When Worlds Collide: The Convergence of the Managed Services and Office Equipment Channels

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Apr 03, 2018

When Worlds Collide: The Convergence of the Managed Services and Office Equipment Channels

West McDonald from Print Audit hosts a podcast on "Convergence Radio" with industry thought leaders and discusses the strengths and challenges of the channels and raises the question if they will converge.

Preston-Woolfolk-2015-cropped.jpg GVanDeWalker-Circle-200x200.jpg Velo-Taylor-Toce.jpg

Preston Woolfolk
DOCUmation

Greg VanDeWalker
Collabrance & GreatAmerica

Taylor Toce
Velo IT Group

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Transcript:

West McDonald: Hello, everyone, and welcome to another exciting episode of Convergence Radio. Today's episode is called When Worlds Collide: MSP and OED Insights on Channel Convergence. I'm lucky to have some great guests today, some old friends and some new ones. So Greg VanDerWalker is also on the call, and maybe, Greg, you can introduce yourself. Well, thank you,

Greg VanDeWalker: West, very much, for having us on this call. As West mentioned, I'm Greg VanDerWalker. And I'm with two organizations. I'm with GreatAmerica Financial Services, I've been with them since 2003. I serve as the senior vice president of IT channel services.

West McDonald: Well that's great, and I've known you for a lot of years, Greg, and you've always come to the table when I want to do things like this, and I really appreciate that. And so maybe we'll meet one of our new guests today, and Preston Woolfolk, would you introduce yourself?

Preston Woolfolk: Sure. Hey, this is Preston Woolfolk, I'm with DOCUmation. We're primarily a office equipment dealer, that's how we got started in this industry. We cover the entire span of Texas. I'd say about 10 years ago, we started to transition to being a true technology dealer. And our three primary divisions are our IT, print, and our software. So nowadays, we position ourselves as a true technology dealer, covering all the major markets here in Texas. And our final guest is Taylor Toce. Taylor, maybe you'd introduce yourself for us.

Taylor Toce: Sure thing, West, thanks for having me, man. My name is Taylor Toce, I'm the president of Velo IT Group, headquartered in Dallas, Texas. We are a managed IT services company, so what that means is we're classically the outsourced IT department for small, mid-sized companies, typically 10 to, maybe, a few hundred employees. Where we serve as their full outsourced IT department. Everything from IT support, up on through strategic planning and budgeting for our clients in that realm.

West McDonald: Well that's great, thank you very much for being part of the group today, Taylor.

All: Yeah, thanks for having us.

West McDonald: All right, so let's get into it. Greg, maybe you could just take a couple of minutes and talk a little bit, because, as you mentioned, obviously, you have two titles. One with GreatAmerica Financial Services, and the other with Collabrance. So maybe give me a little bit about your experience, and what you're seeing, as far as the reality of convergence in the marketplace.

Greg VanDeWalker: Yeah, West, the short answer is yes, there's definitely a convergence. But I think it depends on your heritage and how that convergence has taken place. And I'll start from the office equipment perspective. I would say about eight, nine years ago, many office equipment dealers really wanted to get into it, to get into managed services, and they were coming fast and furious. And really, just thought would be nice bolt on, and it would be just a great way to get more wallet share of their customers. What happened was it is a very difficult business to get into. And a lot of people came and went. And when you look at companies like DOCUmation, who had a good strategy, they had top level commitment, they've been able to make the transition very, very well. And so today, when you look at the landscape of office equipment partners, there are a handful of them that are doing, what I would say, extraordinarily well. There's a bigger group that are doing pretty well. But I would not say it's the masses that are making that convergence. When I put on my IT managed services hat, again, we deal with thousands of MSPs across the country. I don't see a lot of them getting into print. But it is happening at a more rapid rate. And some of that has to do with some of the partner programs that are available, making it easier. I've talked to an MSP recently who's bringing on a copier line. And so it is beginning to happen. I will just say from a numbers perspective, I've seen more copier dealers getting into IT than IT getting into print.

West McDonald: Yeah, I think you're right. And I've been speaking with a lot of managed service providers over the years, about managed print, and the gut reaction has been, we don't need to do that. It's fixing things, we don't fix things, right? It's delivering toner, we don't deliver toner. And it's a whole new business model, based on pages, et cetera. And I think one thing that's got my eyebrow raised a little bit today is, as you know, I'm a big fan of the seat based billing for managed print, bringing a similar billing model to the managed print world, as we see in the managed services world. And GreatAmerica was absolutely instrumental in being able to make the seat based offering a possibility. And what really intrigued me is you guys launched that program, was that the first customer that you had was not actually an office equipment dealer, but it was actually managed service provider.

Greg VanDeWalker: And in some ways, that shouldn't surprise you, because most managed service providers are used to billing that way. That's the way they have billed since they opened their doors, and so it certainly resonates well with them. And it's a nice layer on to how they're pricing today. So that doesn't surprise me.

West McDonald: If we're moving into a new world, where office equipment dealers and managed service providers could be coming together, what do we need to do, as a company, to prepare for that, right? And that's where we are right now. And certainly, starting to your point, earlier, that the dealers that are doing it well, like DOCUmation, have definitely taken a much more sophisticated approach, I think, to building the program. In other words, not just bolting it on, or putting a tab on a website, right?

Greg VanDeWalker: It is a different business, and it has to be treated like a different business. And again, the ones that are successful, they're committed to making it work. And the ones who aren't, it's more of a hobby than a business.

West McDonald: Now as we're talking about how different the business model is, maybe, Preston, I actually will start with this question for you. Do you have two separate divisions for your managed print services and your managed IT services? In other words, separate salespeople or separate P&L, et cetera, or are they combined?

Preston Woolfolk: There are separate P&L, you want to track them 100% independent, different financial benchmarks and targets. It's a very-- almost take the model of the OED, and flip it upside down, and that's really where you get the managed IT model, financially speaking. But from what we've seen, that works best in terms of sales, utilize your front line sales manager and bring in specialist behind them. That's what's worked out best for us. And I believe if you really look across all the OEDs in America, most of them that are doing very successfully have that same model, as well. They've just tacking on specialists that can go out, talk IT, sell IT, but utilizing their current sales team to do that. That's great.

West McDonald: And one other quick question, as we're on the business model, there's obviously two ways to go about this, right? One, building your own offering, or secondly, working with a stock provider, like Collabrance, to have that as a standard offering. Did you purchase a managed services company, or did you build it from the ground up?

Preston Woolfolk: We built ground up. That's been a DOCUmation thing. All of our branch locations and our offices, we've been very organic. We have one small, maybe million dollar, acquisition in almost a 15 year period. So we've been very much an organic growth company. We built from the ground up. I was actually the first employee, so I was initiated with, let's go start an IT company, so that's what we did. And that's about the amount of thought and planning we put into it, as well. We kind of just went and did. And we worked with Collabrance from day one. So we've never acquired an IT company, we've done everything organic, from current customers, and new customers actually bringing in the DOCUmation folder. And really, the main reason behind that was the risk association with it. Oh sure. A lot of people don't talk enough about that. But IT has a much, much higher risk if you get it wrong, than you do on the traditional office equipment dealer. There's a lot more at stake if you-- let's say you mess up a customer's server, you could bring down their whole office for about two weeks to a month, right? Or potentially, lose all their data. Worst risk that usually happens on office equipment side is machine goes down, you box up a new one and get it out there same day and get them back up and running. So it's a very different approach to risk when you look at both of those, as well.

West McDonald: Well that's definitely a very interesting perspective. So risk mitigation, obviously, on the managed IT side is much more important. And Taylor, I'd like to bring you in to the conversation. So where I want to get started today, is that, obviously, you both have different business models. And you are selling into, potentially, different kinds of customer bases. Or is that true? What's similar today, as far as the kinds of customers that you're selling to, and what's similar about the business models?

Taylor Toce: Yeah, I think that the client base overlap is probably pretty significant. You'll see the office equipment dealers have reached, typically, into much larger companies than some traditional MSPs do. Now there's some large MSPs out there that do focus on enterprise accounts, but for the majority, I think that the client overlap is probably pretty significant. But I can certainly reiterate that it's a completely different business model. So last year-- I've been running this managed IT services company for almost 12 years, now, and we have gone through a few evolutions of what is managed IT services, how do we present value to our clients? So our sales approach and who we're selling to, even though might be the same client, but how we're selling and who we're selling to is probably very different than the majority of office equipment dealers. Last year, we started providing managed print services into our client base, using the seat based approach. And it is, indeed, a completely different business. We have a few clients that are taking advantage of it, it's certainly a learning process for us, as well. But we've also, over the years, thought about, OK well, what if we go and we bring on a copier line? Well, that's different. We've talked a lot about the risks associated with the management IT business, which I certainly agree with. I think that-- and Collabrance provides a great service, I think, for those that are trying to get into the industry. But I think, really, though, there is very little barrier to entry to the managed IT services space. I think that a lot of office equipment dealers will typically look at this space and say, kind of like we've said, this is an easy bolt on, we can start providing these services to our clients. And it's the same clients, it's basically the same thing. Well, I can't tell you the number of times I've seen friends of mine, in the equipment industry, fail doing that.

West McDonald: Wow.

Taylor Toce: It just doesn't work. With that said, I think there's actually, again, there's a very small barrier to entry into our industry, but there's a huge barrier between entry and success.

West McDonald: Yeah, no I would completely agree. Let me take you back for one second. Because you did mention that you are now selling managed print services. And that you're doing it from seat basis. What made you look at managed print services, why did you think that that might be something that you want to offer?

Taylor Toce: That's pretty simple, our clients were asking for it. Our clients were saying, hey look, we've got a copier vendor, we've got a managed print vendor, and we've got you. And can you take over these other areas? Now the fact that our client was coming to us and asking us to take over their copier and managed print business, and this is not one client, dozens of clients have probably asked us this, at this point. Is a good indication to the fact of, I think, the level of strategic relationship that a good, a successful, MSP is going to have with their client, versus, in my opinion, and it doesn't sound like the guys at DOCUmation are struggling with this, but I think a lot of the office equipment industry struggles with just being a very transactional, in-out-done kind of relationship. And especially with the way the industry tends to really churn sales reps. If you have sales reps for less than a year, six months, not a whole lot of potential to build a long term relationship with a client there, right? So with those things in hand, we do have a high level strategic involvement in our client base, and we are working with them on their business, not just with technology. And so as a result, it's become a pretty natural question for our clients to say, hey look, you guys are doing a wonderful job over here, can you do this and this? Like I said, I have some friends in the office equipment space, and their big, high margin sale is managed print, a lot of times. And quite frankly, it's the lowest margin thing that we do. It's a completely different business. It's a completely different model. I think that, typically, MSPs are going to have fewer, deeper, relationships. As to where, classically, office equipment dealers are going to have a lot more relationships that are nowhere near as deep.

West McDonald: So it's interesting, when you talk about core focus on the business, that it is managed IT. And that the managed print services stuff, you've actually been called in to do. And I wonder, maybe Greg, I can get your perspective on this. Do you think that it necessarily has to be a low margin business? What are you seeing when you're working with managed service providers on the managed print side?

Greg VanDeWalker: It's just like anything new. No matter what you're getting into, you're going to be a little hesitant, there's going to be a little trepidation. But as time goes on, as a confidence builds, as you really begin to have the ability to nuance the value to your individual customers, there's no reason why the margins can't grow. Where it might have a challenge of matching some of the IT services, it's just because the sheer percentage of services in the overall spend is so much greater in managed services, compared to MPS, there's still a good chunk of that payment that is related to hardware and getting the margin on that is a little bit more difficult. But there are still folks making really good margins on both of those businesses.

West McDonald: Well that's great.

Greg VanDeWalker: You know, West, I wanted to tack on one thing, and maybe, really a question for Preston. As we have been talking about customers and users and what are some of the differences, this, to me, is one of the biggest differences that I see. When you look at the copier channel, it's a very healthy industry, financially. And most copier dealers that are successful truly have thousands and thousands of customers. Where a very, very successful MSP could have 60 customers. And one of the difficulties that office equipment dealers have is they've got these thousands of customers, I should have thousands of customers when it comes to IT. Preston, I'd be interested in your perspective on if you look at the overall customer base that you have at DOCUmation, what percent, do you think, is really an opportunity that fits the target customer for managed services?

Preston Woolfolk: IT client base is less than 1/10 of 1% of our client base. We have, right now, roughly 70 IT clients and I guess, 8,000-ish unique customers to DOCUmation. And only 70 of those, we do IT, and about half of those are-- maybe 60% of those-- are crossover, meaning we do both IT and print for them. So there's only, roughly, 40 or 30 of those that we don't do the print for. We tell our guys, when they're out looking around and talking to clients, that maybe 10% or 20% of those they're out there talking to are probably a good fit for managed IT. I think that's one of the really big differences that you're seeing in this convergence is that-- we always tell people we work with, anybody from Joe's Automotive all the way up to the largest hospital system, or the largest customer here in San Antonio, we do that across our company, but when it comes to IT, we're for more nuanced. We're focused primarily around 15 to 100 user mark, maybe a few hundred. But we like to stay very, very deep and very targeted towards that user base in IT, because of the differences that come into play when you involve much larger companies. The technology stack is very different.

West MacDonald: Now as we are talking about those differences, maybe that's a good opportunity for us to walk right through the door on this. What do you think the primary differences are, from both of your perspectives, from an office equipment dealer, versus a managed IT service provider?

Taylor Toce: I think office equipment dealers have done a really good job of building sales organization, for the most part. And I think in the industry, most MSP organizations, they might say they are, but their not sales organizations. And so honestly, that's a problem in the MSP space. You've got all these guys that really to be successful in this industry, you do need to onboard new clients every month and continue to increase your recurring revenue base. We have a very successful track record of doing exactly that, here at Velo, but the majority of the industry just doesn't do it. The other big thing is client share in the MSP space is just so prevalent. It's hard to put exact numbers on this, but just based on what we see in our own marketplace here in Dallas, we also have sales teams in Louisiana. And in both of those markets, we see all of our known competitors, as we track and call on their accounts and such, they're probably losing nearly a third of their accounts every year. The turn of the MSP space is terrible. So when we come in, and we have just at 95% client retention over the past five years, that's almost unheard of in MSP space.

West McDonald: So what do you think you're doing differently? Because I've had the same kind of experience when I speak with a lot of managed service providers, on the churn. What do you think you're doing differently?

Taylor Toce: For us, at this point, it's pretty simple, but it wasn't always simple. It took us years to figure it out, to crack the code, so to speak. What we're doing differently goes back to that deepness of relationship. We have very deep relationships with our clients. And what I mean by that is that we're very strategically involved in our business. Business owners can go out, they can find anybody to come and un-jam the printer or take this virus off my computer or restart my server or get my email working again, whatever. But ultimately, what I call, hitting it with a hammer and solving a problem, is not valuable. You might as well just be billing for your time, the whole MSP space is crazed with recurring revenue and per seat billing stuff, which is good, and we should be doing it. But they're not presenting any value. Most MSPs do not present value in that area, because there's no value in billing per seat, versus billing by the hour, if you're still going to treat your clients as if they're hourly clients and write off the unsolved problems. So the MSP space talks about being proactive. The stuff that people call proactive, we still consider, and run metrics on, is reactive time. And so we've really moved that line, so to speak, to where we're presenting value at the very top of our client organization. Meaning, we're having frequent meetings with the owners, c-levels, VPs, general managers of our client companies, and discussing it with them, what does your business look like a year from now? Two years, three years from now? What are we going to do with technology to help give you velocity towards that goal? Not just, hey, those meetings are not valuable if MSPs are sitting around having meetings with their clients about how do we solve more issues. That should not be the conversation. So we don't have those conversations with our clients. Once our clients have been board with us for around 90 days, and we've got the ship righted, so to speak, our relationship turns to a very strategic relationship.

West McDonald: Now this is a refreshing conversation, because I do speak with a lot of managed service providers now, and you, right now, sound like an office equipment dealer. So selling at the c-level, selling at the c-level, solving business problems, working deep. And maybe that's a good segue, Preston, in the office equipment channel, we are known for being pretty strong sales organizations. What are we like as technology providers? What are we like as people that actually manage people's IT infrastructure?

Preston Woolfolk: I think that's really what Greg was mentioning earlier, why so many office equipment dealers have failed, is that they dip their foot in the ocean and dash it around the place, and really didn't dive in and say, I'm a true technology provider. And that's one of the big weaknesses of the office equipment dealer industry is that if you're viewed as a copier salesman, or you're selling copiers, or even the fact that you're mentioning, Taylor, well, they have managed print services provider, separate from the copier provider, those aren't technology companies. They're just break fix copier companies, or break fix print companies. They're not really looking at the business, assessing what's right for the business, providing a good solution. They're not focused on the right things. And I think that's really where the office equipment dealers have failed is that they didn't dive in to IT and say, we have to be, sorry for the buzz word, but technologists. They have to be technologists, they have to truly understand what is the heart of IT. How's business, everything operates around that central network. That network's down, the whole office is down. That's the brainchild. And there are so many more layers you can add on to there. And so the office equipment dealers have really had to migrate away from saying, I've got a great break fix service techs, almost like you might have an automotive tech, into I've got to have really good technology people inside this office. They've really got to understand that it's not about just keeping the network up and running, it's like what Taylor is saying here, it's providing that extra value in moving that company forward. Because that business owner doesn't have time their own. They're looking for advice, they're looking for true consultants to help them make that switch. And be able to propel their business, not just sit here and service their business.

West McDonald: Well that's great. And let me ask you this, it kind of does push us in this direction, now. Obviously, both of your organizations, both Preston and Taylor, you are living examples of convergence, where you're sort of offering each other's services. And I would say that's still a pretty small part of the office equipment channel, as well as the managed service provider channel. So what do you think, is it always going to be kind of a niche play, or do you think that office equipment dealers and managed service providers have to get serious about looking at offering more converged services as they continue to grow? And maybe we'll start with you, Taylor, on your thoughts there.

Taylor Toce: I think the convergence will continue. I mean, I think it'll be difficult. I think the best way to put this is that you've got-- there are still so many office equipment dealers that don't understand exactly what Preston was just talking about. Just a comical example is that there's still so many office equipment dealers that are calling their clients every quarter having them fax in their meter reading. There's nothing engaged with my client about hey, fax me your meter reading. And that's the only contact that client gets from their office equipment dealer, is four times a year, when hey, fax me your meter. So I think that there's a lot of office equipment dealers that have a really, really long way to go if they want to make that transition.

West McDonald: How about managed service providers offering managed print services?

Taylor Toce: That's exactly where I was going. On our side of the space, the managed services side of the space, this is an incredibly sophisticated thing that we do, but the truth is, the majority of the industry really struggles and is incredibly unsophisticated. So when you look at the things like the client turn, and when you look at-- a lot of times, and nothing wrong with being a technician, but a lot of times, you have these technicians that next thing they know, they've got a company, and they aren't really business people, they were good with working on technology, so they're really struggling to run a managed service provider business. So if they're struggling to run the MSP side, they really have no bandwidth and shouldn't really have any attention looking at the print side. They shouldn't even be looking at it right now. They need to fix the managed services side of their business that's struggling. So I think that that's a real difficulty. I do think that you will have more MSPs start to bring on, not only managed print, but also things like copier lines. Now there are bigger barriers to entry there, especially with the way the equipment manufacturers have that kind of locked down. But I think that you'll have certain MSPs, that are successful in certain markets, be able to take advantage of bringing on managed print, bringing on copier lines. And I think, in my opinion, your MSPs are in a better position to bring those things on, it's a completely different business model, but Preston, not to hurt anyone's feelings or anything, but I would argue that it's a far less risky, far less sophisticated, business. So if you've got the MSP side buttoned down, you should be able to, theoretically, bring on the managed print and office equipment side almost-- I hate to use this term, but almost as more of a bolt on.

Preston Woolfolk: I would agree with you on that one, Taylor, if my perception wasn't that most see MSPs view the office equipment industry almost a little bit beneath them. I've noticed that a lot of MSPs I've talked to, the whole, turning a screwdriver to go fix a printer or copier, almost doesn't really fit in their wheelhouse of technology and IT and this knowledge brain that you've got on the IT side. Which does require, I'd say, different employees, with maybe more advanced skill sets in some technical roles. There's a lot more education that needs to go behind that, there's a lot more advanced certifications, as well. The one thing I would say that I think MSPs are going to have a really hard time on is growth. And unless you're an office equipment dealer, you don't really see the pressure put on by the manufacturers. And that's one thing I don't think MSPs would be able to keep up with, because I actually don't like too much growth in our IT division. And I don't know, Greg, maybe you can agree with me on this one. Too much growth, too fast, is actually detrimental to the business, not beneficial, because you can't always properly manage that. It's more of a slow and steady snowball effect. Whereas in the office equipment industry, bring on the growth all day long, as fast, as quick as possible, it just gets better. But I think that's where both are hard, and both are difficult, but in very different ways. And I'm almost going to predict that, either A, we're going to see a bunch of MSPs try to get into the office equipment industry, and they probably won't be able to touch the high level, MSP side, they'll probably only be able to get in through HP, or some of the MPS, dealers, or they're just going to get into it, and they're not going be able to match the sales output that the manufacturers are going to require of them. And as what you're seeing across the industry right now, a lot of manufacturers are de-authorizing large dealers and actually dropping them from their lines, because they're trying to centralize and focus into, really, the dealers that are making them money. And so, I don't know, I think you've got two different ways you're going to look at that. But I don't believe the office equipment dealers, many more of them are going to enter into the IT business. I think the first wave really knocked out probably 75% of them that would actually try to enter into it. I think there's only a few lingering dealers, because across the nation, the office equipment dealers are consolidating. There's just less of them even to enter into the MSP market.

West McDonald: Well Preston, is that because there are less print pages being printed, though?

Preston Woolfolk: On the black and white side, yes. Color has been increasing. So I think it's more of-- we're seeing the 90s all over again. Back then, it was the big guys trying to go public with everything, between Hillman, and all the others. I think now, you're just seeing the private equity and the regional giants that are just going and mass acquiring. And a lot of that's probably due to the cheap cost of money over the last five to eight years. They're really able to go out and acquire, and it doesn't cost them anything. So I think there will be less dealers to even enter the IT business, because there's just not as many--20 years ago, there were 10,000 dealers. Right now, there's like 1,800. And IT companies, there's probably 20 times the amount of IT companies than there are dealers across America.

Greg VanDeWalker: Yeah, Preston, we track that number, pretty regular. And to your point, on the copier side, it's about 1,800. I just saw the most recent CompTIA numbers, and IT, North America, 139,000. When you hear Taylor talking about the churn, there's just so many, unfortunately, really low performing, low operational maturity level, IT companies out there that are bottom feeders, that are going out for way too low of a price per seat, just to get the business.

Taylor Toce: Well there's the problem, they can't keep it, Greg.

Greg VanDeWalker: Yeah, they can't. They can't, and so companies like you come in there, at probably two to three times the price, and you get the business.

Taylor Toce: Yeah, but we keep the client for 10+ years.

Preston Woolfolk: To add to that point, here in San Antonio, when I was selling IT, I was the front line sales guy, selling the IT services, I kept stealing these deals, left and right, these customers, from this guy named Chris. And it was, over a three year period, it was, I think we probably took 12 customers from Chris. Until I really had to figure out, it's a different Chris. There's like 12 different Chrises here in San Antonio--I don't know who Chris is, I just know we stole 12 different clients from 12 different Chrises. I never found the same Chris. So I guess that's a popular name, if you're into having kids and wanting them to get in IT, name them Chris.

West McDonald: I was just going to say, it's interesting, when you see the rise of the mega dealer, and that certainly is another episode of Convergence Radio coming, right? But for those dealers that are, let's say, regional dealers, or for smaller office equipment dealers, that are actually handing the business down to the family and actually want to grow it, versus sell it out, will they be able to grow just as an office equipment dealer, or are they going to have to diversify some of their services, as well, into the future?

Preston Woolfolk: I think that they've got two options. Well, maybe three. One is you've got to sell out to the regional mega dealer. And we see, let's call eight to 10 of those right now, popping up all across America, regionalizing. I think you've going to sell out to them, it's one of your options. Second, you have to diversify to be a value add against them, because they are, going in the long run, bet you on price and cost.But third, I would say, diversification is best, because you've got to watch where the future of the office equipment dealer industry is going, with the decline impressions that Taylor brought up earlier. But I also think that they have a major value add of being part of that community. The number one thing that always gets mega dealers and that really took down the icons of the world, those type of companies, is they don't have localization. They just become another big supplier. Everything turns transactional, because they're focused on the finances and they're not focused on their community, nor on the service that they're providing, necessarily. And I think that's where those that are going to stay regional, but also stay regional in the context of the culture they're staying regional to, that if they focus on that, I think that that community turns around and sees that as a much bigger value add than necessarily just a cheaper price.

West McDonald: And Taylor, you mentioned you had your own thoughts. Maybe you want to share those.

Taylor Toce: I think that it's going to be really, extremely difficult for office equipment dealers to continue just being equipment dealers, right? If they're not getting further, first of all, deeper relationships with their clients, and getting more deeply involved with their clients, I think it's really hard for them to stay around. Sure, maybe there are some groups, or maybe even in the larger companies, where it's really a pricing game, maybe. But I think for all of your small and mid-sized companies, your office equipment dealers are going to have to get deeper in their relationship. I think a natural play there, and obviously, Preston had some really insightful numbers, earlier, about such a small fraction of the clients are truly 100% overlap in his business. But I think that will grow. I think that will grow a lot. I think you'll see a lot of office equipment dealers that are doing managed IT. And get the managed IT piece really figured out, and figure out how to scale it, because really, that's the trick. We talked earlier, or Preston had mentioned earlier, scaling is great, but slow and steady, I agree with that, minus the slow part. Steady, though is very important. And I can say that, because again, my business is focused-- we do the managed print stuff, but that's a-- because clients have requested it, like I said, we're focused on managed IT. And so we learned how to scale very steadily, but on an increasing rate, at an increasing rate, an increasing rate. And so as long as we steadily increase our rate of scale, I think that you'll start to have--we started to figure that out, and it's led us to have a very, very successful MSP, by any measure. And so when you look, though at the office equipment dealers, I think that they'll eventually start to figure that out, also, as it starts to gain more of their attention. So just like anything else in life, guys, where our attention goes is where our results are. So I think that office equipment dealers, I think maybe even by force, will be forced into really startingto pay attention to and really focus on the managed IT side develop company cultures, and we didn't really talk about this today, but develop company cultures that are different. I think that the culture of a successful office equipment company, a successful MSP, very different. So I think they'll start to develop that, and be able to scale that, and I think you'll see office equipment dealers, because they did initially have a sales orientation, and like I said earlier, most MSPs do not, I think you'll see office equipment companies become more and more successful in the MSP space.

West McDonald: And one of the things that I'm seeing, as well, is that office equipment dealers, really, are providing the means to get information, that may be physical, into the digital realm. So through document management or other processes. So it's coming together. These devices are no longer built just to put marks on pages, but they really are digital on ramps for other kind of workflows, right? And it looks like we're coming to the end of our time, here. So I just want to get one parting thought from each of you on recommendations for office equipment dealers or managed service providers for the future. So maybe we'll start with you, Greg VanDeWalker.

Greg VanDeWalker: This sounds a little trite, but I think the people that are going to win are the ones who truly focus, 100%, on solving customer business issues, being strategic. Whether you have a copier heritage, whether you have a managed service heritage, customers are willing to pay a lot of money for somebody who can really help them strategically grow their business, help reduce risk, and protect their data. And so you see companies, like DOCUmation, like Velo, who are trying to figure out how can we do more things to layer off more services to really make sure this customer is one of our customers for life? And we're going to see some folks on the OE side win there, and we're going to see some managed service providers win. But it's going to be interesting, over the next five years, to really see the fallout of who those winners and losers are.

West McDonald: I love it. So you're really saying that it's not about office equipment dealers or managed service providers, it's more about companies that are built to solve business issues. And Preston, what about you?

Preston Woolfolk: 100% agree with Greg. I might add maybe a different light to that. I would say that I believe that services will slowly become commoditized, as well, as we're seeing with a lot of things, especially as most--if you see this convergence, you have phone system companies, as well. You might be seeing other things in the future, shredding, water systems, coffee systems, as technology. The internet of things is kind of consolidating all of this. I believe that the--and let me add one other statement, there. And as millennials become key decision makers, we're starting to see, I think it's roughly 30%, 40% of the decision makers that we're meeting with are millennials. There's a different generation that are looking at your business differently. And I would almost say that maybe the culture in who you are as a business, that might be more important, in the long run, who they're doing business with. Because if it's all transactional, it doesn't really make a difference. I think that people are looking to see that key differentiator. And most of the time, it's the great service, the great solution finding, the great relationship, that really deep strategic thinking, comes from great businesses, in general. They're the ones that are really invested in their community, invested in their customers, listening to them, understanding them. And I think that that will exude greater success for those businesses, in the long run, as well.

West McDonald: Well what a great add, and I love the fact that you talked to the importance of company culture. Just as Taylor brought that up, as well. And that for these new buyers, for people that are starting to come into the decision making matrix, that company culture is going to be critical, right? That's great. And Taylor, what about your final thoughts on the future, what people need to do to prepare?

Taylor Toce: I think that companies that have figured out a step science, a step system, what we call the Velo method, for example. Our methodology helps us differentiate ourselves from the marketplace. And that methodology is what makes us very successful as a company, and what helps us successfully decomodditize our services in the marketplace. And so I think that that's something that, if you're going to be successful in this industry, regardless whether you're equipment dealer side, or MSP side, or new to the industry, I think that paying attention to where your value is, in order to decomodditize yourself, is probably one of the most important things that you can pay attention to. And as the millennial on the call, that would be me, I guess, yeah, I think that's totally true, about the relationship, Preston, what you were saying. The decision making process is changing. Who's making decisions is changing. How they're making those decisions is changing. And so I think that unless you're--again, the decomodditization also applies with the relationship. So when we go in, when our sales teams go in, or I go in, and we build these relationships and maintain these relationships, that's a big part of the value add.

West McDonald: Well that's great. I want to thank everyone for all of their time. So Greg, Preston, Taylor, thank you so much for being part of this episode of Convergence Radio.




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Print Audit

Print Audit provides document, device and user management solutions for the Office Equipment and Managed Services channels. The company helps members remotely manage their printer fleets, and has developed a variety of tools that enable organizations to monitor and control user printing behavior. Print Audit is the first provider of RMM to provide an SBB model for managed print.