Our panel shares their views on the most prevalent issues facing the channel today.
Above: Clockwise from top, Doug Albregts, Jim Coriddi, Jennie Fisher, Joe Odore, John Schweizer, and Stephen Young.
In the second installment of our Virtual Panel Series, industry thought leaders discuss an array of issues that impact every dealer, including the current rate of acquisitions, security, the challenges facing their organizations, 2020 goals, and advice on how dealers can improve their businesses in 2020.
This month’s panel features individuals representing the leasing, dealer, hardware, software, and managed services segments of our industry. Participants include Doug Albregts, president, Marco Technologies; Jim Coriddi, vice president, dealer division, Ricoh Americas Corp.; Jennie Fisher, senior VP, general manager, office equipment group, GreatAmerica Financial Services; Joe Odore, product manager, Panasonic; John Schweizer, vice president, office technology, Continuum, a ConnectWise Company; and Stephen Young, president, Square 9.
It’s impossible not to keep asking our panelists about acquisitions. Are you concerned about the impact the many acquisitions taking place are having on the overall makeup of the independent dealer channel?
Albregts: The concern here is more about the competitive landscape and the continual erosion of print. The catalyst for the rapid acquisition pace is the smaller dealer understanding that diversification and scale are critical for survival. Many dealers aren’t bullish on their future and want to capitalize on a sale opportunity while they can. It was not long ago dealers assumed business opportunities would continue to scale. The health of the industry isn’t based on the number of dealers, but more on how we capture the evolving opportunities presented to the channel and how we collectively add value. I think the bigger consolidation will occur with manufacturers. It won’t just impact dealers.
Coriddi: As discussed during our recent dealer leadership forum, ConvergX, acquisitions are part of the ongoing market dynamics and all indicators show that they will continue in the future. We provided sessions for our Ricoh Family Group (RFG) dealer principals, helping them to navigate the ongoing change and what it means for them. Ricoh has an industry leading relationship with our dealer partners. We are always monitoring the distribution changes and providing our dealers with the best support.
Fisher: In general, independently owned dealers tend to offer a customer experience that few OEMs or even large PE-owned firms can match. These independent dealers also tend to have a loyalty among their employees that you don’t often find in other businesses. One challenge today is that valuations are high, and if you are an independent dealer without a clear succession plan, the temptation is high to consider selling. One interesting thing we are starting to see is dealers that sold have waited out their non-competes and are now starting new dealerships in the same geographic area. These new dealerships tend to get traction quickly and are able to scale to a material size in a relatively short period of time. The owners are obviously well connected in the community they serve, and former employees tend to want to join the new dealership when opportunity allows. I certainly can’t yet say this is a trend, but it is happening in a few spots around the country.
Odore: In general, the acquisitions have not really impacted us in any way. With the advances in technology, sophistication of the applications, and declining print volumes, smaller dealers will face many challenges to keep their operation going without diversifying their offerings. For many, acquisitions are a means to an end or the start of something new without having to personally invest in the transformation. I do see that more of the larger acquisitions have presented some new opportunities for us, allowing us to leverage existing relationships to expand our partnerships with the entity acquiring the smaller resellers.
Schweizer: We concur that the acquisition frenzy appears that it will continue. While the decline in the number of available partner outlets has challenges, the strength and financial resources of well-run, financially strong dealers may actually assist the community in the journey through the MSSP landscape. We also have seen an increase in dealers buying MSSP/MSP providers to bolster their business in the space.
Young: We’ve been watching M&A within the dealer channel with great interest for a few years now. I think if I were to assess its impact on Square 9, I would have to say that we’ve been equally impacted both positively and negatively, depending on the acquirer. On the plus side, we are fortunate to work with many of the organizations that are acquiring. This has helped us to open new markets by simply expanding an existing program. At the same time, there have been active resellers of ours who have been acquired by dealers selling a competitive product and as a result, lost a valuable partner.
My primary concern about all the M&A activity would be around the smaller independent dealers who lack the buying power of the larger entities and may no longer be able to compete in markets they’ve held for years. We’ve heard several say they cannot buy the equipment at prices the larger regional entities are selling them. This could also put up barriers for new independents to emerge and fill the spaces created by consolidation.
Security is top of mind for every business these days. How important is security to your dealer customers, and how is your organization doing its part to satisfy their security concerns?
Albregts: Security is something organizations struggle with because it’s never a “one-and-done” exercise. We often hear from clients that they are concerned about getting hacked, not confident that they are secure, and find it difficult to mitigate risk to their organization. In 2019, Marco expanded its Managed IT Services offering to focus more on security. Our services are architected on the National Institute of Standards and Technology (NIST) framework to provide the appropriate security risk management to our clients. This means we identify risks, protect their environment, detect and respond to suspicious activity, and help them recover if needed.
We provide our customers with a Security Risk Assessment so they can find out where their company’s weaknesses are. It shows them where the gaps are and provides a road map on how to optimize and enhance their security posture with an executable strategy.
Coriddi: Security is essential for our RFG dealer partners and their customers, and Ricoh is committed to delivering the tools to help dealers protect their and their customers’ information. Two recent examples include: IDC recognized Ricoh as a leader in print and document security worldwide and Ricoh was recognized as a security pioneer by passing Keypoint Intelligence’s rigorous security validation testing for MFPs. Ricoh has industry leading experts around the world focused on security, vulnerabilities, and engineering state-of-the-art capabilities to be on the leading edge of building secure technologies.
Fisher: Businesses tend to look at security in one of three ways: 1) Not at all; 2) A necessary evil; 3) It is part of everything they do. When businesses are negatively impacted by an incident, or they get better at understanding security risk, the shift towards number three happens. At GreatAmerica, we understand the importance of securing our assets, including those information assets that belong to our customers. We have a comprehensive security program in place and a team of folks dedicated to the protection of information assets. That team strives to build a culture of security being baked into everything we do that permeates throughout GreatAmerica.
As far as how our dealers are thinking about it, our customer satisfaction survey conducted in November revealed that 40% are currently offering some sort of security solution to their customers, and another 17% plan to.
Odore: Security is a key message for our products, we take advantage of the security benefits with dedicated scanners over multifunction products. The lack of storage on document scanners and volatile memory on scanning devices make adhering to security policies easier and reduces the burden of incorporating additional security measures and sanitization policies. We are asked a lot about the security of our products. For most of our devices, sanitization at the end of the product life comes up a lot, and for network devices, what secure communication protocols are in place.
Schweizer: Security is top of mind with most dealers who participate in the MSSP-MSP market. It should, however, be a high priority for every dealer even if they are not in the MSSP space. At a minimum, all dealers should protect their own operation with a robust security option like Continuum Fortify. Dealers access the networks of their clients and the devices on those client networks. The absence of a robust, expertly managed, security regiment could have dire consequences for a dealer operation when they are compromised and subsequently put their clients at risk. Several dealers, with none or inadequate security protocols, were compromised in 2019. The outcome was not pretty for these dealers or their clients.
Young: Our dealers rely on us to ensure their customer’s information is safe and secure. Especially as customers progressively migrate to the cloud where their data is fully under our control. Failure to provide a secure environment not only exposes the risk of compromising their customer’s data and creating a significant security incident, it also has the potential to damage their overall relationship with the customer. Something like this could easily result in a loss of their entire portfolio of business.
Square 9 has taken a multistep approach to address growing security concerns. This includes regular audits of our own business practices and security measures, which has allowed us to become SOC 1/ SOC 2 and HIPAA certified in 2019. We are also continuously evaluating our cloud infrastructure to ensure the highest levels of virus, malware, and firewall protection are in place and up to date. Finally, our infrastructure team is always evaluating new ways to harden our platform and add new layers of protection.
CR: What’s the one goal you set for your company this year that would disappoint you the most if you don’t achieve it?
Albregts: We’re driving Marco to be a world-class company. That means becoming more efficient, and it takes everyone in our organization to make that happen. We just kicked off our 2020 Strategic Plan to over 90 Marco leaders at our annual Leadership Conference in January. We are focusing on eight main corporate initiatives around three key areas: growth, efficiency, and investment. Gaining efficiencies means leaders need to look for ways to eliminate waste and optimize operations. As you approach a half a billion in revenue, to assure continued growth, you have to make sure your capital is working for you, not against you.
Coriddi: We are focused on helping our dealer partners grow their business. We engage in true partnerships with our dealers, developing strategic business plans and providing the resources to help them execute. When our dealers are successful, Ricoh is successful.
Fisher: Maintaining or elevating our employee engagement. This is an area of high focus for us. We firmly believe that highly engaged and happy employees are the key differentiator to delivering an outstanding customer experience that sets us apart from our competition. We strive to maintain a culture of strong integrity and customer care–internally and externally. Where every employee understands the value they bring to their customers in what they do every day. We recognize that we must be relentless and disciplined in driving it. We survey our employees every two years related to this topic. Traditionally, we score extremely high on employee engagement, and we would be extremely disappointed if our scores did not maintain or improve in this critical area of focus on our next survey.
Odore: Significantly increasing our software and professional services sales. Our goal is to lead with software and solutions by providing customers with document management and content management more than just hardware. This is one area of our business I would be disappointed if it did not achieve significant growth.
Schweizer: ConnectWise and Continuum saw tremendous growth in our office technology dealer partners last year. We plan to invest additional resources in this emerging channel of powerhouse MSP’s inside our dealers. We would be disappointed if we didn’t break last year’s record pace. We are also on a mission to empower our partners with the best fully managed security offering in the industry, Continuum Fortify.
Young: We have been actively developing a strategy for supporting our reseller community with an increased level of inbound lead generation. This is about to roll out in Q1, and our goal is to deliver a greater level of support for small- to medium-sized dealers who don’t have the marketing budget or expertise to build an inbound lead strategy.
We implemented our own inbound lead strategy in 2018 through HubSpot and have built on that with vertically specific strategies that we feel the reseller community can really embrace. We’ve begun testing this approach with great success and believe that by increasing the geographic footprint of our activities and by dialing up our budgets, we can provide our resellers with a level of marketing support they haven’t received from other vendors. We’re expecting great success with this program and would certainly be disappointed if it underperformed.
CR: What is the biggest challenge facing your organization in 2020, and what are you doing to address that challenge?
Albregts: Marco became the biggest dealer in the copier industry and one of the biggest in the IT industry. Our revenue grew from $38 million in 2005 to $408 million in 2019. Our focus was all about growth, and we are proud of this achievement. In 2019, 80% of our growth was acquired. In 2020, we are flipping the switch, as 80% of our growth will be organic. We will still grow; however, we want to grow more efficiently. Highly efficient companies are more secure, more resilient, and more sustainable.
Coriddi: The changing industry dynamics combined with low margins continue to be challenging. Future success will be dependent on incorporating new business models and revenue streams – such as a subscription model. In 2019, we launched our RICOH IM Series, which incorporated innovative technologies that enable the MFPs to evolve in parallel with customers’ requirements. We’re already seeing increased reliability, which translates to reduced service costs for dealer partners. This is essential for dealers as they look to improve efficiencies and grow their business. We are working with our dealers much more differently than ever before. We are helping them in many new ways, including:
- Succession planning and driving new management strategies in their dealers;
- New opportunities to create new annuity businesses with increased value;
- New tools and data to drive more efficiencies;
- And much more…
Fisher: We see our efforts around digital technology transactions as both a challenge and an opportunity. As we build on our technology offerings in order to evolve, our aim is to serve our customers in increasingly more automated and personalized ways. This will likely be a source of competitive advantage for some period of time, but we ultimately believe it will be a requirement to be relevant in the not very distant future. We will be a leader in this digital transaction transformation, but like all things technology, there are always some challenges in the implementation. As in all things at GreatAmerica, our culture and talented people remain at the forefront of change and give me confidence that the “GreatAmerica Experience” will remain strong throughout this evolution.
Odore: Integration of other product categories outside of the office products group. Panasonic’s B2B division is comprised of many product categories like projectors, professional displays, laptops, mobile devices, etc. We are all part of the same unit company but have operated independently, and we are working more towards collaborative sales efforts that offer more of a solutions portfolio with our products through service and external partners. We aim to customize offerings for a real solutions sale versus everyone just trying to sell their products.
Schweizer: The merger of Continuum and ConnectWise is a significant undertaking for us in 2020. We have an excellent plan to integrate the products, platforms, and services this year, and the unified offering is the most powerful and comprehensive in the industry. While the merger of two companies this size and scale is not without challenges, our plan keeps us focused on the partners and the market trends and advancements. We must and will continue to develop our leading product portfolio and enable our partners to engage their customer bases effectively.
Young: Like most technology organizations, the challenge is always the ability to staff and train for new positions that emerge through continued growth. We saw several years in a row where our Professional Services demand grew by more than 35% year over year. This resulted in a far greater hiring demand than anticipated for supporting our dealer network. We were able to get that under control towards the end of 2019, but it was a challenge.
Looking at 2020, we still have a hot job market and an aggressive business plan that we feel will again result in 25-30% overall growth. In order to meet the anticipated demand for resources, we are proactively interviewing on a nonstop basis. This includes college job fairs, state-run technical education programs, and of course, traditional recruiting strategies. It’s a delicate balance between appropriate staffing levels and getting too far ahead of the curve, but we feel it’s our only option given the time it takes to train qualified resources for what we need them to do.
CR: What should every independent dealer be thinking about today if they want to remain relevant to their customers?
Albregts: Understanding the value-add they provide to their customer. Why complicate things? Most customers don’t value document management because information dissemination has become omnipresent, and reliance upon the reproduced copy has diminished over the years. I sound like a broken record, but the value is in IT managed services, security, and other customer pain points where a dealer can add value. Can a dealer still run a robust document business and grow? Sure, we are seeing that happen with well-run organizations, but it’s becoming more of a challenge for those trying.
Coriddi: Successful dealers have ongoing relationships with their customers. They look beyond the “box” and look for new ways to solve customer problems. This includes meeting room services and other technologies that are adjacent to our core business. Managed services, both document-related and IT services related, and Integrated Production solutions, offer new value to our customers.
Lastly, think about new ways to offer workflow and value than they have in the past. Incorporating a subscription model is a perfect way to grow and strengthen this relationship on an ongoing basis.
Fisher: With buyers going online to research companies, products, and answers to their questions before we even have the opportunity to talk with them, our sales and marketing approaches must evolve. If dealers’ only lead strategy is to send sales reps out to cold call, they will be missing an entire audience that is online and already finding the trusted sources to help them. Dealers need to consider their online presence, the content they share, and how their sales and marketing teams interact to capture this great opportunity. This is why we’ve been hosting “Smarketing” events for our dealers with success; our next one is May 19-20th.
Odore: Diversification is going to be the key to success in today’s market. Technology services and software will be the driving force for customers. If you are relying on hardware alone, your long-term success will be challenging.
Schweizer: Relevant is a perfect word for the MSSP-MSP space as you have meaningful conversations with clients as their Technology Service Provider or MSSP-MSP partner. Security is another! Antivirus, remote monitoring, and management (RMM) and business continuity are just everyday necessities. Dealers need to supplement those offerings with a strong security partner that is capable, has the capacity, and the necessary skills to lead in the ever-changing threat landscape. I continue to remind every partner that they cannot go it alone in security, but the associated revenue growth and margin opportunity is incredible.
Young: The key for relevance in the equipment industry is to create separation from your competitors. I have been on many sales calls over the years, and reps will invariably speak about service levels, reliability, and print quality, but so is their competition. In the end, that leads the discussion to price differentiation, which is where no rep wants to be.
The conversation needs to be about how you can help [the customer] evolve as an organization and increase profitability by working more efficiently, not by saving a few dollars on their monthly lease payment. Products like PaperCut and Square 9 have historically done a great job of being that differentiator, but I believe we’ve only scratched the surface. With emerging markets like Artificial Intelligence and Robotic Process Automation, it will be more important than ever that the dealer surrounds themselves with strong partners who understand their business model.
CR: If you can give independent dealers one additional piece of advice to help them be successful in 2020, what would that be?
Albregts: If your business plan includes selling your business, of course, Marco is the best choice! If that’s not in your plans, the best advice I can give to dealers is to run an efficient business and begin to diversify into something your customers will value.
Coriddi: Even if you’re successful today, continue to plan for the future. Whether it’s developing longer term business plans, thinking about the next disruptive technology or creating a secession plan, think about what’s next and how you can continue to grow that success. Ricoh is here to help by providing the resources for our dealer partners to plan, execute and succeed. Here’s to a great 2020 and beyond!
Fisher: Have clarity around the priorities and goals you have for your business each year. Not just numeric goals, but the specific few things the organization will need to do in order to achieve those numeric goals. Strategic planning in this form can really help harness the energy and focus of the entire organization around these goals–especially if you are willing to share them with all of your employees.
Odore: Lead your sales and marketing initiatives towards delivering solutions to problems and not just hardware. Print volumes are down, scanning is up, document management, and content management of information will be key to survival. I would even start looking at other office technologies like hosted voice or visual technologies. Leverage all you can to retain your customer from a provider that will deliver it all.
Schweizer: Follow the benchmark model in your core copier business and continue to improve your craft there. Invest in the MSP-MSSP and the production print space, don’t dip your toe in, get after it, and win. Our dealers grow their MSSP-MSP business at rates significantly ahead of the industry. The common thread is that those that don’t consider or treat it as a side business achieve success. By the way, there is a financial benchmark model for dealers in the MSP too, just ask us, we’ll share.
Young: Dealers know better than I do what it will take for continued success in 2020, but I would encourage them to view their customer relationships from a different perspective. All dealers are rightly concerned with maintaining or increasing their MIF, but many aren’t monitoring the value of those relationships or, more importantly, where they’re trending. It’s something we refer to as Total Contract Value.
A good example would be my last three equipment contracts over the last 15 years. I have renewed with the same dealer each time, but my actual costs for both the gear and my maintenance have decreased in each term. At the same time, the equipment I received was not only faster, it also included more options. I’m not sure of any other industry where I’ve seen pricing go down consistently as functionality, reliability, and service levels go up.
The goal needs to be not only increasing the MIF but also increasing the Total Contract Value of each customer. One approach we’re seeing for achieving this is through the addition of SaaS solutions to the customer agreement. By adding value-added products through a recurring revenue stream like SaaS, the dealer is building on their relationship as a solutions provider while establishing a stopgap against the continued erosion of revenue.
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