by West McDonald, Vice President of Business Development, Print Audit
A few weeks ago I was lucky enough to attend MWAi’s Executive Connections Summit on behalf of Print Audit at the Valley Ho in Scottsdale, Arizona. One thing that became clear early on was that this event was about much more than just Managed Print. The introduction of the new FORZA ERP really caught my attention, as did the announcement that PERRY proTECH had adopted it. What was the story here? Why the change? What did PERRY proTECH think they were doing?
I was lucky enough to get some time with Jeff Boate, the President of PERRY proTECH to get some answers. Little did I know just how deep and wide he believed the changes were going to need to be if our industry was not only to survive, but thrive. Here is our conversation:
West McDonald: What do you think of the general state of the union for Managed Print?
Jeff Boate: Clicks are declining, right, we know that. What’s more troubling is that gross margins are also declining. That’s a double whammy to most dealers. PERRY proTECH’s CPP base is still on the rise. But there’s a catch: We see less clicks per device and the increase in pages is due to getting more machines under contract.
West McDonald: It doesn’t sound like you are concerned about flat growth industry-wide for Managed Print. Why do you sound so upbeat?
Jeff Boate: We’re going to grow anyway. A big reason for that: Adding Managed IT services to our quiver. PERRY proTECH is employee owned. We’re always thinking about shareholder value. We view the Managed Print space as a mature market. The recession of 2007 brought it all to a head for us, we knew we had to explore some offerings that had a much stronger growth curve. Our conversation focused around bringing the same level of growth to the next generation of owners at PERRY proTECH. Managed IT services came out as a way to do that. It was a no brainer. The growth level of Managed IT is exponentially larger than we imagined and allowed us to continue to grow our share value.
West McDonald: So you are diversifying your offering to bring more value to your customers. Do you need additional sales people to be able to sell this new Managed IT offering? Is this outside the realm of expertise of your traditional sales force?
Jeff Boate: Managed IT and Managed Print both have similar value propositions. Training our existing sales folks to sell Managed IT was easy because of the similarity.
West McDonald: That’s great to hear, Jeff. From a selling perspective it sounds easy enough to get the reps to sell Managed IT. But just because the value proposition is similar doesn’t mean the mechanics of delivering the offerings are even remotely the same, correct?
Jeff Boate: That’s true. The customer type is quite different for both offerings. Managed IT is typically sold to smaller customers who don’t have their own IT, whereas Managed Print is sold to larger customers that have some complexity around print.
West McDonald: A lot of dealers I have spoken with who have tried selling Managed IT have said that organic growth can be challenging and slow. Are there other ways a dealer can grow their IT services business?
Jeff Boate: The other way to do it is Mergers & Acquisitions (M&A) and we do that as well. For dealerships there is a real challenge around thinking Managed IT is easier than it really is. The truth, however, is that there are a completely different set of services. You can’t dip your toe in, you have to go all in. And buying a company with a maturity level around Managed IT can help a lot to ensure success.
West McDonald: What about smaller Managed Print dealers who may not be of the same scale as PERRY proTECH? What if there is no M&A budget?
Jeff Boate: Looking for a Master MSP like GreatAmerica Leasing’s Collabrance or CharTec is another really great way to start. We have incorporated some aspects of the Collabrance program into our offering. They handle all the backend and reduce the cost of entry for an MPS dealer. If I was a dealer just getting started, I would start with a master MSP.
West McDonald: At the Executive Connections event hosted by MWAi you announced that you are adopting their Forza ERP. That doesn’t sound like an easy move. Can you tell me more about the decision to do so?
Jeff Boate: The key to getting good at Managed IT is standardization of product components. This is also true for program management components. At the end of the day I have to be able to deliver share value and I can’t do that running 16 different systems. I don’t think, as a dealer today, you can be on a purpose built platform. Our industry is changing too quickly. You need the flexibility that a true ERP like Forza and SAP’s Business One can offer. As a dealer, who knows what product offerings are around the corner that will allow us to continue to grow?
West McDonald: Is SAP’s Business One a good choice? I’ve heard it’s an established ERP but many in the Managed Print world may not be acquainted with it.
Jeff Boate: There are 45,000 installs of SAP’s Business One around the globe. We know that this single source system is a winner and will carry our business into the future. MWAi has done a great job of driving a strong relationship with SAP with it’s Forza offering. They made sure the necessary components are there for Managed Print and beyond.
West McDonald: Let’s take a minute to talk about billing models. Earlier you mentioned that pages per user are flat or on the decline. If you are changing so many of the business components of your offering do you think that, one day, this will extend to Cost Per Page billing?
Jeff Boate: It’s been on my mind. On the Managed IT side we’re strong believers that it must be billed on a per seat basis. I’ll be honest, we talk a lot about doing the same with Managed Print. We’re not there yet but we are going to get there. It just makes sense. Offering per seat billing for Managed IT and MPS sets you up like an actuary for an insurance company. You’re building a portfolio where most times you’re going to win and can absorb the hits when you don’t. Insurance companies have been around for hundreds of years so I think it’s safe to say the business model is sound.
West McDonald: Print Audit agrees and has built systems around user-management that allow our Premier members the ability to build seat-based billing models that reduce customer spend while increasing gross profit levels. Seat-based billing is the next logical step as dealers begin to offer both Managed Print and Managed IT. It doesn’t make sense to have 2 completely independent billing models.
Jeff Boate: Part of me hopes that it takes my competitors a long time to come to the conclusions we have at PERRY proTECH. Business is great and the future is bright. It hasn’t been easy and we’ve invested a lot of time and money in building a business model that will meet the changing needs of our customers.
West McDonald: It’s a lot to take in Jeff: Flat page-growth, non-purpose-built ERPs, potential changes in Managed Print billing models, and adoption of Managed IT Services. Your enthusiasm around all this is contagious and PERRY proTECH sounds like they are ready to lead the charge. Thank you so much for taking the time for this enlightening chat!