Everybody’s Talking18 Apr, 2001 By: Lester Anderson imageSource
The “solutions business” has been the buzzword in the imaging industry for the past couple of years. There is no uniform agreement from vendors on what constitutes a “solution” in the marketplace (other than selling more of their product). There is, however, a definition from the customer—a solution is, “whatever it takes to solve my business problem.”
As a solution, hardware vendors often promote their product with software. This combination often solves a problem of monitoring the hardware on the network. Some solutions improve the effectiveness of the product, such as; color correction and color management tools for color output devices. Some solutions provide an enhanced capability, such as; providing scanning utilities along with document storage and retrieval designed for a desktop or a small workgroup. The key for these to be solutions is to match them to a customer’s business needs.
The reason resellers of office automation products looked toward providing solutions is that the margins on the hardware started to erode. The concept of selling a turnkey solution reduced some of the price pressure, because the sale became part tangible (hardware) and part intangible (services in problem solving). Also, for an industry built on a recurring revenue stream, the idea of an ongoing software and services relationship with a customer fit the dealer business model very well.
At CAP Ventures, we have done extensive research in this area. Interviews with end users on what they want to buy and for what (products/services) they are willing to pay. CAP has published research on the marketplace and projections on the growth of the market for software and services. Our research shows very conclusively that there is market demand and profit for those who pursue the opportunity. With a 35% CAGR (compounded annual growth rate) it is an opportunity that dealers cannot afford to ignore.
What Does It Mean?
Like any new technology venture, the early adopters are often the scouts with the arrows in the back. The concept that paralleled the business model was not fully understood by all involved—management, sales, and service. The sales aspect was often the most challenged in the beginning, in the identical way that computer vendors were challenged in the 1980s, when their shift was from hardware to software. Selling hardware is a tangible sale. Selling hardware is often a set of specifications and a bottom line price sale. Selling software and selling services is an intangible sale. The computer industry found out that changing from the hardware to the software/solutions sale required a change in mindset of the sales force. It also required sales management to change its methods, from compensation plans to projected sales cycles.
The successes in the computer industry shows that such an evolution is profitable and builds stronger customer/supplier bonds. Look at the success IBM has had in the past decade, since it implemented this change in focus from hardware to solutions. But, it is not automatic. It means that from management to the feet in the street, a new way of doing business must be the order of the day.
Who Wants To Buy?
Opportunity does knock to those who listen for it. A few years ago, the market was concerned, because the connected digital multifunction product required the IS (Information Systems) or network manager to become involved with the sale. Now, it is the involvement of this IS manager that will pave the way for the dealer to become the solution provider to their customer.
CAP Ventures Network Document Solutions practice finished a research paper of case studies of networks and their document output requirements in December 2000. Interviews were conducted with the Vice President of Information Systems or the Director of Network Operations at these corporations or government agencies. One of the conclusions from these interviews is that the senior network manager would be very happy to contract out print support services, if they could find someone to buy the services from!
These IT professionals find that working with a consultant or reseller, who adds value for a fee is well worth the expense not only in the implementation, but also in the ongoing support. The network managers and those who work for them consider print devices and print output essential, but are the bottom of the list of desirable duties internally. Monitoring and managing things like bandwidth, storage, security, communications, and strategic applications are considered more exciting and prestigious duties. With the IS industry’s negative unemployment rate (some studies say there are 10 jobs for 8 information systems workers in many markets), they do not have the staff to do everything. The concept of contracting out some of the document oriented services, or licensing software to make the job easier, is an option they would love to have—and one for which they will gladly pay.
Go Alone And Partner—Not Mutually Exclusive
How should a dealer get started or expand their efforts? The answer is partnership. In today’s technology world, no one can totally go it alone. All the major computer companies partner, providing the customer their special expertise, and they are partnering with software or service vendors who can complement the value proposition to provide the customer with a complete solution.
The partnership concept is on both sides of the equation. You and the software/services vendor mutually partner in creating the solution to meet the customer’s needs. You and the customer partner in solving their business problem, and because businesses need to be constantly fine-tuned, you are an ongoing resource to maintain that solutions partnership.
In selecting vendor partners, it is a questions of not only providing the partnership solution of software or services, but also training and support on the sale of the combined solution. Fortunately, many vendors, traditional hardware vendors, traditional and new software vendors, and some new services vendors, are all looking for the right partnerships in the distribution channel.
You as a dealer have that final link to the customer that is so valuable for these other players in the market. Leverage that with those who bring the sales and technical expertise to forge a profitable partnership for both sides. The customer is going to be sold by the correct sales technique backed up by the technical ability that they are willing to buy. You know that senior, sophisticated major account buyers, demand from you an experienced and expert sales person.
The IS Manager is going to demand a high level of expertise in those who deliver the solutions—that is why you should partner with the software vendors and sometime services vendors to deliver that high quality product. The IS manager is going to see through a “just good enough” delivery plan, and you will not only lose that opportunity, but also close the door on future opportunities.
Get The Know How--Get The Facts
Where to do this? Trade shows, magazine articles, newsletters will all give you insight. An ongoing feature in the Image Source Magazine will have profiles of partner players in the marketplace. This feature will not be a shortcut to try to give you pre-packaged solutions—but as a resource for you to determine if this type partnership makes sense for your business.
Like any other business expansion decision, the keys are investigation and follow through. Like any plan to expand your organization you must consider the basics:
Does The Solution Fit My Market—Or A Market Into Which I Want To Expand?
· How can I get my sales force to sell it profitably?
· How can I deliver the product to satisfy the customer?
· How do I continue to support the customer, so I become a partner in the solution?
· How can both my company and my customer profit from this ongoing relationship?
Profit From The Opportunity
At the start of this article, I stated that the growth in this market is 35% per year, but you can’t deposit percentage points into a bank account, only money, so let’s look at the revenue potential. CAP Ventures’ forecast for this market is that by 2004 there will be over $1 Billion of software and services provided through this distribution channel in the United States. Those in the channel who begin partnering and promoting this opportunity now, will be in the best position to profit from this increased revenue.
Lester Anderson is the Director of Network Document Solutions Consulting Practice for CAP Ventures, (Strategic Consultants to the Digital Business Communications Revolution). CAP Ventures is a strategic consulting firm for providers and users of digital business communication technologies and services. We provide knowledge and business strategies through timely research, analysis, forecasting, benchmarking, counsel, market education and implementation. For more information on CAP Ventures visit their website at www.capv.com.