Growing Competencies: Dealers Make Case for Developing Internal Managed Services Platform

A continuous drum that has been beaten in the office technology space is the ongoing movement toward offering managed services as opposed to taking a pure hardware play approach.

Yet, even as dealers successfully ramp their capabilities in MPS, managed IT, document services, facilities and the entire scope of a customer’s repertoire that can be monitored, measured and managed—either through developed in-house proficiencies or via turnkey vendor solutions—a significant segment of the dealership population has yet to take the plunge.

We’ve assembled a roster of medium and large players in the managed services space to examine the core elements of their offerings. We also discussed how they target their customer base, as well as the process of developing their service infrastructure. They’ll offer insight as to whether managed services are a fit for your dealership and offer some strategies and advice for breaking into the most profitable and fastest-growing segment in the office technology sector.

Grand Rapids, MI
Managed services: MPS, IT, facilities

This $68 million dealership targets accounts with 10-125 users, and can adjust those parameters depending on other factors, according to Casey Lowery, director of sales. He sees service desk, remote monitoring and management, endpoint security, vCIO services with technology planning, business continuity and hardware-as-a rental as the key elements of a comprehensive managed IT services program.

In developing its overall managed platform, Applied Imaging has taken the acquisition route. One of the benefits of this approach, according to Lowery, is the ability to rapidly scale the size of a team. Keeping the service in-house enables the dealer to maintain more control of the process and service delivery than they would if utilizing a master MSP.

Casey Lowery, Applied Imaging

“There have been several challenges related to this strategy,” he said. “Some customers in the acquired base do not fit the offering model. Also, post-acquisition, roles don’t always remain the same and it can be a challenge to make sure all the individuals that come on board are in the right positions. Additionally, when merging cultures, there will always be a learning curve and adjustment as individuals from both sides try to understand the new environment.”

As for the hard costs associated with in-house development, Lowery notes that since many of the tools that are consumed by the managed services model are subscription-based, the costs tend to scale along with the revenue. That makes it difficult to amortize an expense in a way that a dealer can reach a point of being more profitable in the future due to the initial investments. Lowery projects a six-month journey to offsetting the initial investment and continued costs.

Lowery believes that from a target customer standpoint, managed services won’t seem ideal if the customer doesn’t believe its core focus should be on its business and instead chooses to concentrate on operational aspects like IT that can be more effectively outsourced.

“From our practices standpoint, we are pursuing a pure offering where the solution is completely outsourced to us,” he said. “We have found this position to be most successful for us. Based on our current services model, medium-to-enterprise customers are probably never going to be a fit.”

Syracuse, NY

Managed Services: MPS, IT, video, security

Usherwood Office Technology, with annual sales exceeding $25 million, focuses its managed services efforts on accounts ranging from 20 to 160 employees, serving verticals including legal, education, non-profits, accounting, architects, and engineers.

Lou Usherwood, Usherwood

The onboarding of a client into the world of managed IT requires a measured approach. According to company President Lou Usherwood, his firm employs a six-step process called Odyssey Global IT, which guides clients through a series of events starting with the initial Odyssey Consult, followed by Discovery, Optimize, Tracker, Roadmap and Aegis. The process provides clients with a predictable stack of services built to secure their network environment, stabilize their workflow and boost productivity throughout the office.

Usherwood notes the company prides itself on developing a core understanding of IT by embracing legacy and future technologies in order to integrate its clients’ networks. “We would not acquire or partner with a company if we didn’t already have these core foundational elements within our own business,” he said. “In the future, Usherwood is well positioned to add incremental acquisitions to strengthen our organically built core IT foundation.”

Since 1998, Usherwood Office Technology has invested more than $5 million in developing its own best-in-class IT solutions platform. While there were times when the investment didn’t seem to be paying dividends for his company, Usherwood advices dealers to exercise patience in moving into a new offering.

In deciding whether to offer managed services, Usherwood encourages dealers to look at the big picture. “Where do they see their future and what is their exit strategy?” he posed. “I tend to look at investments over a 10-year period. So I would never invest in an industry or line of business if I didn’t plan on dedicating the next 10 years of my life making it incredible.”

Aston, PA

Managed services: MPS, IT, document capture

Doing it the right way from the start is fundamental to the KDI Office Technology platform, and that entails constructing a solid MPS platform tied into the ERP system with quality support personnel, notes Greg Bryan, chief technology officer. KDI, which posted sales revenues of $31 million last year, typically seeks out clients with a minimum of 10 workstations and one server.

Bryan feels the strength of KDI’s managed IT offering is the experience level of his staff and the company’s experience in providing services for the business equipment environment. “We’ve grown through that digital age where machines were first put on the network, and over time we’ve evolved to be able to match that IT service and support with the MFP world,” he said.

Like many of his contemporaries, Bryan believes the benefits of in-house development for KDI’s IT offering far outweighs initial startup costs. It also provides benefits beyond a third-party solution, which can present its share of integration hurdles. The firm recently acquired a capture company to provide back-file conversions and scanning projects, which were previously outsourced. The capability is tied into KDI’s document management offering and represents its move into the cloud.

Greg Bryan, KDI

KDI is now aligned with Brazilian provider NDD on its managed print component, which provides extensive metrics, including supply forecasting. While the platform is run from a third party, KDI does all of the service and support internally.

According to Bryan, it took two to three years for KDI to fully onramp its own managed services offering. The primary objection to taking the vendor route is a control issue, though he admits the expense proposition for smaller dealers can make it cost- and resource-prohibitive.

“If they’re a bigger dealer and have a lot of accounts, and if they’re going to maintain them and can afford it, I think that’s the way to go,” Bryan said. “However, if they’re looking to enhance their offering, then some of these other providers like Mindshift and All Covered that they can get through their vendor/MFP relationships might be better. We have the resources to do it all internally.”
Fraser Advanced Information Systems (AIS)

West Reading, PA

Managed Services Offered: MPS, IT, network, workflow, disaster recovery

This dealership, with more than $40 million in annual revenue, focuses its managed services portfolio on the SMB market for customers with 50 users or less. The dealership seeks out IT client candidates that match its technology profile and desire centrally managed solutions ranging from antivirus and security to email and automation.

Melissa Confalone, Fraser AIS

Many dealers grapple with the decision to rely on third-party solutions as opposed to developing their own competencies, particularly in a nuanced space such as managed IT. Melissa Confalone, vice president of sales for Fraser Advanced Information Systems, notes that developing internal managed service capabilities offers benefits that exceed the initial time and resources required in the development phase.

“It isn’t turnkey, but it allows you to completely understand every part of the business which, once you scale, gives you the competitive advantage,” she said. “You can adjust your services and your stack as technology enhancements impact your clients and prospects, and you don’t need to be reliant upon the offerings of a third party.”

Jim Pierce, Fraser AIS

Where do the best opportunities lie within one’s own client base? Most dealers will find that any customer set can benefit from the use of a managed services support model, according to Jim Pierce, vice president of operations for Fraser Advanced Information Systems. From comprehensive services for small businesses to hybrid or selective services at the enterprise level, Pierce believes the true value of the model is in standardization and scalable support architecture.

“This allows small businesses to have all of their IT requirements met for a fraction of the cost they would incur by hiring internal staff,” Pierce said. “The model also allows the enterprise to offload management of specialized or selective systems without modifying their current internal support structure. Both scenarios save money for the client while allowing them to bring value to their staff.”

Nashville, TN

Managed services: MPS, IT, solutions, 3D printing

This $80 million dealership offers a wide range of managed services, including 3D printing. On the managed print end, NovaCopy casts a wide net from five to 1,000 users, while in an area such as managed IT, the prime target is the SMB space. Verticals can play a factor here, according to Jonathan Kilton, director of sales operations, as the expectations and ramifications for a legal client, for example, can be quite different from that of a HIPAA-compliant hospital system.

Jonathan Kilton, NovaCopy

NovaCopy is an advocate for the development of its own managed service capabilities and the ability to customize as it builds out and expands within the customer base. “We have a really good synergy between our product lines—wide-format, production and copiers, 3D,” Kilton noted. “Our training, processes and how we go about servicing them can be pretty in line from one product to another. When we get into solutions and IT, those are similar as well. We’re able to lean on a lot of our resources to effectively manage those different lines.”

The managed IT component is one of NovaCopy’s newest initiatives, having ramped up its offering in the last three years. Kilton has taken a very deliberate approach to growth here, adding personnel, programs and resources to ensure the dealership doesn’t “bite off more than we can chew.” He characterizes the job of IT management as a blend of a postman, medic and security guard.

Kilton notes the timeframe to efficiency was different for MPS and IT. On the print side, NovaCopy was able to reach the seven-digit mark in sales in about a year’s time. But a month into the IT campaign, Kilton discovered that he needed to increase his staff from two to five in order to effectively manage it, with heavy focus on processes and automation.

“It benefited us to have some profitability to lean on, pools of money to help get it off the ground,” he said. “If we were running lean going into that, it would not have been good for our company to go down that path. You have to be ready to commit resources.”

Kilton strongly cautions owners not to consider managed IT as a last resort for faltering dealerships. “If you feel like you’re losing control of your base and you’re trying to find something to grasp onto, don’t turn to managed IT,” he said. “The cost of it will put you in a hole completely. Secondly, you’ll start to have a lot of unhappy customers if you’re not adequately protecting them, and given the potential of letting a virus get through…the legal liability alone can put you under.

“Don’t overload your IT department, because that will frustrate your people and your customers. It should be well thought out and systematic. It’ll be a change in not only the customer mindset but how you, as a company, operate and do business.”

Erik Cagle
About the Author
Erik Cagle is the editorial director of ENX Magazine. He is an author, writer and editor who spent 18 years covering the commercial printing industry.