European Channel MPS Priorities

The critical role of the channel in driving MPS adoption

Report Excerpt March 2014

Managed print services (MPS) represent an attractive opportunity for channel partners to move towards a recurring revenue business model. This marks a shift away from a traditional reliance on transactional hardware sales to a more predictable contractual approach. SMBs (small and medium businesses) are becoming increasingly aware of the benefits of managed services, as they embrace trends such as cloud computing and mobility. As SMBs look for guidance, the channel will play a critical role in driving the transition to MPS. This paper examines MPS adoption amongst resellers in Europe, based on original Quocirca research, and discusses the challenges faced as they embark on their MPS journey.

Louella Fernandes Quocirca Ltd Tel : +44 7786 331924 Email: Louella.Fernandes@Quocirca.com

Clive Longbottom Quocirca Ltd Tel: +44 118 948 3360 Email: Clive.Longbottom@Quocirca.com

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Executive Summary

European Channel MPS Priorities

Amidst printer hardware commoditisation and pressure on margins, more channel partners are recognising the value of shifting from a transactional to contractual model. Although a shift to MPS is not without its challenges, those that have made the commitment to MPS are enjoying success in both on-going revenue opportunities and longer-term customer relationships.

SMB interest in MPS is growing

Many SMBs are still reliant on printing with 40% indicating colour print volumes have increased which is in turn seeing a rise in consumables expenditure. Quocircas SMB study revealed that around 40% of SMBs are planning to use an MPS in the next 12 months in order to control costs. Overall, 22% of channel partners indicated that they have evolved to a full MPS business, with a further 36% at the early stages of their MPS journey. UK and German resellers are most advanced, in contrast to the French and Spanish channels which are also seeing lower customer interest in MPS. As SMBs navigate the ever-increasing range of MPS offerings, they will look to channel partners for guidance. Channel partners should take a proactive approach in educating SMBs and providing clarity on the benefits that MPS offers. For SMBs that are already resource and cost constrained, MPS enables better control of print costs, predictable expenses and reduced IT burden through capabilities such as automated supplies management. Whilst the channel recognises the value of MPS, many are still looking to improve their capabilities to achieve their key goals of developing recurring revenue streams and improving profit margins. Certainly, those further along the MPS journey are already reaping the benefits, showing the greatest success in terms of achieving these goals. More SMBs are using and planning to use software solutions to improve their productivity. In response to growing SMB interest in mobile printing and digitisation of document workflows, almost 40% of channel partners are looking to expand their solutions portfolio. Most partners, regardless of where they are on the MPS path, will have cash flow concerns and a fear of lost revenue as they move to a recurring revenue model. Current MPS programmes are failing to deliver around financial incentives and support. If not rectified, this will be a major hurdle to MPS adoption in the channel.

MPS momentum in the channel is growing The channel is critical in driving MPS adoption

Mature MPS partners are achieving their goals

The channel is looking to expand solutions capabilities Partners are looking for more financial support from partners

Conclusions To fully capitalise on the MPS market potential for SMBs, channel partners must shift focus to a services led approach by fully embracing the opportunities for developing long-term customer relationships. SMBs want many things lower costs, improved service and reduced IT burden. By developing a more service-centric strategy through MPS, channel partners can deliver all of this and more.

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European Channel MPS Priorities

Full Report Table of Contents

The following table of contents is taken from the full report which is available to purchase from Quocirca. Please contact louella.fernandes@quocirca.com for further details.

Methodology and Definitions ................................................................................................................................... 4 Introduction ............................................................................................................................................................. 5 The need for MPS ..................................................................................................................................................... 5 Channel adoption of MPS .................................................................................................................................7 MPS drivers and priorities ........................................................................................................................................ 9 Obstacles to MPS transition ................................................................................................................................... 12 Adapting for MPS ................................................................................................................................................... 13 Conclusion.............................................................................................................................................................. 15 Appendix Survey Demographics .......................................................................................................................... 16 About Quocirca ...................................................................................................................................................... 20

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Methodology and Definitions

Methodology
In late 2013 Quocirca carried out a survey to gain a better understanding of the key trends in the MPS provider space. Telephone interviews with 125 channel firms across the UK, France, Germany, Spain and the Nordic region were conducted during November and December 2013. In addition this report references the findings of Quocircas SMB end user study, also conducted during November and December 2013. 750 interviews were carried out across the UK, France, Germany, Spain and the Nordics.

Definitions
Quocirca defines a managed print service as a service from an external provider to assess, optimise and continuously manage an organisations document output environment. MPS allows organisations to reduce costs and lower risk while improving efficiency by rationalising their print environment. It also leverages any existing investment in multifunction peripherals (MFPs) while continually monitoring usage to ensure the optimised infrastructure meets the businesss ongoing needs. MPS covers a number of service areas across three broad categories: Assessment A review of the current print environment to provide recommendations for rationalisation and an estimate of potential future savings. The options range from basic online assessments to full workflow assessments. Some providers also offer environmental impact and document security assessments. Optimisation This includes device rationalisation and consolidation to improve user-to-device ratios and developing print policies covering change management, deployment and transition, providing a governance framework for a full enterprise MPS. Management Continuous process improvement, business reviews, SLA monitoring, remote management and workflow improvement.

For the purposes of this report, MPS is split into the following broad categories: Basic MPS A fixed monthly or quarterly fee contractual approach to purchasing or leasing printer hardware, service, supplies and support on a cost-per-page basis. Full MPS A broader MPS contract that may include assessment, on-going proactive management and software solutions.

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Introduction
In the face of continued hardware commoditisation and shrinking margins in the printer market, channel partners are recognising the need to transition from transactional to services-led approaches. MPS promises to usher the holy grail of recurring revenue for the channel, whilst helping cash-strapped SMBs shift capital expenditure to more predictable operational expenses. The MPS market is finally coming to fruition with most manufacturers now offering a range of service offerings to help their channel take advantage of the growing opportunity. Quocirca estimates that around 20% of European SMBs now use some form of basic print service, rising to almost 40% in the UK and Germany. Although many SMBs are still purchasing and managing their own print devices, Quocirca estimates that within the next two years, almost half of them will have transitioned to some form of MPS. One of the key factors driving interest in managed services is the growing acceptance of cloud services. According to 2, Spiceworks over 60% of European SMBs are using some form of cloud services today. The new reality of IT anywhere, with the growth of mobile computing and BYOD (bring your own device), means SMBs are increasingly comfortable with the cloud. Many have bought into its promise of a faster, easier, cheaper and less risky route to get the IT solutions they need to support their business activities. Like the cloud, MPS minimises capital expenditure, offers predictable expenses and can reduce the print-related IT burden through proactive service. These benefits are clearly resonating with SMBs - with 72% of resellers offering MPS agreeing that the growing awareness of cloud computing and other as a service options is making it easier to sell MPS. The full report provides an insight into channel partners attitudes towards MPS as well as the challenges they have experienced in making the transition, in terms of resources, training and delivery. It also aims to provide some guidance for channel partners on how to establish the credentials they need to be seen as a trusted MPS provider and build successful ongoing customer relationships.

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European Channel MPS Priorities

Adapting for MPS

There is no doubt that resellers must adapt their businesses to remain relevant to todays mobile- and cloud-centric SMBs. Not only do they need to transition to a services-led model, they also need to develop a solutions portfolio that can provide customers with further productivity benefits. Although building a managed print services offering can involve direct up-front costs and on-going investment, resellers dont necessarily have to bear these costs themselves. Partnering with an established MPS vendor that offers the necessary infrastructure, compliance and technical expertise, either as a white-labelled or branded service, allows resellers to expand their service portfolios as quickly as possible. This approach not only reduces the risk to the resellers business, but also means they can continue to focus on meeting their customers needs, rather than on building internal systems and recruiting new staff. When it comes to financial support, some printer vendors have financing programmes that offer financial support to channel partners while finance providers such as BNP Paribas, GE Capital and IQ Finance also have programmes designed for meeting the needs of managed service providers. Ultimately, a hybrid approach a balance between transactional and contractual will be the reality for many resellers starting out on the MPS journey. Through making judicious decisions, resellers can ensure that their MPS offering deepens their customer relationships as well improving their margins and, ultimately, growing their business.

Resellers should consider the following steps to become a successful MPS partner: 1. Deepen market knowledge While cost is often high on the agenda when companies decide to start using MPS, end users consistently cite improving document workflow and administrative efficiency and reducing paper usage as prime motivators. MPS can also minimise customers IT burden and improve user productivity through automated consumables management tools and software solutions. Resellers need to engage with customers to discover their needs and identify the appropriate solutions. 2. Establish key partnerships It is essential to establish relationships with third parties to build a comprehensive and commercially viable portfolio of services and software. For instance, resellers that lack the skills or expertise to develop their own MPS platform may partner with existing MPS vendors to gain access to cloud MPS infrastructure platforms. Resellers should also look for partners whether printer manufacturers or ISVs (independent software vendors) that can deliver and support a flexible software portfolio that addresses areas such as mobile printing, document workflow and secure printing. 3. Develop strong SLAs Service delivery is absolutely vital to the success of any MPS engagement. When multiple parties are involved in the delivery of services and solutions it is essential that roles, responsibilities and expectations are clearly defined through appropriate agreements. 4. Educate the market Resellers should establish their MPS credentials and reinforce their role as trusted advisors. MPS is a broad and often misunderstood term, so each customer is likely to have different attitudes and expectations. In order to establish trust, a reseller should offer a proactive approach that demonstrates that they can address some of the prime inhibitors to MPS such as cost, lack of clarity on benefits and poor flexibility.

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European Channel MPS Priorities 5. Establish a clear structure and accountability Changing from being a hardware provider to a service provider takes time, however, to make an effective transition to an MPS model, a business must have clear accountabilities for delivery in place. Measuring performance through SLAs and KPIs, with an aligned system of incentives and rewards for sales staff, can help resellers implement their commercial MPS strategy successfully.

Conclusion
It is evident that the channel is ready to embrace MPS. Those resellers that have already evolved their business with a mature set of offerings are successfully developing longer-term customer relationships and creating new revenue streams. SMBs are certainly reaching a tipping point, where reliance on printing is becoming ever more costly and inefficient. While many are ready to move to MPS as a way of addressing these concerns, awareness of the benefits it can offer is still lacking. This provides an opportunity for channel partners to act as trusted advisors and educate their customers on how MPS can address the challenges they are facing. For support in the transition to MPS, channel partners should look to vendors that can provide a flexible MPS platform as well as sales skills, marketing and financial support. Those resellers that can adjust their internal structure to embrace an MPS model and engage with a range of third parties will be those that prosper in the growing MPS market.

References 1 Quocirca, SMB end user study, December 2013 2 Spiceworks, State of SMB IT report, 2013

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About Quocirca
Quocirca is a primary research and analysis company specialising in the business impact of information technology and communications (ITC). With world-wide, native language reach, Quocirca provides in-depth insights into the views of buyers and influencers in large, mid-sized and small organisations. Its analyst team is made up of real-world practitioners with first-hand experience of ITC delivery who continuously research and track the industry and its real usage in the markets. Through researching perceptions, Quocirca uncovers the real hurdles to technology adoption the personal and political aspects of an organisations environment and the pressures of the need for demonstrable business value in any implementation. This capability to uncover and report back on the end-user perceptions in the market enables Quocirca to provide advice on the realities of technology adoption, not the promises. Quocirca research is always pragmatic, business orientated and conducted in the context of the bigger picture. ITC has the ability to transform businesses and the processes that drive them, but often fails to do so. Quocircas mission is to help organisations improve their success rate in process enablement through better levels of understanding and the adoption of the correct technologies at the correct time. Quocirca has a pro-active primary research programme, regularly surveying users, purchasers and resellers of ITC products and services on emerging, evolving and maturing technologies. Over time, Quocirca has built a picture of long term investment trends, providing invaluable information for the whole of the ITC community. Quocirca works with global and local providers of ITC products and services to help them deliver on the promise that ITC holds for business. Quocircas clients include Oracle, IBM, CA, O2, T-Mobile, HP, Xerox, Ricoh and Symantec, along with other large and medium sized vendors, service providers and more specialist firms. Details of Quocircas work and the services it offers can be found at http://www.quocirca.com Disclaimer: This report has been written independently by Quocirca Ltd. During the preparation of this report, Quocirca may have used a number of sources for the information and views provided. Although Quocirca has attempted wherever possible to validate the information received from each vendor, Quocirca cannot be held responsible for any errors in information received in this manner. Although Quocirca has taken what steps it can to ensure that the information provided in this report is true and reflects real market conditions, Quocirca cannot take any responsibility for the ultimate reliability of the details presented. Therefore, Quocirca expressly disclaims all warranties and claims as to the validity of the data presented here, including any and all consequential losses incurred by any organisation or individual taking any action based on such data and advice. All brand and product names are recognised and acknowledged as trademarks or service marks of their respective holders. Quocirca would like to thank the following vendors for their sponsorship of this study: Brother, HP, Kyocera, Konica Minolta, Lexmark and Xerox.

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