Opportunities abound for MPS providers

Posted on Jul 23 2018 - 11:00am by Editorial Content
RATING

Managed print services are an untapped opportunity for channel organisations to extend their influence within the SMB market, says Quocirca Research Director, Louella Fernandes

Louella Fernandes

Louella Fernandes

MPS adoption in the SMB market remains relatively low, compared to the enterprise market.

The managed print service model is proving an attractive prospect for channel organisations seeking to protect and grow future revenue, against a backdrop of hardware commoditisation and shrinking margins. While leading channel organisations have invested in the resources, expertise and infrastructure required to offer and deliver MPS, others have yet to make the leap. Those that have made the transition are reaping the benefits. Overall, 34 per cent of channel organisations already selling MPS have increased their revenue by five per cent or more in the last year. This compares to 24 per cent of channel organisations which are not selling MPS that have seen an equivalent rise in revenue.

A recent Quocirca study revealed that the leading benefit following a move to selling MPS has been the expanded opportunities for selling document workflow solutions, noted by 67 per cent of channel organisations. Over half (55 per cent) of respondents also agree that MPS has provided further opportunities to sell non-print related services such as IT services.

Enhance status
The SMB market is ideal for channel organisations aiming to enhance their status as trusted advisors. SMBs face a range of challenges in tackling escalating print costs and driving business efficiency. Budget constraints and a lack of internal resources are driving many to turn to managed IT services in general to better control and manage their IT infrastructure.

Despite this, the shift to MPS is a work in progress for many channel organisations as the transformation requires significant changes to be made. Copier dealers may have built up decades of expertise in developing the infrastructure to serve clients on a contractual basis, but other channel organisations do not have such capabilities and may find themselves needing to build new platforms, design new services and develop recurring billing processes.

Consequently, many print channel organisations still make most of their revenue on their legacy transactional equipment and peripheral sales. Quocirca’s survey reveals that transactional sales continue to represent just over 60 per cent of revenues for print channel organisations. However, the shift to building a recurring service model through MPS is underway – 35 per cent have fully evolved to MPS with 37 per cent indicating they have started, the remainder say they have yet to start or have no interest in growing their MPS business.

Although many channel organisations are evolving their business and moving beyond traditional sources of revenue, this is not without its challenges. Overall, 54 per cent of participants in the recent survey report that their biggest concern in growing their MPS business is too much competition from other MPS providers, which includes their own suppliers. A skills gap is clearly evident – half report that sales and technical resources skills are a key barrier to delivering MPS.

A prime opportunity
The SMB market is a prime opportunity for MPS and workflow solutions. Quocirca’s recent PRINT 2025 study revealed that SMBs are dealing with a variety of print management challenges. They continue to rely on print to support their business activities, but in many cases, it remains inefficient and costly. Reducing paper usage is rated as the top print management challenge, particularly amongst larger SMBs, followed by reducing consumables costs and enhancing security. This points to the need for channel organisations to develop offerings beyond simple MPS contracts that encompass audit, optimisation and document workflow.

Many print-focussed channel organisations are well positioned to capitalise on the momentum towards cloud-based, ‘as-a-service’ IT consumption amongst SMBs, by positioning MPS as an enabler of improved productivity and efficiency.

By accelerating the shift to a services-led business model, channel organisations can increase the proportion of their business that comes from recurring revenue, leading to deeper and longer customer relationships, healthier margins and better long-term revenue prospects.

So, what are businesses looking for from MPS providers? Unsurprisingly service quality comes top, but priorities vary depending on organisation size. Larger SMBs are more likely to value a proactive service to support digital transformation, while security expertise is valued more highly by the smaller SMBs.

Security is an opportunity for MPS providers with the expertise and technology to deliver secure print hardware, services and solutions, skills which SMBs typically lack. As line-of-business (LOB) decision-makers become more influential in technology purchasing, channel partners must expand their sphere of influence beyond IT managers. Almost half 45 per cent of larger SMBs say that being a strategic partner to both IT and LOB is a top requirement for a print supplier.

For channel organisations, building an MPS business requires careful planning. Moving too fast can impact cash flow, but not moving at all can impact growth and new business. A successful MPS can help build more predictable, recurring revenue streams, augment recurring revenue streams from managed services, and open doors to new customers.

Need to build competencies
Consequently, channel organisations will need to build competencies beyond their traditional expertise. Remaining focused on a single product or service is not the route to being accepted as a long term trusted partner. To maximise their potential in the market, and overcome challenges during the transition, channel organisations should consider the following:

Adapt to the changing market.
Channel organisations must retool to shift from the outdated reselling model and embrace a new role as trusted and strategic advisors to customers. As businesses turn to the channel for guidance and support in addressing challenges, channel organisations will need to be able to deliver consultative led services. This also means tapping into adjacencies such as digitisation and security, which are increasingly a necessary part of the print proposition.

Establish strong vendor relationships.
It’s important for channel organisations to establish strong and successful relationships with vendors. They should not only look at the mechanics of an MPS platform or programme, but also evaluate a vendor’s ability to engage and develop the partner relationship. Broad support from vendors for lead generation, PR, content creation and more are all necessary to ensure channel is fully equipped to find and win in MPS.

Specialise by industry or application.
The shift to margin-rich services means developing industry specific expertise. Investment should be made in the skills needed to deploy and connect a range of technologies to specific industry sectors.

Focus on selling business outcomes.
As digital transformation initiatives become further engrained in businesses, channel organisations will need to position offerings as supporting digitisation and digital workflows with both Line of Business and IT departments. For larger businesses, the channel needs to focus on building skills in selling business outcomes to LOB buyers, while retaining a strong relationship with the IT department.

Partner with other service providers.
Partnering with providers that offer complementary skills or products helps develop a broader portfolio and provides accessing to new expertise. This is particularly important for channel organisations that want to position themselves beyond print as more general managed IT service providers.

Monetise.
Channel organisations that invest in software development resources to expand their offerings should consider monetising and building IP through custom built applications. Building a portfolio of wrapped around the MPS business can lead to new opportunities. Consider including assessment or consulting services as well as integration services. With MPS adoption still low in some segments, there is an opportunity to develop a phased approach to MPS expansion.

Step outside the comfort zone
Traditional print channel partners must be willing to step outside their comfort zone to capitalise on the opportunities.

Channel MPS programmes are failing to deliver in key areas. Top areas in which vendors are failing to deliver are margin retention, response times, lead generation and vertical market support.

Overall, 77 per cent of channel organisations rate margin retention as an important factor in choosing their MPS programme, but just 47 per cent are satisfied with this. 67 per cent rate short response times as important, but only 48 per cent are satisfied. Just 39 per cent are satisfied with lead generation, compared to 55 per cent who rate it as important. 72 per cent rate vertical expertise highly yet only 49 per cent are satisfied.

While MPS is viewed as the biggest opportunity today, by 2020, channel partners expect that vertical workflow applications and security solutions will offer the greatest opportunities. Partners believe that vertical market expertise will be key to profitability by 2020. The clear majority (91 per cent) of channel organisations agree that they need to expand their vertical expertise by 2020. To this end 72 per cent plan to expand their product portfolios, 68 per cent plan to offer new software products and 64 per cent are looking to acquire another channel organisation.

Rapidly evolving technology landscape
The rapidly evolving technology landscape demands that channel organisations move quickly towards a services-led model. With the right strategy and execution, the channel can navigate disruptive market changes and remain relevant and competitive.

If a channel MPS provider can successfully reshape one part of its customer’s business, with the right expertise and services, it can expand its influence – particularly as more SMBs look to accelerate digital transformation.

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