Channel Conflict: Dealers Vs. VARs

Digital copier dealers are changing their direction, and it’s going to lead them straight into the path of traditional document imaging resellers. No, this isn’t breaking news. In fact, it’s something that has been brewing for four or five years now. However, armed with improving hardware, software, and marketing support, it seems that dealers are reaching a new level when it comes to document imaging sales.

One of the most telltale signs for me occurred at the recent Sharp National Dealer’s meeting in Las Vegas. Not only was Sharp’s OSA (open systems architecture) embedded systems platform one of the stars of the show—yes, software was one of the stars of a digital copier event—but, on top of that, there was no golf. Yes, a market often known for the extravagance of its dealer events is getting serious. Over dinner, a Sharp executive told us, “We received feedback that the dealers wanted more educational opportunities and less entertainment. They said they wanted a second day to visit the booths at our partner trade show. We told them that would mean cutting out golf, and they were in favor of that.”

As reported in the Feb. 16 edition of the Document Imaging Report, that tradeshow included no less than 15 document imaging software vendors, many with product SKUs developed specifically for the dealer channel. And, as we’ve reported in past editions of DIR, with market leader eCopy growing in excess of 30% per year, scanning on digital copiers is hot. “Document management is the most common solution sell for digital copier dealers,” said a consultant at the Sharp conference who was advising dealers on how to manage their businesses for the future. “Scanning is the fastest growing function set on the MFPs,” added a Sharp executive.

On top of all this, it’s interesting to note that InfoTrends recently adjusted its projections for sales of workgroup document scanners significantly downward for the near feature. According to Brian Bissett, editor of the MFP Report, this may have something to do with the increasing adoption of scanning on MFPs. “I think copier and scanner vendors may have been counting on the same end users for their growth,” he told us. “Obviously, this means somebody is going to come up short.”

No, we are not saying that digital copiers, even Sharp’s single pass dual-sided scanning (SPDSS) machines, can serve as apples-to-apples replacements for dedicated document scanners. After all, MFPs typically can’t handle mixed batches of documents very well—although Sharp’s introduction of ultrasonic double-feed detection on one of its high-end units is a step in the right direction. There is also often a question of users not wanting to tie up their workgroup/departmental printers with large batches of documents being scanned. However, we will say that many of the image quality issues related to MFPs have been alleviated and, with scanning increasingly going distributed (meaning smaller volumes at multiple sites), digital copiers are proving to be a viable option in cases where a workgroup scanner may be overkill.

And dealers have one key advantage over traditional imaging VARs—every potential imaging customer typically already has a relationship and a lease with a digital copier dealer, and often a document scanning solution can be incorporated into that lease. So, instead of having to make a capital acquisition, an organization can merely upgrade an existing contract. However, it is also important to note that the whole practice of leasing MFPs is currently coming under some fire, which could create an opportunity for savvy document imaging VARs.

The Opportunity for VARs

In case you haven’t noticed, HP has made a big splash in the MFP market over the past couple years, by some estimates capturing as much as a 15% share in a market they barely competed in until a couple of years ago. HP has succeeded by selling MFPs like printers. In other words, as low-cost, maintained-by-the-customer, networked devices. And these devices are typically sold to IT departments and not purchasing departments.

Yes, printer vendors are MFP vendors’ biggest fear. That’s because no matter how much they talk about solutions and scanning, it’s still consumables and print “click” charges that pay the big bills for these guys. To combat the printer vendors, the aforementioned analysts recommended that MFP dealers develop their own relationships with IT departments… of course this is where traditional imaging VARs have an advantage. If they haven’t learned to talk-the-IT-talk, they probably haven’t sold many solutions to date.

Yeah, there is still a lot of business to go around in the fast-growing document imaging space. But another thing that the dealer consultants pointed out was that the discrepancy between the haves and the have-nots in the dealer market is growing, and we suspect the same is true in the traditional imaging VAR channel. As the market matures, users want resellers with proven résumés, not start-ups taking a chance. And if IT is truly getting involved in the MFP decision, this opens up a chance for traditional imaging VARs, who bring solutions experience to the table.

Of course, the key to getting to that table in the first place, may be through the printer. So, if you’re an imaging VAR, and you’re not selling MFPs, you may want to look at some of the new low-cost devices available from HP and more recently Xerox. Maybe you don’t want to get into the whole click charge print thing, but then again, the click charge has worked fairly well for certain image capture vendors historically, so maybe it’s not such a bad thing after all.

Just some thoughts to help you diversify and succeed in an increasingly diversified marketplace.