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Office Equipment Dealers – Has Connectivity Become Commonplace?

7 Dec, 2004 By: InfoTrends/CAP Ventures imageSource

Office Equipment Dealers – Has Connectivity Become Commonplace?

Last month, InfoTrends/CAP Ventures provided readers with the results from
recent research regarding the growth of office document solutions sales through
the independent dealer channel. Using those same results, which were compiled
through completed surveys from more than 100 independent office equipment
resellers throughout the U.S., this article takes a look at how key issues,
including network connectivity, aspects of the sales process and issues relating
to partnering, appear to be impacting the growth of the office document
solutions market.

The Critical Role of Network Connectivity

Since the introduction of the first Fiery color servers for color copiers,
the issue of network connectivity has been a hallmark for the analog to digital
transition that has, for the most part, driven the office equipment market for a
decade. Since about 1995, manufacturers have pushed hard on both direct and
independent reseller channels to increase the rate at which multifunction
devices are connected to networks. The average network connect rate for color
copiers has been between 78-95 percent since the early 1990s. At the same time,
and despite frequent connectivity claims of 50 percent or more by some
manufacturers, the actual weighted connect rate for all brands and segments of
digital black & white copiers is believed to have been substantially lower,
ranging from 30-45 percent.

Based on InfoTrends/CAP Ventures’ recent research, the independent dealers
recently surveyed indicated that their average network connect rate across all
speed segments for copiers is currently about 48 percent. As expected, the
connect rates tend to increase on average as the speed class of devices
increases. The lowest average connect rate reported by dealer respondents was
about 26 percent for Segment 1 devices and the highest average connect rate was
approximately 69 percent for Segment 6 devices.

Connectivity is generally viewed as the first and minimal hurdle leading into
a potential solutions sale. If we look at these numbers, connectivity rates of
50-55 percent are better than in years past, but still indicate that connected
MFPs are not yet mainstream when compared to the large installed base of
standalone analog and digital devices. This provides some indication that
dealers’ customers are still largely unaware of the potential added value that
networked multifunction devices can bring.

Adding connectivity to an MFP sale can add a layer of complexity to the sales
process, something a majority of salespeople want to avoid. Yet, it’s a critical
element in starting the discussion with customers outside of the traditional
"feeds and speeds" debate. Also, based on these research results, only 73
percent and 37 percent of respondents indicated that they currently sell Segment
5 and 6 class devices respectively. These two speed categories with the highest
reported connect rates are also the two speed classes that are least commonly
sold by the dealers who participated in this survey.

Although these reported connectivity rates are still relatively low, initial
reported connectivity rates for universal copier/printers that are color enabled
tend to be in the 90-plus percent range. As these devices displace similar speed
black & white devices, the aggregate connect rate in workgroup environments will
increase naturally over time.

Taking the Solutions Discussion to the Right Decision Maker

The issue of building a solutions business on network connected devices is
clearly predicated on more than simply having a product portfolio and marketing
strategy that stresses connectivity. The roles of the individuals who procure
office equipment, as well as MFP and printer-centric document solutions,
continues to evolve. In the past few years the dynamics within the purchasing
process has been shifting away from traditional purchasing departments towards
more strategic and IT-centric decision making departments.

From one perspective, this is an important and valuable shift. As key
business managers, including presidents and CFOs, get involved in the decision
making process regarding office document solutions, the visibility and relative
value of these MFP and printer-based technologies is increasing within all sizes
and types of organizations. As has been expected for years, IT managers are
assuming a greater role in the procurement of office equipment, including
digital copiers due to the need to manage the compatibility of all devices
connected to the network. IT managers are also interested in deploying these
technologies because solutions and capabilities for applications like document
capture provide tangible and immediate value to the workgroups and departments
they support on a daily basis. 

Despite this broad trend, it appears that dealers are mixed in whom they
approach for software-based office document solutions and digital office
equipment. About 43 percent of dealers indicated that they primarily work with
purchasing and office managers while another 43 percent indicated that their
organizations are primarily targeting IT departments and C-Level managers. Over
time, driven partly by customer demand, more dealers will need to prepare and
build go-to-market strategies that are in-line with the strategic needs and
interests of roles outside of purchasing and general office management to
continue to grow placements in connected office equipment as well as office
document solution deployments.

Partnering - Where Are the Services Coming From?

The issue of partnering with IT-centric services providers has been discussed
and bounced around between resellers and manufacturers since the first digital
copiers could be networked. Over the past nine years there has been some slow
movement by independent dealers to build relationships or, in a few rare cases,
acquire other firms like small VARs or systems integrators. Probably the most
significant acquisition of this form was Xerox’s purchase of XL Connect in 1997,
now sub-branded X Connect. This group provides the core systems integration
services within Xerox Global Services. When asked by InfoTrends/CAP Ventures,
only 22 percent of respondents indicated that they currently outsource
value-added integration or consulting-based services.

Without making too broad a set of assumptions based on the results to this
question, we believe in most cases that dealers have limited their exposure to
complex solutions that would require substantial customization. This has limited
a real need to pursue external resources to manage what are today relatively
simple deployments. Also, although the market will grow more slowly as dealers
rely on existing internal staff to climb the learning curve around solutions, it
appears they are keeping their costs down and leveraging existing core
competencies in this area.

Research Take Away

When we start to look more closely at the results from the InfoTrends/CAP
Ventures research, we can see some positive, but also mixed results based on the
responses. It’s hard to say exactly when the "office document solutions" market
was really first created, and whether or not the progress in growing that market
has been good or bad. Early expectations, like with any new industry, were
probably wildly overoptimistic and unrealistic.

Overall, there are still a limited percentage of dealers who appear to be
actively and aggressively marketing connectivity as a lead in for solutions.
Connectivity rates in the segments that represent the greatest rate or unit
placements, particularly Segment 2, are very low. The movement towards offering
services appears to be focused around homegrown, incremental service offerings
based mostly on existing dealer resources. The independent dealer channel still
needs to hone its focus and go-to market initiatives around more strategic
messaging that will resonate beyond the traditional customer participants in the
purchasing cycle.

Nevertheless, the request by customers, manufacturers and developers for
dealers to significantly alter their businesses is and has always been a tall
order. Yet, based on some of the results we’ve seen from this study, it appears
that some dealers are following through on this opportunity, making the
necessary changes to grow a more solutions oriented business, while still
conservatively managing the risk of investing in what is essentially a new

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