, configuration, and integration with other platforms. “If a customer wants to integrate with an AR solution like Great Plains, a partner might not have the expertise to do it,” said Morris.

“A customer might have 20 to 30 software applications in a private cloud or on premise,” said Rubino. “Integration takes a lot of time and is costly to support, but the customer wants a single integrated platform. Minimizing the number of applications would reduce cost and streamline support.”

Staying Current with Technology

Technology is never static. A solutions provider needs to be able to support the installed base, but be one step ahead of customers in terms of knowing the technology. “Our biggest challenge is staying on top of changes in the market,” said Haney. Evaluating and vetting [new products] is really important for us. It takes quite a bit of time and resources.” Marco does this to qualify that the software can deliver value to its customers.

One area that all solutions providers and software companies are looking at is the cloud. All the software companies we spoke with offer cloud versions of their products, and most of the solutions providers also support cloud implementations. Many businesses now consider cloud options because they are seen as less expensive and require less infrastructure.

“We see hybrid [cloud and on-premise] more often,” said Haney. “More and more is moving to the cloud, but it’s still in transition.” He added that the way you support a cloud implementation is different because it’s hosted outside the customer site, and this creates different benefits and challenges. Ultimately whether it is an on-premise, hybrid or hosted, you still need to vet the solution and any other software that connects to it.

Customer preferences are definitely trending toward the cloud. Docuware, for example, sells a fully featured cloud version of its product. In 2015, that product represented 5 percent of its sales, according to Behm. In the first half of this year, Docuware cloud sales are running between 30 and 33 percent. Behm added that while there are inherent advantages to the cloud, it has a slightly different licensing model. Partners might need to adjust how they sell the cloud and pay commissions.

Selling and implementing cloud solutions also requires knowledge of popular hosting platforms like Amazon Web Services and Microsoft Azure. “A big if not the biggest challenge [for partners] is to get their heads around the cloud infrastructure components,” said Morris. “Cloud products might be easy to use, but there is a learning curve to installing and configuring them in the cloud on these hosting platforms.”

“Most of the cloud options hit the SMB market first,” said Seymour. “They are looking for easy entry solutions, but not necessarily cloud-hosted solutions.”

The ability to collect, analyze, and take action on data is another rising customer demand that solutions providers will need to handle properly. “The ability to aggregate information is increasingly important,” said Young. “People are looking to take data and transform it into useful information—to turn their scanned images into editable content or to scan and extract data from invoices, for example.”

Keeping Support In-House

All the solutions providers we spoke with emphasized the importance of supporting the software they sell in-house as much as possible. “We do as much support in-house as we can,” said Sutton. “It allows us to be much higher touch and have faster response times.” He added that they will escalate an issue to the software provider’s support service if it exceeds NovaCopy’s level of expertise or bandwidth. That’s spelled out in the customer’s project plan, so the customer knows all the points of contact and levels of escalation.

Setting customer expectations for support whether it’s in a project plan or SOW is important. “All software is flawed,” said Osborne. “You need to have a process for resolving problems if there is an issue.”

“The systems to support the solutions need to be adjusted [from those for hardware],” said Bryan. For example, an MFP will always be in the same location, so the tech can arrive at any time with the tool bag and repair the product. With solutions such as document management, the user needs to be available to demonstrate the issue to the technician, so appointments are scheduled.
Marco’s “sizable” help desk is staffed with people who are used to dealing with software solutions, according to Haney. He also cited the importance of having direct access to the engineers at the software company when there is a problem the in-house team can’t resolve. “Whenever we can, we like to have direct access to level 3 engineering support. They can look at the code, see the problem, and fix it. If you buy through a hardware OEM, request the ability to bypass their support and go direct to developers when needed to speed up resolution.”

Again, most OEMs are highly dependent on their channel partners, so they have channel support programs designed for fast resolution and when necessary, offloading the support load. Support needs to scale as you add more customers and your existing customers increase the use of what you’ve implemented. “As partners gain more and more customers, demand grows. If you don’t have people to meet the need, you won’t grow,” said Behm.

The Opportunity Is There

All the software companies saw the office equipment and printer/copier dealers as a key part of their channel programs. What they value the most is their commitment to customer service, strong sales teams, and large, loyal customer bases. “Three of our top five partners come from the document imaging field,” said Erickson. “We’ve really been effective at enabling office equipment dealers that are making the investment to become solutions-savvy. Many have large customer bases that represent rich hunting grounds.”

The key takeaways are that software solutions can bolster business with your current customer base, help land new business, and increase profitability. All that comes at a cost in terms of staffing, training, and perhaps organizational restructuring. Those that have made the investment seem to be happy with the results.