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So why are dealers imigrating toward the IT space?

7 Jan, 2013 By: Tom Callinan, Strategy Development imageSource

So why are dealers imigrating toward the IT space?

With 28 years in the imaging industry, I’ve seen my share of the “latest trends” as espoused by the “experts.” In the mid 90’s, all of the experts were stating that if you were not in the networking space you would be out of the copier space. The slogan was: “whoever owns the network will own the copiers.” I swallowed that hook right up to the sinker, and decided it was better to sell my dealership then to try to turn myself into an IT Networking VAR. I’ve heard the ‘experts’ state that dealers would struggle with digital and would never be successful in the production space because of the investment. So I’ve seen both sides of the “expert” coin - from what to do - and what we couldn’t do. What I’ve have learned over the years is that experts can be wrong; in fact, I can’t say that predicting the future is my greatest strength either.

Today it is impossible to go to an industry event; pick-up an industry publication; or talk to a dealer without some form of IT being on the agenda. It seems dealers can’t wait to discuss their network operations center, and every customer tour now has the wow factor of large screen monitors on the wall and casually dressed “techie types” in the cubes; despite the fact that much of their efforts are still directed to the support of the copier base.

The goal of adding new products and services, and hence the experiments with IT, is and has remained the same - grow revenues and profits. In the past it was difficult to gain traction in adjacent growth areas because copier dealers weren’t feeling a lot of pain; the industry was growing, albeit at a shrinking rate. Those days of industry growth are over and if you ask me (see my comment on my predictive abilities above) our industry will shrink faster than most of the experts are forecasting. To digress, I’m not an analyst but I am logical and observant and I see people using mobile devices to replace paper at an accelerating rate. Therefore, we have our pain factor - it is going to get increasingly difficult for a mature copier dealer to grow.

From my discussions with dealers, I think they are either feeling the pain or can see the pain on the horizon, maybe for the first time in their careers. That is driving them to look for new revenue opportunities.

So why are dealers migrating toward the IT space? I think the answer is simply because we have our toe in the water so why not jump in rather than seeking some new opportunity. That wouldn’t be how you bought a business if you were running GE, or how you’d invest if you were a venture capitalist; but I certainly understand the reasoning. Most of the time if you were going to enter a new business you’d do an industry-attractiveness study to understand market dynamics, competitiveness, barriers to entry, etc. But the copier dealer is in the IT space simply by selling MFDs, which are both entry and exit points for paper, and applications such as capture, advanced scanning, and document management.

Frankly, I’ve spent over a year researching the IT space. My clients’ were asking me for my opinion on certain areas and I wasn’t in a position to give sound advice. That isn’t because I don’t have as much experience as most copier dealers in the space. While at IKON, the largest IT services company in the portfolio reported to me and the company adopted the professional services (PS) approach that was pioneered in my region (developed and led by a very talented staff member who reported to me; not by me!). But these clients weren’t asking me about having PS as a compliment to copiers but rather about launching and/or buying IT companies. I was surprised at what I found.

Surprises & opportunities…

First, and this really shouldn’t be a surprise but it is certainly different from what we are used to in the copier space; the IT service space is highly competitive. This isn’t some new space we can go out and conquer; there are some really large and sophisticated players, and there are also thousands of smaller shops. To me, this makes selling to the dealer’s current customer base the most logical approach.

Second, unlike copier companies that basically try to sell to everybody; most IT companies are focused vertically or horizontally, and by customer segment. Since most copier companies have customer bases found primarily in the SMB space, the portfolio should be focused on SMB or the dealers should select a vertical for their IT entry.

Third, managed services, the apparent nirvana of many copier companies, has zero barriers to entry: zero. Any one of your employees can start a managed services company in their garage tomorrow (the MSPs have a term for these guys: “trunk slammers” because they work out of their car and are so prevalent). Anybody can buy the remote monitoring and help desk on a per device basis from master MSPs, or even from the RMM companies directly.

So why all the excitement about MS? One, there is a lot of excitement about it in the low end of the IT space, because it is somewhat new. Two, it is a good fit for the SMB space that doesn’t have onsite IT. Refer back to second point above.

Fourth, the cloud is changing the way IT is sold. This brings up another point with IT. There are frequent entry points because IT doesn’t simply evolve, it has massive change. That change puts everybody on equal footing: not knowing much. Unfortunately, the cloud isn’t that new any longer and even though you can get educated on this new offering, you won’t have the legacy knowledge that IT companies possess.

Fifth, the engineer is key, and we need to change how we invest in our employees. If you don’t send these engineers to training and keep their certifications current, they will go to a company that will make that investment, and you’ll be out of the IT business fast.

Dealers seem to be abdicating their education in the IT space to whatever vendor they interact with or to whoever is giving a seminar at a local industry event. Yet we know that Microsoft, Cisco, Salesforce, EMC, Oracle and some other large IT providers dominate the space. If you truly want to get exposure to the IT space, I encourage you to include attending these companies’ user conferences, such as Microsoft’s Worldwide Partner Conference or Saleforce’s Dreamforce.

I’d also encourage you to adopt Cloud-based solutions that compliment what you currently sell. I’d focus on workflow, as helping companies reduce their use of paper will help you to place more devices while you are getting deeper into the IT space.

Staying close to your core will provide an easier learning curve. You could enter any segment of IT services, or even get into the managed services space; but in so doing you are effectively starting a new business. There’s nothing wrong with that, just make sure you have a solid business plan and understand the market. It will take more than listening to one seminar; it will take true market-attractiveness analysis and an objective review of your company’s capabilities. So before you jump in make sure you likethe water.

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