Recently, Phil Downe from purchasingb2b.ca wrote an article entitled “Pitfalls and pointers on print”. While well meaning and well written, the article fails to understand managed print services outside the realm of corporate power associated with OEM’s and non re-manufactured toner production companies. You can see the original article, here.
Below, I am going dissect his article piece by piece and employ some perspective management to correct some of the assumptions made in the piece so that readers will better understand some of the dynamics of MPS and how they can leverage the service without running into some of the issues he brings up.
Phil Downe: “Ask any print vendor how they’ll help you lower your print costs and they will try to sell you some type of smart-print technology with panoply of print management features called managed print services. It would be refreshing to hear the salesperson say, buy fewer devices, get them cheap, get the lowest possible cost per page (CPP) and print less.”
Rebuttal: While many OEM’s and even some independent MPS providers will in fact try to sell you “some type of smart-print technology with a panoply of print management features” this is most certainly not managed print services.
According to the MPSA, managed print services are defined as: ““The active management and optimization of business processes related to documents and information, including input and output devices.”
While this definition can include one or more software recommendations, many vendors such as Expert Laser Services offer this DCA (data collection agent) software at no charge as part of a free analysis of a client’s office imaging fleet.
Yes, some companies, particularly large corporations, will attempt to charge you absurd amounts of money for both the analysis and the software but, with a little homework and research you can avoid these costs all together and again, while software is one small piece of the puzzle that is MPS, it is certainly not the epoch of manage print services.
As for this statement: “buy fewer devices, get them cheap, get the lowest possible cost per page (CPP) and print less.”
Not only is this impossible in light of TCO (total cost of ownership); it is a perspective which is skewed by expectations based solely around offerings from vendors who are selling MPS, without actually knowing what their product is.
You cannot buy cheap, commercial devices and manage them at a low cost per print because cheap printers designed around planned obsolescence have an intrinsically high cost per print due to extremely small toner cartridges, inefficient design and a service cost that equals or exceeds the price of replacing the machine itself.
The one thing that Phil seems to miss entirely at this point of the article is that a real managed print services program 1) does not require the purchase of software and 2) does not necessarily require the purchase of new equipment.
In all the MPS contracts I have closed, I have never once sold a new machine to the client at beginning of the process. If new machines are purchased, usually we are looking at 1-3 printers over the course of the first six to twelve months and that is an atypical situation at best.
Phil Downe: “With sales commissions at risk that’s not going to happen any time soon. The rhetoric will continue but basic print technology advances have plateaued and are now at a commodity level with historically low profit margins. There also isn’t much room to improve on the CPP service models so I expect you’ll be hearing a lot more about MPS going forward.”
Rebuttal: Phil would be right about this if he was not over-looking one very large sector of the managed print services world. Clearly, his view ignores the toner re-manufacturing industry which, when considered in light of his statements above, illuminates the fact that you can cut the cost of a managed print services program by 20-40% just by using re-manufactured cartridges.
Food for thought here folks… Always remember, to dig deeper down…
Let us continue, shall we?
Phil Downe: ” The amount of printing that still goes on in this, the ‘digital age’, its impact on the environment and its associated costs are high. With the exception of companies in the high-volume print business, newspapers, publishing and so on, it’s been suggested that others spend from three percent to eight percent of their total IT budget on printing.
To cut costs you must be ready to go to tender and change vendors if necessary. Two things I can attest to are that competitive RFP strategies produce the greatest savings and no amount of unleveraged bargaining with an incumbent will come close to fair market value pricing when trying to renew your initial print deal.
If you’re in the market for a printer fleet up-grade or a service agreement re-negotiation then a little up-front work in creating an effective, well-timed RFP will pay big dividends. No surprise to anyone, but if you want the best deal be prepared to negotiate several issues simultaneously. It’s also amazing how big the discounts get on combined hardware, features and service deals when the volume gets into the three and four-digit range.
Print vendors promote their software and steer away from the simple device sale combined with a CPP to cover the services. That dynamic just isn’t profitable anymore so their focus will be on recurring software license revenue combined with constant up-selling and imperceptible constant CPP increments for every imaginable deviation of product mix, impression volumes and feature additions.
Rebuttal: Phil, you had a compelling argument up until that last paragraph which I have made bold above. The truth is, you are once again assuming that all managed print vendors are relying on the same protocols and dynamics which cannot be further from the truth. Yes, SOME companies are doing this, but to suggest to potential buyers that this is simply how it is across the board is not only misleading, but also casts an unfairly negative perception over the MPS industry as a whole.
Not all companies play by the elitist hand book and I want to make sure people are aware of the other players in the game, such as Expert Laser Services. Many independent MPS providers actually provide programs that are the exact antithesis of this statement “Print vendors promote their software and steer away from the simple device sale combined with a CPP to cover the services.” Literally, there are vendors who are doing the exact opposite of this.
Again, a little homework goes a long way…
Phil Downe: “Split charges. I prefer the simplicity and flexibility of a two price-point model; an associated charge for a specific device, plus a CPP charge for the services. The first charge, (either the purchase price or a monthly lease charge) gives the buyer complete flexibility on hardware selection and the second charge, related to the actual usage, covers all the consumables and services. The CPP charges may vary depending on the device type, monochrome, color, MFD, wide-format and so on.
Your alternatives may depend on whether you prefer CAPEX or OPEX for this type of expenditure. Both have their implications for the balance sheet, KPIs and taxes. Leasing just adds a benefit at the end of the term when you can return the device and get an updated replacement with a new warranty. Whether you RFP it at that time or not is up to you.
I prefer lease terms that coincide with the end of the hardware warranty period. These are typically 36 months but like everything else, it’s negotiable. There’s a two-fold advantage, first the CPP charges don’t increase to cover the additional parts & service after the warranty expires and second, the end user gets a newer device with an even lower CPP and the customer satisfaction scores tend to stay high.
You’ll want to keep your leasing options flexible especially at the end of the term to facilitate returns and replacements. Leasing works great for the lessee when you return the equipment at the end of the lease and it works out great for the lessor when you extend the lease or buy it out. Do the former and “ever-green” the fleet.”
Rebuttal: Ok, Phil has some very sound advice here and it is all good except for a major misunderstanding at the very end of this article which I have high-lighted in bold text. Let me be very clear, you do NOT want to ever ever-green your fleet*. I think as a buyer, Phil misunderstands the term “ever-green” which actually means failing to alert the lessor at least ninety days in advance of your last lease payment that you would like to make your final payment. In which case, the leasing company can legally continue to charge you the monthly leasing cost even after you have already paid it off in full…
I have met clients who made ever-green payments for three or four years because they did not understand this. Thus, they effectively paid more than twice as much as the machine was actually worth.
DO NOT GET EVER-GREENED.
*To be fair, I am unsure if Phil intended to use the term “ever-green” as a metaphor for refreshing a printer fleet or, if he actually confused the definition of the term which the leasing industry uses to define the event of which I outlined and warned against above.
Phil Downe: “New equipment will be required periodically but please don’t be overly concerned about non-coterminous leases. Odd or shorter lease terms tend to cost more. Treat each device as if it’s on a separate lease so even if you add devices well into the initial term just make sure you have your residual values and competitive lease rate benchmarked, and add the new equipment to the fleet for a similar term. Even if you change vendors and service providers in the future, they are all quite adept at maintaining one another’s equipment until it eventually gets replaced.”
Rebuttal: Regarding the bold text highlighted in the paragraph above. Quite frankly, this is a totally false statement. It is simply not true.
Phil Downe: “The print RFP. The hardest part of the RFP process is defining your needs to the prospective vendors. It all depends on how mature an asset management process you have but you need to produce data on what you have, where it’s located, what it does, how much it does, (print, scan, fax, copy, staple) and that will enable the vendors to propose comparable, ideal replacements.
The needs analysis can get as complicated as you really want to make it. You can get into detailed floor plans and count the volumes per device function per department and even create rules to cut down on the number of devices, like acceptable distances for employees to walk to pick up a print job.
I don’t think you have to over analyze it. You can probably poll network-connected devices to get a print count on most within your organization. Those who do so should be able to tell what has been underutilized, where upgrades are required and where additional features would add to employee productivity. The good news is if you do get it wrong it’s an easy fix—just move the device to a more efficient location or add another.
Replacement device selection isn’t all that complicated either. Recently a client with over 60 different printer and MFD (multi-functional device) models replaced them all with just four standard devices. Just pick some standards for each device and set the minimum specifications, split them into bronze, silver, gold and platinum categories with the minimum specifications for each and have the vendors bid the net lease charges. Ask for all the hardware pricing details, list price, discount percentage, net price and volume clip levels. Transparency means everyone can calculate it. Set the mandatory specifications and then allow for every possible feature with the optional, additional monthly lease charges for each.
The CPP price point, several in fact depending on the device, covers the cost of all consumables and services. Depending on your company size and needs you can work in other recurring charges that can be quoted separately. These might include full or part-time vendor personnel to perform the services and one-time charges for additional implementation tasks like assessments, installation, training and “wiping” or destroying internal hard drives and disposal of or packaging and returning replaced equipment.
Print costs, like all technology costs, come down and although it’s not always easy to find time to test the market every three or four years there are significant savings for those who do. A final suggestion is be aware of minimum monthly print volumes or minimum contract value terms. Customers who have adopted a departmental charge-back system, combined with a digital storage philosophy and increased end-user environmental awareness have reported significant reductions in print costs. It would be a shame to continue paying for printing that isn’t taking place when the other benefits of reducing print are so significant.”
No Rebuttal: This last section of the article is sound and quality advice. As a buyer, he understands his job and responsibilities very well. That being said, his understanding of managed print services and the advice given prior to this portion of the article, is flawed at best.
I implore you to do your own research and simply know that not all managed print services programs are created equal.