For the document imaging industry, 2017 has been highly eventful, including a spate of new technology innovations, the continued movement toward managed services and the onslaught of mergers and acquisitions among dealers and manufacturers.
M&A activity is another indication of market contraction as smaller entities give way to well-fortified businesses that can offer a vast network of product and service offerings, along with greater sales and administrative firepower. It behooves the “mom and pop” shops to focus on differentiation through quality technical service and customer intimacy as these behemoths continue to expand. It behooves the “mom and pop” shops to focus on differentiation through quality technical service and customer intimacy as these behemoths continue to expand.
You can find credible examples of this in our roster of Elite Dealers. But the best place to start is taking a look at what ENX Magazine has identified as the most compelling narratives of 2017. We’ve assembled a Top 10 list of the biggest news stories and trends that have impacted the dealer channel and will undoubtedly have long-term ramifications on the way it does business.
Here are the Top 10, in no particular order:
Konica Minolta Introduces the Workplace Hub. The cornerstone of its Workplace of the Future platform, the Workplace Hub was five years in the making for Konica Minolta. The Hub integrates hardware, software and services across an organization’s entire IT ecosystem. A multi-vendor device, the manufacturer calls it the most connected intelligent-edge platform for the Workplace of the Future.
One of the most exciting aspects of the Hub is its integration of the Internet of Things (IoT), artificial intelligence and decision-support capabilities. This forward-thinking approach addresses the expectation of greater demand for collaboration and data-driven decision making in a mobile-friendly, secure environment.
The Hub itself includes a Konica Minolta MFP, a server based on Hewlett-Packard Enterprise (HPE) technology, local and cloud storage, and secure WiFi access points. The company also provides software to securely manage locally and cloud-stored data. Manufactured with anticipation of future needs, the Hub seems poised to continue to grow and evolve a step ahead of current technologies.
The Onslaught of Cybercrime. At numerous industry conferences, cybercrime and the importance of network security was a familiar topic of conversation. Data protection specialist Datto conducted a survey that found ransomware attacks cost U.S. businesses $75 billion dollars’ worth of downtime in the form of lost sales, lost data, and the loss of confidence between businesses. High-profile breaches of major corporations such as Merck, Target, Home Depot and Equifax left millions of Americans’ data in the hands of thieves. Most alarming: 80 percent of data hijacks are committed against the SMB space, the subset most likely to be lacking in data backup and disaster recovery.
Many manufacturer product offerings address network security and IT awareness. HP enlisted actor Christian Slater to star in a series of videos demonstrating how cybercriminals can infiltrate a business’ network and gain access to unencrypted and confidential data.
Xerox Looks to Future of Work. Xerox Corp. rolled out the largest and most ambitious product release in its history with the unveiling of 29 AltaLink and VersaLink printers and multifunction devices in its ConnectKey portfolio, then took to the road to host a Future of Work Global Tour that encompassed dozens of stops in 25 countries. These devices, dubbed Workplace Assistants, boast a user interface that emulates a smartphone and has an open API to allow for app integration in addition to the scores of apps that are preloaded and available through the Xerox App Gallery. The ConnectKey technology provides for mobile printing, advanced security, a personalized user experience and optimized managed print services capabilities.
Lexmark Loses Landmark Supreme Court Case. The U.S. Supreme Court ruled almost unanimously against Lexmark in its case against Impression Products regarding U.S. and international patent exhaustion. Impression Products refurbishes, refills and resells toner ink cartridges, including from Lexmark, which argued the practice violated its patents. The matter before the court was whether restrictions placed on a patented product could be enforced through a patent-infringement suit. In the past, that had been the case, but the high court wrote that Lexmark exhausted its patent rights because “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose. As a result, even if the restrictions in Lexmark’s contracts with its customers were clear and enforceable under contract law, they do not entitle Lexmark to retain patent rights in an item that it has elected to sell.”
However, the court also said that if the patentee negotiated a contract with the purchaser that restricted the purchaser’s right to sell the product, then the patentee would be able to enforce that restriction but not via a patent-infringement lawsuit. Still, the ruling could have unintended consequences, according to Charles Brewer, president of Actionable Intelligence.
“Now that patent rights are deemed exhausted upon the first sale, we expect to see a lot more remanufactured products coming into the U.S. from overseas companies,” Brewer said. “The price of cores will also drop because more empties will be imported, too. It’s a big win for the remanufacturing industry, but there is a down side. With many restrictions lifted on legitimately remanufactured cartridges, more clones are likely to come into the U.S. as well. U.S. Customs will have trouble differentiating between what’s a legit reman and what’s a clone.”
Konica Minolta Acquires Muratec, TLS.NET. In July, Konica Minolta made is 30th acquisition in the past five years when it added Muratec, a manufacturer of MFPs, managed document solutions and cloud services. Muratec also provides digital and industrial label machines. The move gave Konica Minolta solid A4 black-and-white technology and greater inroads to growing its industrial printing business.
Around the same period, Konica Minolta brought aboard TLS.NET, a managed IT services company that specializes in voice, cloud and IT solutions. TLS was added to the company’s All Covered IT Services division, providing another tool for clients to move their company’s voice services to the cloud, resulting in greater scalability and security.
Seat-Based Billing Gains Traction. While the seat-based billing concept isn’t a new one, the concept came of age in 2017. SBB uses a monthly flat fee per seat for printing rights under a managed print service contract rather than calculating a cost per page. The “seat” incorporates consumables, parts, support and software, with the opportunity to layer in other services. Users of the concept enjoy a fixed budget without having to worry about overage and page-count validations.
Two of SBB’s biggest evangelists, West McDonald of Print Audit and Luke Goldberg of Clover Imaging Group, conducted SBB Road Shows in Las Vegas, Philadelphia and Kansas City, MO, to provide five-hour presentations on the topic. It won’t completely replace the cost-per-page platform, but SBB is quickly gaining favor in the document imaging industry.
KYOCERA Acquires DataBank. KYOCERA Document Solutions America obtained DataBank IMX, a provider of document scanning, data capture and enterprise content management (ECM) software. DataBank is the single largest North American reseller of the Hyland OnBase ECM solution.
The acquisition helped KYOCERA strengthen its dealer offerings for ECM, business process improvement and document business process outsourcing, which are vital foundations of its Total Document Solutions (TDS) 2.0.
The Movement Toward Services Versus Hardware. One of the common themes discussed by dealers, analysts, consultants and other observers is the migration away from providing hardware only to offering managed services of all types—print, IT/network, document services, security, facilities, even water and any other aspects of business that can be monitored, measured and managed. While not a new talking point in 2017, the continued race to the bottom in cost per copy has dealers increasingly seeking alternate avenues to profitability.
“The industry is moving in this direction, just as many of the markets for other products have. This trend will have many implications and challenges for those of us in the industry, and so it is an exciting trend to watch,” noted Fred Carollo, vice president of Originations, Office Technology, at EverBank.
Visual Edge Technology (VET) Breaks the Bank. If VET was an all-you-can eat restaurant patron, you’d definitely want to make your way to the buffet line first. But the Canton, OH-based company is a picky eater, acquiring only firms that are top performers, including MCM Business Systems, AXSA Inc., XMC Inc., American Copy Service Center, Netwise Resources and TLC Office Systems in 2017 alone.
VET does not provide sales figures and won’t be found on our Elite Dealer list. Based on estimates, it is a top three performer heading up the list with a bullet.
Growing M&A Activity Across the Board. Whether it’s dealer buying dealer, manufacturer buying dealer or private equity firms snapping up dealers and OEMs, there is no dearth of transactional activity in the office technology space. Among the big boys, Marco obtained Koestner Office Products and the copier/printer business of Data Business Center in Rapid City, SD. DEX Imaging acquired the assets of Enoch Office and Digitec.
Atlantic, Tomorrow’s Office acquired Praxis Data Systems. Kelley Imaging Systems added Benchmark Document Solutions and Superior Business Equipment. RJ Young completed a deal for ACS Technologies, while Oval Partners/FlexPrint picked up Action Imaging Group.
Other deals of note include: Donnellon McCarthy added NOE Office Equipment, Impact Networking acquired Lance Allen Document Solutions, KDI Office Technology picked up ImageNet and Modern Office Methods (MOM) obtained Full Service Networking. Allied Business Solutions obtained Core PC and Idaho Business Systems, and James Imaging Systems brought aboard Ross Imaging.
In addition to the aforementioned manufacturer-led deals, Xerox’s Global Imaging Systems added G-Five, MT Business Technologies and Laser Resources, while private equity firm Thoma Bravo acquired IT management platform provider Continuum. Ricoh made a deal to acquire Avanti Computer Systems and Katun Corp. changed hands from a private equity firm to General Plastic Industrial Co. Ltd. of Taiwan. Sharp Electronics obtained Arista Business Imaging Solutions.
Other OEM/solutions-related deals: ECi Software Solutions was acquired by Apax Funds. Static Control obtained the assets of Ink Technology Corp. and Clover Imaging Group picked up DC Imaging’s ColorLabs Ink Innovations.
Doug Johnson, chief strategy officer for LMI Solutions, believes the proliferation of transactions and manufacturer activity (plus deals consummated late in 2016 that saw Lexmark and Sharp change hands) will impact the landscape moving forward.
“Both of these trends are interesting, because the dynamics between these two points in the value chain will morph in 2018 as each looks to establish more control over their destiny and historic ‘rules of engagement’ may be thrown out the window,” he said. “The implications to the market of mega dealers, more OEM-owned dealers (really a direct play) and the impact of Chinese-owned acquisitions are yet to be seen.”