The 90s and the beginning of the new millennium were driven by the boom of the sales of document management systems. The quick deployment of such tools among large and medium companies helped the customer to define and control the printing behavior of its employees. By establishing profiles, each user saw his/her printing capacity limited according to the assignment of his/her company. The companies gained control of what they print.
Starting from the middle of the last decade, the demand rose for Cost per Page (or “Pay Per Page”, or “click charge”, or “bill per page” ; it’s all the same) by the customer as a consequence of finding out that it still had no control over printing expenditures. The customer now needed to control what it was paying for each document printed. In other words, it looked to control its printing costs. As a result, the demand for tools to capture the printer and copier counters to bill for the pages printed boomed. Thanks to the Cost per Page solutions offered by the Dealers, the customer got its problem solved: it prints, it pays; it doesn’t print, it doesn’t pay. Dealers that offered Cost per Page got recognition from their customers, but they also suffered unexpected consequences. While the customer had its problems solved, the dealer saw new problem arise. The origin was on the goal established: the goal being to bill for pages, the dealer focused on acquiring a software tool to grab the counters and on learning how to build the offer. It is only late in time that these dealers have realized that managing printing services is not so simple and requires a change on their objective and scope in their Managed Print Services (MPS) business. The purpose of this article is to help the dealer find its way to set up an MPS business.
The dealer’s problem
As said, most of the early adopters of MPS have focused their initial effort on learning how to price a cost per page, and how to get the counters and bill for pages instead of cartridges. I’ve met dealers who spent up to US$150K on consulting just to learn how to price a page, and also many who paid US$50K to acquire a tracking system; this is a tool that only collects the page counters, generates consumable alerts for a limited number of the supplies available at the printer with no accuracy nor with analytical capability, and does little more. No matter how beautiful are the reports generated, if there is no information in them, they are then valueless for MPS (Managed Print Services) purposes.
Once you’ve been in MPS for a year or so, you discover that none of these initial investments protects the margin, nor guaranties good service to the customer. Building a proposal is important: no proposal, no business. But unfortunately the margin carefully negotiated during a proposal is far from being the one finally reflected in the financial statements of the dealer when billing pages. A cost per page invoice streamlines the customer’s procurement process, but the inefficiencies remain. They are indeed moved to the side of the MPS provider (the dealer). These inefficiencies are all related to the cartridge, how it is stocked, delivered to the customer, installed in the printer and used. The losses are so relevant that some analysts state that only 70% of the printing capacity shipped (toner, drums, fusers…) is really used in printing a document. What this means is that for every US$100 on toner or other supplies shipped to the printer, US$30 is never used to print (it is thrown away, lost or simply not used). If your commercial margin is bigger than 30%, then relax: you may still show operational profit. But if not, or if you are interested on increasing your profit, then keep reading.
The scope of the MPS business is to manage the costs during the life of the contract: 36 to 60 months. It is therefore obvious that a tracking tool is helpless. Just reading counters is not enough to manage an MPS business. Not even the generation of supplies alerts is enough. What is needed is the capacity to identify clearly and easily the deviations from the optimum situation in order to implement corrective actions on time. Only yield management software can save the bottom line by streamlining the processes under a decentralized business such as is MPS.
It is hard to recognize that the investment of US$50K made 12 months ago is useless. But let’s be positive: the dealer now has an MPS business. It is obvious that it could have used this money more efficiently. But it is not time for regrets: it is time to manage the MPS business. It’s a new phase and not the last one. Time has come to proceed towards value added profitable services. A highly specialized yield management tool eliminates most of the “false” deliveries the dealer currently has without him knowing it. It should also identify and reduce the amount of supplies underutilized or wasted due to early replacement or uncontrolled local stocks. Most importantly, it should provide analysis, therefore allowing a deep control of how well it is doing in managing every printer, and the improvements that can still be done. By using a yield management software tool the dealer will streamline its procurement process.
Opposite to what most of the new to MPS players think, signing a click charge agreement with a customer does not protect from competitors. If the assessment during the life of the contract has been poor or standard (not different to what the competitors offer), there are great chances that any of the many competitors across the globe will take the customer out from the dealer.
The long term goal of a dealer moving from a transactional business to a service business is therefore to provide assessment. Most of the current MPS dealers dream of it. I say “dream” because we all know that with most common tools this is just not possible. Assessment requires accurate information about the printing devices managed. A tracking system does not provide nor information nor accuracy, except for the counters. The information generated by yield management tools is a must to feed the assessment software tools. An assessment tool provides highly specialized analysis and documents, that the MPS provider uses in order to make recommendations to the end-customers on how to adequate the printing resources to its actual needs. The biggest challenge these tools are currently facing is the lack of quality information to work with. Should the data be collected from sources where the information is not filtered in the appropriate way, the outcome assessment may be useless or even false. The information used should be accurate and auditable, and therefore this is not something that can be found in a tracking system.
MPS dealer should not limit itself to collect counters and ship cartridges. There are three basic steps to be performed on its way to selling services (and not only shipping cartridges):
- First: get ready by collecting the data to provide cost per page,
- Second: streamline the procurement process and ensure a sane profitability on all customers,
- And third: protect the customers by providing assessment.
All three stages do depend on the infrastructure put in place initially. While a tracking system prevents the dealer to progress to second stage, indeed it forces the dealer to start again from zero because the next stages require historical information that it is supposed to be captured from step 1. Yield management tools will soon replace the existing tracking systems in MPS. They are not only streamlining the procurement process of dealers, but also acting as the source for any assessment tool to work with. Being late in this technology impacts your profits, but most important, prevents the dealer to make progress towards a service business and therefore increases its vulnerability.