NewField IT

Death of a Copier Dealer – Boiling Frog Syndrome

Self-awareness–the biggest barrier

by: James Duckenfield, Co-Founder NewField IT

We have all heard about how a frog happily becomes poached alive if placed in cold water that is gradually brought to the boil. Without an acute change in temperature they don’t have the stimulus to make a change and jump out of the water.

In the same way, many copier dealers are continuing to do the same thing they have done for years; the marketplace is gradually changing around them, but not sufficiently quick enough to provide the stimulus for some to change their ways. For many copier dealers, little has changed since copiers became digital some 15 years ago. Salespeople are still targeted on box sales, typically on margin. With margins being squeezed over the years, the whip has been cracked harder to maintain earnings. Managed Print Services as a concept has had little effect for most copier dealers although some have simply renamed their existing services.

Significant consolidation has taken place during this time as more progressive dealerships and manufacturers have acquired less progressive firms for their client base. For those that remain, what does the future hold?

Through our first hand interactions supporting dealers and resellers we have experienced the full spectrum. We have seen that approach varies considerably, as does their vision; some have a clear vision and drive, and others fall into the ‘boiling frog’ category, as they see no reason to change their ways simply looking for tactical fixes for problems that arise on an ad hoc basis.

The biggest problem facing many copier dealers is that they have not noticed the temperature rise around them. Seeing no reason to re-think strategy having made good margin for years, they’re putting reducing margin down to a tough marketplace alone. Why then have some dealers and resellers thrived in the marketplace and been able to buy up the struggling competitors?

The successful copier dealers such as Global Imaging and Ikon (prior to their acquisition by Xerox and Ricoh respectively) were successful because of their vision. They saw what was going on in the marketplace, they saw printer manufacturers starting to compete in their traditional home territory, and even some systems integrators muscle in too. They realised that a change of approach and significant investment was going to be required to stay one step ahead of the competition. Both companies invested in two key areas – consultancy and systems engineers. These two resources are expensive but set them apart from most of the competition as they were able to analyse their clients’ environments and put together sophisticated solutions that they could implement and provide quality support for on an ongoing basis.

In contrast, many copier dealers view software as an optional accessory for their MFDs that is actually an inconvenience: it can be complicated, it requires engagement with IT (who they are less comfortable dealing with), and may require ongoing support. They also don’t like the potential impact on the sales cycle, as a more sophisticated approach to understanding customer requirements is needed: a process that can badly delay revenue unless they invest in developing a good methodology. Finally, they have little understanding of the risks surrounding systems implementation and therefore often look for the cheapest option, rather than the option that will work first time and not provide a future liability. Those not understanding the risks should read the story around BSkyB’s law suit against EDS and how mis-selling of a £48M ($72M)project led BSkyB to claim £700M ($1.05B) in damages, and has cost EDS over £200M ($300M) in damages as an interim award from the courts.

Worse still are the dealers and resellers who think that, by hiring one or two systems engineers and mastering a simple solution like a USB key for assessments, they can tackle the complexities of any print solution. We have seen the disastrous consequences of these companies winging their way through systems implementation. Some manage to patch things up or parachute experts in at considerable cost and with some loss of reputation, but others have lost their customers altogether. After the BSkyB case, some may be lucky just to lose their customer in the future and may face costly lawsuits. Copier dealers risk giving their sector a bad name and pushing customers to the IT resellers who already have their sights on the marketplace.

The first step is to realise where one is incompetent so that steps can be taken to improve. Copier dealers then have four routes into the future:

1. Sell Up
   Market consolidation continues and both larger dealers and manufacturers have an appetite for acquisition

2. Scale Up
   Invest in a consultancy team, methodology to ensure sales cycles are not unduly extended, technical resource and training to implement print management, scanning and soon document management systems and crucially the resource to support these systems on an ongoing basis.

3. Partner Up
   Find a partner to provide the consultancy, systems implementation and support who you can rely on and pay IT market rates to ensure quality.

4. Close Up
   Dealer and Resellers that fail to modernise will slowly perish as they are out-competed cf. the frog.

So, if you’re a copier dealer, ask yourself: what’s your strategy? Are you really fit to compete or are you only dipping your toe in water? If you are only dipping your toe you are probably a frog and need the magic kiss of investment to transform yourself to a competitive business of the future!