Print Management Insider Blog

The “New Math” For Managed Print Services

Posted by Rob Thiessen on Jan 12, 2015 9:55:34 AM
New Math
The simplest solutions are often the cleverest. They are also usually wrong. 

One of the difficulties I’ve always had with Managed Print Services (MPS) as it is marketed today, is the apparent conflict of interest that exists between MPS providers and their customers, under the Cost-Per-Page (CPP) billing model.  Let me first point out that CPP is not a requisite of MPS.  In the Managed Services space generally, Cost-Per-User or per Seat billing is more common.

Nevertheless, most of the businesses I encounter who provide MPS in North America today, are using CPP as their go-to billing model.  This continues to be the case, even though it is widely understood that growth in printed pages within North America is generally flat, or in decline. There are many factors which come to bear on this point, most of which I trust are understood by the reader, so I’ll get straight to the point:

Basing your organization’s revenue on a linear association with an ever-shrinking volume of printed pages is in conflict with your organization’s interests, and therefore the industry’s interests as a whole.

On the other hand, your customers benefit from this trend. They benefit further from the technologies that are specifically designed to replace the printed page as well as manage output in order to reduce volumes and limit waste/cost.   These technologies are constantly evolving, and are certainly an integral part of the imaging industry today, not to mention the “less paper” office of tomorrow.  As it turns out, end users are not necessarily being introduced to these technologies by their current MPS provider. This is due to a perception that introducing current customers to print alternatives and print governance will lead to lower page volumes and hence, lower revenues. Of course, on the surface they are right!  Given the business model described above, fewer pages means less revenue.  On the other hand, if they choose to place their revenue interests before a customer’s interest in savings, MPS providers run the very real risk of losing their customer to a competitor who is happy to provide them with cost saving solutions in order to gain market share.

So what should MPS providers do to win customers, keep customers and build recurring revenue, given the pitfalls of the CPP billing model and the need to balance the customer’s interest with their own?

First, recognize that the same threat you face within your current customer base, represents an opportunity for you in your competitor’s current customer base.  By embracing print governance strategies in all new opportunities, you will attract business away from your competitors, using tactics that your competitor is not likely to be promoting themselves.  This gives you a differentiator.  This strategy even works on prospects who are tied into multi-year MPS contracts with your competition now. Rather than walking away from these “locked in” prospects, approach them on print governance strategies which can help them reduce their spend.  Doing so not only gives you a foothold inside the customer site, it also gives you new revenue, and the opportunity to reduce your competitor’s income by helping the customer to reduce their monthly spend on printing.  You’ll find that when the MPS contract expires, you are in a much stronger position to win the toner and service portion of that business.

Second, take a close look at every account you have now and decide what balance to strike between preserving current revenue (short term interest) vs. keeping the account (long term interest).  Sometimes, it pays to play defense by giving your current customer greater value at the expense of your own revenue. It’s certainly much cheaper than re-mounting an offense to try and win them back in the future.  Having said that, with the right solution partner and strategy, print governance solutions can actually deliver both savings to your customers, while at the same time increasing your (net) profit in the account.  That is where the “new math” gets interesting.  Your customer will save more while you profit more.  Skeptical?  Give me a chance and I’ll show you the math…

Third, partner with solution vendors that place you, the dealer, at the center of the value proposition for solutions.  That means you retain control over both the customer and the solutions they use. In most cases, dealers are simply handing their customers over to solutions vendors who provide them with the software and offer a margin on the sale.  This arrangement does not offer the dealer any “stickiness” associated with the solution, nor does it offer recurring revenue or pricing flexibility which they can use to make up for displaced CPP revenues.  This traditional solution sales model benefits the customer and the solutions vendor most, while the dealer stands to lose out in the long term.

Finally, consider the prospect of billing per user instead of per page.  After all, it’s people and not devices that are the real “printers” in the workplace.  Headcounts are generally increasing over time, as are the total number of documents which people produce. However, nowadays many documents never get output to hard copy.  If a document is printed, it will be a person who makes choices about what, where, and how to print it. If you think about it, it’s people, not pages or devices, which constitute the center of the document universe. Perhaps it’s time for MPS providers to acknowledge that in their business model.  Doing so will allow dealers, and our industry as a whole, to capitalize on growth and new revenue streams instead of just worrying about where all the pages have gone.

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Topics: Billing, business, business strategy, Cost Per Page, CPP, managed print, Managed Print Services, MPS, Office Equipment Dealers, print audit, Print Behavior, print management, print tracking, printers, printing, sales, strategy, success, tips

Rob Thiessen

Written by Rob Thiessen

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