Delivering managed print services to a customer is like being married with a prenuptial agreement. You want the relationship to work, but if things get ugly, you’re both likely to run for the protections of the contract.
Like the sanctity of marriage, managed print services and cost-per-page print delivery can be very attractive. As an alternative to traditional, break-and-fix printer sales which have seen margins dwindle in recent years, managed cost-per-page print services bring in recurring revenue that can scale into a stable annuity stream more profitable and easier to manage than break-and-fix printer sales.
This attraction towards the recurring revenue model of managed services is why managed services as a whole are poised to account for nearly 20 percent of the $432 billion in revenue expected to run through the channel in 2011, according to the Institute for Partner Education & Development (IPED).
But like all managed services, managed cost-per-page print services are not without risks. Poorly written per-page managed print contracts can lead to unexpected or unrecovered costs, which can cut into a managed print provider’s margins and expose them to unnecessary risk. Like any supply chain, the purchase and flow of paper, toner and maintenance to a managed print customer must be in line with the cost structure of the managed print service, and calibrated to a customer’s real print usage over a significant period of time.
You don’t want to frighten off prospective managed print customers with a lengthy, intimidating contract. But you must include the right language to avoid some of the most common per-page contract pitfalls. And with the help of Paul Herman, Director of Service Platforms for Xerox’s North American Reseller Group, we were able to whittle those pitfalls down to a Top 5 list.
Not getting the coverage equation right in a managed print contract can cost you a lot of money very quickly. Think about it. Toner cartridge pricing is typically based on 5 percent coverage, which gives us an industry average toner price per page based on 20 percent coverage ( 20 percent being the multiple of 5 percent each of red, blue, yellow, and black (CMYK)).
Contracting your managed cost-per-page print on this standard coverage cost can get you into a lot of trouble very quickly if your customers suddenly begins to exceed 20 percent coverage on a regular basis, which is all too often the case, says Herman.
“Page with more than 100 percent coverage are quite common,” says Herman. “And since managed print breaks down the cost barrier to print, don’t be surprised if your customers begin printing more than they were before they became managed print customers.”
In many instances, customers who enter into a managed print agreement will immediately see the value of having a new, high-end multi-function printer available for use and task it with printing work they previously may have been sent outside, such as full-color marketing material. In this case, your pre-contract managed print assessment designed to tell you how much on average a customer prints will suddenly be way off, and if you based your contract on 20 percent coverage, you’ll likely find yourself buying a whole lot of toner, out of your own pocket.
To avoid this pitfall, work with a print vendor who offers coverage-independent managed print programs. You’ll find that many managed print programs reserve the right to change their per-page costs based on toner coverage fluctuation. But some, such as the Xerox PagePack program, are coverage independent, which means your customers can have the freedom to print while you enjoy a consistent margin at a cost you can write into a contract and stick by.