West McDonald, VP of Business Development at Print Audit, sees a change coming in the MPS (Managed Print Services) market and warns that dealers had better be ready for it. “There is an all-out war for pages,” he wrote in this recent blog post. “Margins on cost-per-page contracts are under pressure. What is a Managed Print provider to do? Change the game by billing by seat instead of by page.”
It’s a radical change from the cost-per-page (CPP) billing style used by most of the industry. While the immediate benefits of charging customers by volume is still alive and well, McDonald argues that a more sophisticated pricing scheme will reign supreme in the future. Coming off of his ITEX 2015 debate with Info Trends analyst David Ramos, the industry veteran offers five reasons why per-seat billing (PSB) will replace CPP.
Protection: “The debate on whether or not people are printing less is over.” He cites an estimated 2% to 5% decline in print volume every year. At that rate, the loss in revenue will force providers to switch to a new billing method.
Simplification: For resellers that offer both Managed Print Services and Managed IT, billing them for two different services causes unnecessary headaches. “PSB allows for revenue layering,” says McDonald. “Dealers can increase PSB levels by layering additional value-added-services on top of original contracted seat to increase revenues over time!”
Alignment: McDonald argues that the CPP model puts providers in conflict with the consumers’ best interests. “Under a CPP model, you want more pages to increase revenue. Your customer wants to print fewer pages” he says, arguing that PSB eliminates that problem by rendering “increased/decreased printing irrelevant as a savings mechanism.”
Profitability: “Gross profit levels for Managed Print under CPP are under downward pressure.” On the other hand, argues McDonald, solutions that help consumers manage workflow and enforce print policies are on an upward trend. “Adding software solutions that address workflow and print governance are highly profitable – upwards of 70% [profit margin].” It seems that providing consumers with quality solutions will be the future wave of revenue generation.
Stickiness: When a reseller adds solutions into a PSB-based contract, retention of clients goes way up asserts McDonald. “’Selling” solution software for a one-time revenue gain gives 100% of the benefit and control to the customer. Why let that happen?” he argues. “Layering solutions into a seat price means the customer has more reasons to stay with you as their provider. If they leave you, so does all the software!”
McDonald makes a pretty compelling case for the eventual death of CPP. Fortunately for him and the rest of the team at Print Audit, the company is well prepared for the future and offers several tools for helping resellers implement PSB billing into their operations. This includes a PSB calculator, as well as tools for assessment, contract modeling, and print governance.
Providers looking to add MPS solutions into their PSB contracts may want to take a look at Print Audit’s excellent Print Audit Facilities Manager platform, which BLI honored with a Summer 2014 Pick awardas “Outstanding MPS Solution.” And be sure to read BLI’s full Solutions Report on Facilities Manager.