MPS Failures? Who’s to blame? Just recently, Scott Cullen did an exposé on our company with Wes McArtor, President of BEI Services Inc., that was published in this very magazine. After reading his writings, we were encouraged to use our data and write an article about the challenges and solutions in growing (and/or maintaining) profitability in the service department in an MPS environment. As it happened, we were actually in the middle of a very large survey of more than 12,000 printer and copier dealers, asking a number of questions about their dealership and MPS. We were doing this study to better understand market opportunities, problems and issues in the industry and to find additional benefits for our MPS customers. First we needed to see who was offering MPS and of those, what they thought of it. From the data sampling we received in the survey, we found that 62% of the dealers do not offer any sales MPS solutions at all, 20% dabble in MPS, 10% have an offering, 6% have this as a major offering and only 3% push it to all their customers. Of those dealers who had an MPS offering, we asked for their experience and opinions of MPS and found the following results: Only 29% of the providers thought MPS was a great success, while 48% said it was just OK, 21% said it was not making the profits they hoped for and 2% wished they never got into MPS. I found this very surprising from all the hype about MPS and was curious as to what causes these failures or the lack of profitability of the more than 70% who said it was not a great success., thus leading to the title of this article… “Who’s to blame?” Of the 70% who were not reaping great successes with MPS, we believe there are many points of failures. Personally, being in a company that measures almost everything you can in the imaging business, this next fact absolutely BLEW me away!!! Of the 37% of dealers who offered some sort of MPS solution in this study, nearly 57% had no means in which to measure the performance or lack thereof for their services. They had no service software to gather their service data to measure the performance of the machines at their accounts. Can you imagine flying an airplane without a fuel gauge and not knowing what the head wind is doing to your performance? Everything may seem to look fine, but at some point the plane will run out of fuel and crash. It is not much different than flying blind with MPS; if you do not know the performance of the machines down to your exact cost per page produced, it can cause your MPS solution to crash and burn. Case in point: without something to monitor and report on individual machines, you may not know that a single desktop printer was serviced 8 times in a year. It would have been much cheaper for the dealer to have replaced that machine after the second or third service incident. Now multiply this single instance with thousands of machines, and you can see how this lack of measurements and understanding can cause a company to lose thousands of dollars every month. Another issue we see in the MPS solutions starts with the way the majority of dealers pay their sales people. If you want to have a successful and profitable MPS solution, you need to pay your sales people based on the profitability of the deal they sold. As you transition to MPS services, you need to wean them off hardware sales and pay them based on the profitable pages the dealership receives from the customer. A page based commission plan ensures they have skin in the game and they will make every effort to ensure the deal is profitable because if it’s not, they don’t get paid. I am not saying don’t pay them something for selling the hardware, but put more emphasis on creating monthly recurring revenue that will handcuff the sales people to your company after time, and also ensure they continue their relationship with customers. This payment plan will also encourage them to seek out more and larger page count deals because it increases their recurring revenue. Possibly the most expensive cost we see are the expectations of the services provided for customers.  Many dealerships are what I consider “copier centric”, meaning that it is not uncommon to service a single copy machine a few times a month. With this same mindset for printers, it doesn’t take long for a dealer’s profit margin to dwindle down very quickly. Promising scheduled cleaning sessions, toner replenishment and other manpower-consuming items such as gathering meter readings will eat right through your profits very quickly. Manufacturer   Model  Low CPP High CPP   % Difference Canon IR2200 $0.00519 $0.03714 715.61% Ricoh AFMP161SPF $0.00689 $0.01618 234.83% HP HP4050 $0.00171 $0.00679 397.08% Kyocera FS3900DN $0.00208 $0.00577 277.40%   Be smart in what services you want to provide your customers. If you want to provide desktop service for all their needs, use cheaper labor and have less experienced technicians replenish toner and collect meters. Monitoring technology is another issue. Our study shows that more than 40% of MPS providers do not use monitoring technologies like FM Audit, MWA Intelligence or Printfleet to monitor their equipment, requiring them to do much more manually. Implementing these types of technologies can help you reduce costs by collecting meter readings, warn you of errors on the machines, and save you expensive manpower. Since almost 80% of MPS is acquired pages, you should know about the products you are acquiring to service and support as well. This last issue we’ll discuss is one closest to the BEI heart and deals with the technical competence of the dealership on the models you are providing or servicing. You would think that one model would perform the same across all dealerships, and that the variance in numbers would be somewhat small. Our studies show that it is not as much about the machine performance as it is the technical performance on those models within the dealerships. We performed a study on four very common models across a number of dealerships. With at least 50 of these models in the field at each dealership, we found the following results that prove this theory. These average Cost Per Page (CPP) costs include only parts and labor costs and contain no toner costs. Below is the table that shows the lowest cost per page, the highest cost per page, and the percentage difference between them. The Low CPP is the average cost per page of the best performing dealer servicing the model, and the High CPP is the average CPP of the worst performing dealer servicing this model. Looking at the differences in CPP costs, it obviously proves my point. These same models perform completely differently for different dealers. These cost variances can truly make or break your MPS solutions, so knowing the models your dealership services well is crucial to the margins you will make. There is a management principle that says “You cannot manage that which you cannot measure!” My guess is that the companies doing well in MPS are measuring their results and are reacting accordingly. The ones failing and not making the profits they should is because they are not measuring the results correctly and knowing what adjustments they need to make. So, who’s to blame??? You tell me… Bud Karakey is Vice President of Operations of BEI Services. Prior to that position, he was with MWAi for 16 years as one of the founding members of ADS Communications, which is now part of MWAi. He can be reached at bud.karakey@beiservices.com.