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Mike Stramaglia: Outlook from an Industry Leader

7 Dec, 2004 By: Aaron Shea imageSource

Mike Stramaglia: Outlook from an Industry Leader

Mike Stramaglia has a long history of leadership in the document imaging
industry. Over his nearly 30-year career in the business, Stramaglia has served
as the CEO of Imaging Portals, Inc., president and COO of Hitachi Koki Imaging
Solutions, Inc. and has held senior management positions with Minolta
Corporation and Ricoh Corporation. Two years ago he joined Electronics For
Imaging (EFI), one of the world’s top digital printing solutions companies, and
became the general manager of its Service Automation Group.

Stramaglia has seen the evolution of the copier/printer industry from some of
the highest posts. His years in the business, along with his view from the top,
has allowed him to gain a strong perspective of the industry—where it has been,
where it is today and where it is heading. Stramaglia took the time to discuss a
gamut of industry issues with imageSource.

imageSource: What is the major competition for today’s dealers—other dealers,
mega-dealers, OEMs, or computer printer companies?

Mike Stramaglia: If you are speaking directly to a hardware-centric
dealership about their requirements and needs, typically you will hear that they
are competing with all of the other distribution that you
mentioned—mega-dealers, OEMs, other dealers, so on and so on. But I also think
in that line of thinking they are meeting a greater and greater demand from the
end user for dealing with other channels of distribution and other brands like
Dell and HP—printer-driven or MFP-driven distribution that are continually
finding better ways to deliver  products at lower costs and lower gross margin.

So that is a huge challenge to the conventional way of doing business, and in
order for the dealers to compete and grow their businesses, they have to respond
to the fact that those other distribution channels are targeting them. And that
means they should be looking at other investments that will take them into
competing with other consulting services, print management services, Kinko’s,
and print output-type companies where production printing is finding itself more
and more involved in the desktop and corporate America.

It is easy to say Xerox, Dell, HP and other printer companies are the
competition, but on the other side you now have a whole confluence of new types
of competition, such as consulting companies. There are other companies
providing software applications that a dealer is in fact competing with and may
not even know it at this point.

IS: From the standpoint of consulting companies, what kind of products are
they putting out that dealers are competing with today?

MS: They are involved in all business process improvements. They go to
customers and do assessments. As a result of the assessments conducted, the
consulting company will tell them, for example, that in the IT area these are
the things we recommend you do, or in the document management area, these are
the print management tools or process improvements we recommend. Once that
customer subscribes to that proposal, the consulting company will go out and
outsource that capability to some vendor that is an expert in the particular
area. For example, if they get involved with a corporation like American Express
or even a smaller company, a consulting company will send out a RFP to any
number of businesses and outsource that business to that vendor. In that
particular environment, a dealermay be competing with a small or large
consulting company and may not even know it.

IS: Who do the dealers align themselves with to compete in that space?

MS: They really need to embed themselves and build relationships with the IT
groups or the corporate production printing group. This is where the money is
really being invested at a large level. The dealer should be looking at other
local types of companies that are providing professional services. A dealer
should go to the Web and investigate their local market and find out who is
providing print management tools and IT-related tools. They need to do their own
homework and study which of those vendors or providers they would like to
associate themselves with. There are plenty of them.

IS: What are some of the names dealers should look at to align themselves

MS: There are a wide variety of software and solutions providers to talk to,
although I wouldn’t hesitate to call some of the larger companies like a KPMG a
consulting company, but at the local level. I would certainly get involved with
the Kinko’s folks in the local marketplace.

IS: How do dealers integrate with a Kinko’s besides selling them hardware?

MS:  In the case of Kinko’s, there could be a lot of outsourcing capabilities
that they may be able to work out together. For example, if a dealer gets
involved with a particular major account and they find that the customer
requires document outsourcing, they may be able to work with that Kinko’s and
continue to move some of that print over to the Kinko’s operation while keeping
a lot of the prints locally at the desktop for desktop publishing. So there are
some interesting ways to be able to develop relationships with those guys. The
immediate thought is that it is a competing venue, but in many cases it may not

IS: How do you see dealers positioning themselves to make a clean break from
being so reliant on manufacturers? How do you see them setting themselves apart
from the manufacturers?

MS: Actually, from my perspective, dealers are in the best position they have
ever been in to be able to go out and sell the value-add of that particular
dealership into the marketplace. The reason for that is always going to begin
with the fact that they can pick and choose any piece of hardware and, in fact,
any software they want to install with their customer base. Conversely, the OEMs
are confronted with the challenge of selling first, foremost and as frequently
as possible. The dealer is smaller, swifter, quicker, and, if invested properly,
better educated with the things that are appropriate to their business and their
marketplace. I think that value-add for the dealer really resonates around the
open marketplace. They have IT-related services, professional services support,
print assessment capabilities, and print management. These are things that are
expedient and quick and a dealer can actually deliver today.

IS: So the machine is second fiddle to the applications and services that
dealers are offering?

MS: That sounds a little abrupt. The machine, depending on the segment,
remains a critical component for whatever it is that you are doing. What changed
is the fact that there is very little you can do to differentiate between the
imaging devices–you can only make them faster, slower, color, or have better
paper handling, etc. The functionality has become the dominant factor for what
that machine can deliver. So, what the dealer hangs around that hardware, both
in assessing the customer requirements and, more importantly, partnering with
people that can help deliver better more expedient solutions; that is the key.
It sounds easy if you say it fast, but the dealer has to investigate and must
invest in the skill sets for assessment and the partnerships to deliver based on
customer requirements, not on engine capability.

IS: Is there any type of software you would recommend for dealers who are
just entering the solutions business to sell?

MS: I think people underestimate the power of the dealer community. I have
found that most dealers are extremely bright and capable of selling some kind of
solutions. The ones that are slower to respond, I think the best thing for them
to do is get involved with print assessments or remote printing management
tools. They are relatively easy with a big return. Anything that allows the
dealer to introduce a product like a scanner is also a good way to get involved
in solutions. If the first thing they do is just connect that hardware and along
with that add a print assessment or print management tool, they’re in. They’ve
taken the first step. Those are relatively easy things to train and relatively
easy to implement. To start getting into remote printing and job routing would
be a mistake for a dealer to jump into without reasonable education.

IS: What other products and services should dealers be adding to their

MS: Again, it depends on the dealership. It’s really easy to point out what a
dealer should look at, but whether it fits their business plan is a different
story. I think there is a whole lot to be said for the growth of the scanning
business and what people are going to be doing with scanning and remote
scanning. I think there is a whole lot to be said about further enhancements off
the desktops for print management and document security. Document security is
going to be the buzzword for the next two to three years. Everyone is talking
about it and now with new regulations, such as HIPAA (The Health Insurance
Portability and Accountability Act), the need and requirement for people to
identify and manage original documents is growing by an enormous amount right

IS: How can dealers settle the impact of eroding hardware margins to maintain
or increase profitability?

MS: It continues to fall on the responsibility of the dealers. You look at a
company like EFI; this is the company you want to partner with. We sell Digital
Storefront (print job Web submission tool), we sell cluster printing, document
distribution solutions, print assessment, management tools, and a wide variety
of solutions that revolve around the document and print engines. These areas are
important for dealers to become involved in to avoid further gross margin
compression and leverage their existing base. They need to take new products and
solutions into those customers. To me that is the biggest initiative a dealer
needs to focus on. If a dealer has 2,000 machines in the field or 5,000
customers, that’s an asset. A dealer can go back into that customer base of
products and services, and solutions can sit alongside what they have already
sold to the customer. That is just a natural evolution. I do think they are
doing it. I think the problem is that it is feast or famine. The good ones get
really good and continue to do it. The middle ones are typically slow and
continue to work on it and the copier guys are the copier guys.

IS: Is it tougher to be successful today as a dealer compared to 15 years

MS: I think the opportunity is greater than it has ever been. I also think it
is highly complex and probably more complex than it has ever been. People are
smarter, customers are smarter and the technology is clearly easily embraced by
new generations of people that don’t find any objections to using PDAs or
voice-enabled transmissions for things such as printing and IT. I think those
things are so easily embraced. Conversely, you have to have very talented people
at the dealership that are capable of taking on a new generation of sales
capability. I might add, in today’s world it has become tougher and more complex
from the aspect of document security and IT firewall security. Everyone has to
be a whole lot smarter and better at what they are doing. Opportunity is just
about everywhere and everyone is enabled. But taking care of security-related
issues does make it a lot more complex.

IS: What do you believe is having a negative affect on dealers in the market

MS: If I were a dealer right now, I would be extremely concerned by the
continuing encroachment by folks like HP and Dell. These are high-powered
companies that know how to distribute products in a manner that basically comes
right into their windmill. From their own OEM perspective, that has always been
something they need to deal with. Most OEMs must protect their positions in the
marketplace by going direct. That is just a question of how far and how deep
does that OEM go in managing that direct operation. Typically every OEM is going
to say we want to balance our distribution between our direct operations and

IS: Do you think manufacturers see a place in the industry for dealers in
five years?

MS: I think there has to be a general concern with what the dealer community
will look like five years from now. I would have to say that is a very
legitimate question and the answer is in the making.

IS: So dealers that have spent the last 20-25 years of their lives building
up, let’s say Canon’s brand, should be concerned with what you’re saying?

MS: I don’t see that as a fear factor as much as it is a realistic
observation for what has been happening for 20-25 years in the marketplace. This
is normal business. What is now abnormal is that the dealer must invest in
differentiation. There’s nothing wrong with carrying the Canon brand or Ricoh
brand, or any other OEM brand for that matter. What would be wrong from a
dealer’s perspective would be to rely solely on that brand as supposed to adding
your own solutions around it that make you different and viable. To me a dealer
is an ISP, an imaging solutions provider. I think that is what a dealer must be.
That means they are managing soft documents, hard documents, remote documents
all through enabled hardware or enabled software or both.

IS: What should dealers be requesting of their OEMs to put them in a position
to be as successful as possible?

MS: I may have a different view of this having worked for the OEMs and having
a pretty good read on the dealer community. The dealer fundamentally should
expect their primary OEM or OEMs to deliver a product that works. Support me
with a good warranty and a reasonable array of support programs and solutions
that can help me sell those products. As a dealer, my expectations of an OEM
would be very limited. I think that is one of the new generation thoughts of the
OEM. The most astute dealerships expect very little from the OEM for their own
success. They want to be treated fairly, they want good programs, they want
products that work, they want products to be delivered on time, and they want
reasonable pricing and a good brand. If you can strike up a good relationship
and solutions along the way, that’s a bonus. But the most successful dealers I
have ever worked with have been dealers that have expected little and utilized
the most.

IS: A lot of OEMs produce their own print controllers now, how is EFI
evolving over the coming years to help dealers succeed?

MS: On the controller side of the business, I believe EFI still envisions a
very formidable business plan for controllers. We see that there will be changes
in the way we do these things and the other types of products we get involved
with. However, that is not my area of expertise. The area of the business I am
involved with is basically driven by things that will facilitate better printing
through better asset management and meter reads, an enterprise-type of portfolio
led by the recent acquisition of ADS. Our mission right now for EFI is to
nurture and grow the core business.

IS: What do you see as critical to the future success of the industry?

MS:  One of the things that I always find unusual and I would encourage every
dealer to pursue are their own internal focus groups. They should be collecting
various types of products and solutions and orchestrating a focus group with
their customer base. In the process of doing that, they are going to find out
who their other competition is that they may not normally see. So they’re going
to find out that someone might be in there from the IT side that’s talking about
a scanner solution or some other print assessment program. So the only way to
make a wholesale change in their thinking or add speed to what they are doing is
to gather focus groups. This is how they can learn, share and sell. I don’t see
dealers doing that.

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