We’ve all heard the phrase “we don’t know what we don’t know,” and as it applies to business, it is those variables that are not readily apparent and cannot be factored into a business plan. Natural disasters and pandemics immediately come to mind, as do man-made/triggered phenomena such as wars and recession on a wider scale. The latter group can be somewhat anticipated, producing consequences that are predictable given their track record.
Somewhere between what we know for certain and what cannot be projected is a middle ground that may provide something of a road map to the future. We call these the “sleeper trends”: there are often subtle hints/indications of a possible movement, although they have not reached the point where they are full-blown trends impacting the way we do business. Conditions may change, causing them to never fully materialize, or another unrelated catalyst could hasten and propel the trend forward.
For example, bonus points go to anyone who prognosticated that the pandemic would fundamentally alter the employment landscape. During the onset and peak COVID months, millions of sidelined American workers used their period of pandemic-induced inactivity to take a deep stock of their vocational aspirations and decided to make a change. As a result, we experienced the Great Resignation.
Obviously, not all trends result in tectonic-level shifts to the business landscape. Our concern is more localized to the office technology space, and as part of our State of the Industry report on trends and predictions, we’re unveiling our annual look at those sleeper trends that may not be as impactful in the short term but could grow in scale and significance as the year plays out.
Gap Fillers
For many dealers, the rate of click decline per device is nothing new, and with many anticipating they will not return, the question becomes how will dealers make up for lost revenue and profit. Josh Salkin, a partner with EDGE Business Systems in the suburbs of Atlanta, believes this may have dire consequences for businesses.
“For some, the ability to go earn new business makes up the gap, but for others, it must feel like quicksand,” he said. “There’s not much innovation left in this industry, so it’s kill or be killed.”
After nearly three decades of decreased equipment and click costs across the office equipment industry, Preston Woolfolk—co-president of DOCUmation in San Antonio—notes prices “flat lined” 10 years ago in the IT industry and have remained steady or even increased. He’s banking on more certainty moving forward.
“I’m hopeful that the equipment and click costs we saw in 2019 were the industry’s rock bottom, and moving forward, we can reevaluate how we educate our customers on usage and spending,” he said.
Taking a holistic view of the industry, Novatech CEO Dan Cooper believes there are two opportunities dealers must avail themselves of in order to garner traction. The first is labeling and packaging. Cooper notes many dealers have enjoyed success in selling MPS to a client’s front-office operations, and he believes they need to go deeper within the accounts.
“When we look at the volume of labels and packaging coming out of the warehouse, it appears there is a strong untapped market for our industry,” he said. “Just look at the market cap for a company like Zebra, then look at the products they sell. It’s a natural fit for many of us in the industry.”
Software management also represents a significant growth opportunity, in Cooper’s estimation. “Many businesses will be looking to our channel for help in managing the wide spectrum of software suppliers they engage with to run their day-to-day business,” he added.
Off Kilter
The supply chain issues of 2021 and 2022 may have thrown off the cadence of sales, which is a cause for concern in the eyes of Tyson Johns, director of finance for Pearson-Kelly Technology in Springfield, Missouri. That could have negative impacts on both the rep and the dealer itself. He cited an example of a deal that was booked in January of 2022 that wasn’t fulfilled until November of that year.
“If we are not careful, dealers are going to be associating success with the wrong timing of efforts, and if employees are paid for booked deals, you might also stymie them with bonus, commissions, etc., on very old deals [that may] come at a time when maybe they are struggling,” he said. “This will be a very big market disrupter like PPP loans were to the general business world. People who didn’t know how to measure or were lying to themselves will now start figuring out if they are actually successful or not. Do they have the ability and time to right the ship, if need be?”
As we’ve seen, not all trends become permanent fixtures, and in some cases may actually be reversed. Take remote/work from home, which, depending on geography, is either increasing or receding. MTS Office Systems in Anderson, South Carolina, is seeing a larger proportion of businesses back in the office full-time, notes Mason Smith, president and CEO.
“At least in the Southeast, the remote work trend does not seem to be nearly as large of an issue as it could have been two years ago,” Smith said. “While people might have more flex time, most businesses are back in the office and print levels are back to where they were in 2019.”
Exercise Caution
Those dealers that cast themselves as providers of security solutions should take great care in ensuring they have appropriate protections in place from a liability standpoint, notes Lauren Hanna, vice president of sales for Blue Technologies of Cleveland. With so many providers entering the fray, there are consequences and responsibilities that are inherent in an area as broad and fraught with peril.
“I think that IT, in general, is such a large umbrella,” she said. “When you add buzzwords and services such as cybersecurity, HIPAA compliance consulting, CMMC readiness…there is a lot of liability when it comes to these offerings. You need to have a strong team in place to be able to support and properly evaluate risks before onboarding customers. Cybersecurity risks are constantly evolving, this segment of a business needs to be extremely proactive.”
While monthly recurring revenue (MRR) is not a stranger to the world of dealer trends, some feel it will only increase in significance moving forward. You can count Melissa Confalone, recently named president of Fraser Advanced Information Systems of West Reading, Pennsylvania, among those who believes MRR is the key to future success.
“If for some crazy reason, dealers believed that bundling impressions was a sleeper, then they need to open their eyes,” she said. “The trend is now monthly recurring revenue and increasing it across the board. Network security around printers as unsecure endpoints is becoming a real issue, one that manufacturers are now starting to really take notice to. Copiers and printers need strong hardening programs and protection from some form of software solution such as BitDefender, McAfee and MalwareBytes.”
One area that bears close monitoring is marketing automation. Dean Swenson, president of The Swenson Group, notes his company has invested in the most accurate data available—a sequential email/voice marketing hub and strategies to focus on certain vertical markets.
“If executed properly, dealers will need fewer sales representatives to cover the market,” he said. “It will help retain current reps and attract new talent when appropriate.”
Buying Habits
Jim Dotter, president and CEO of Virginia Business Systems, believes dealers need to take note of the changing manner in which clients’ key decision-makers are collecting and making buying decisions. The retail accessibility to instant data and pricing, he notes, is altering expectations in the business-to-business market.
“We must change both method and speed for interacting with prospective and current clients,” he said. “Sales professionals must have impactful answers and recommendations ready to deliver to clients at a speed that has not been expected in the past.”
The rate of consolidation in the industry bears monitoring, according to Paul Archer, president of Automated Business Technologies in Centennial, Colorado. He feels that with seven private equity firms rounding up dealers in addition to privately held dealers gobbling up competitors, it will result in fewer distribution points for customers.
For those dealers who choose to remain independent, it represents an opportunity to shine. “Dealers committed to staying private will control their destiny and be able to provide a great employee experience and a great customer experience,” Archer added.
