Konica Minolta
Business Solutions U.S.A. announced they have acquired All
Covered, Inc., an IT services company that focuses on small-
and medium-sized businesses (SMB) across the U.S. All Covered
is a 12-year old IT services company with locations in over 20
cities and boasts over 200 engineers. Konica Minolta would not
disclose the purchase price during the press call that took
place before the public announcement.
All Covered has been on an aggressive growth plan, and while
the word “organic” was used several times during the call, a
great deal of their growth has been through acquisitions.
Based on messaging found on their website, they seem to be on
an aggressive acquisition path and are actively looking to add
additional locations.
So what does this mean for our industry? While Xerox and
Hewlett-Packard (HP) are leveraging acquisitions to support
Enterprise customers, Konica Minolta has acquired an IT
company that focuses on the SMB market – a market where the
majority of customers outsource their IT requirements. While
All Covered had not been actively selling hardware in the
past, you can be sure that they will be referring their
customers to the local KMBS branches in the future, and
eventually, working hand-in-hand with the printer/MFP sales
rep.
As far as the
KMBS branches are concerned, this is a huge move as they can
now offer customers management of their documents, whether
electronic or hardcopy, as well as the ability to service and
support the customer’s network, applications, security, etc.
Changing IT companies is often much more difficult and
daunting compared to changing your brand of copiers when the
lease expires, so this strategy could lock customers in
long-term. Rather than push the hardware, Konica Minolta is
hoping the All Covered acquisition will pull it into accounts.
And, the MPS opportunity with this acquisition probably has
Konica Minolta executives drooling.
According to Konica Minolta Senior Executive and Chief
Operating Officer Rick Taylor, “…we intend to deliver
unmatched value to our end-users and channel partners.”
Personally, I can see the value to the end-user. Most small
businesses rely on outsourced IT from companies like All
Covered. In fact, we here at Industry Analysts, Inc.
out-source the IT at our headquarters in Rochester, New York
and from what I understand, when customers like me need a new
printer, they often buy what the IT person recommends
(although we are fortunate not to have to do this).
But what does this mean for the Konica Minolta dealer? Will
they utilize this exciting new service? There is no doubt that
there is great potential for this new service that Konica
Minolta will offer. The big boys currently waging war for
Enterprise customers have largely ignored the SMB market and
it’s ripe for the picking. However, to say dealers are
protective of their customer base is an understatement.
In our research, we have found that most dealers are very
cautious about identifying their customers to their MFP
supplier, particularly with companies that have substantial
direct sales operations such as Konica Minolta. In many cases,
they just don’t trust them. Although Konica Minolta seems to
be handling the “rules of engagement” issue better than some
competitors, primarily due to the outstanding job Taylor has
done in fixing what was once a huge problem, I think they may
find their dealers viewing this new service with some
hesitation.
The handling of the rules of engagement should prove to Konica
Minolta dealers that their accounts will be safe and that they
are all playing for the same team, but in reality, strategies
and management change from time to time and once All Covered
is in the account, the dealer may find they don’t want to
share the account. What if they are dual line dealers and want
to place non-Konica Minolta equipment? What if they drop the
Konica Minolta brand altogether? Dealers could potentially
have to battle their own incumbent brand and that’s when
things can get messy.
Another speed bump in this marriage is the fact that Konica
Minolta, in our opinion, does not have as strong an A4
portfolio as many competitors. This will eventually change but
for the immediate future, I’d wager that Konica Minolta might
sell more HP printers through All Covered than they do bizhubs.
Without considering the amount Konica Minolta had to pay for
this company, the bottom line is that this is a great
acquisition. Konica Minolta has an extensive branch channel
and All Covered appears positioned for considerable growth in
new markets. This could lead to a nice boost in bizhub sales,
for both A3 (console) and A4 (desktop) products and with the
loss of Océ, Konica Minolta had likely felt the need to
replace that channel.
Key areas that need to be addressed are filling in the A4
portfolio and creating a business model where the dealers feel
comfortable using this valuable service. Konica Minolta’s
dealer council will likely have a strong role in making this
work for the dealer channel but until that occurs, dealers
will likely take a wait and see approach. There is a lot of
potential here but at the moment, Konica Minolta has a lot of
work to do to make this a success.
Andy Slawetsky
is President of Industry Analysts, Inc. Much of the company’s
research and testing results can be viewed on their website
www.industryanalysts.com.
