Uncover Opportunities In Professional Services

In the document imaging market, commoditization has become a real threat. Scanning hardware from vendor A is very similar to that offered by vendor B, and as a result, competition shifts from a focus on product uniqueness to product price. Decreasing prices, in turn, lead to decreasing profit margins. For a VAR that earns 100% of its revenue in the realm of document imaging, this represents a dangerous trend. Fortunately, imaging reseller Imaging Office Systems, Inc. (IOS) recognized this trend early and took steps to avoid it. In particular, IOS increased its focus on its Professional Services Group (PSG), which has consistently experienced 30% to 40% sales growth in each of the past five years.

Profit From Professional Services
IOS is a VAR that has been in the document imaging market since 1973, with revenue topping $15 million in 2007. The VAR has built its expertise by following the technology trends as they evolved from the days of microfilm and microfiche to the intricate document imaging systems available today. The reseller has installed more than 500 imaging systems focusing on Fortune 500 companies, government agencies, major universities, and a diverse cross section of vertical markets. In the early days of the company, when hardware and software margins were still healthy, IOS grew accustomed to providing solution enhancements as adjuncts to the initial sale. "Customers were continually coming back and asking for more functionality from their document imaging systems," says John Trimble, VP of sales at IOS. "At the time, we were so happy they bought an imaging system from us that we often bundled those requests in." The requests Trimble is referring to could include everything from enhanced reporting capabilities to document automation tools. Along the way, the team at IOS began to realize they were giving away their biggest value — their expertise.

"The dynamic of our professional services offering really changed when the president of IOS, Gary Gushard, and the senior VP, Bob Barkley, pushed to separate the developmental services IOS was giving away into a new, self-contained cost center," explains Trimble. The development of this division, now known as PSG, gave IOS the ability to minimize commoditization and lessen the impact of declining hardware margins. A large part of PSG centers around elements typically associated with professional services, such as consultation, custom development, process improvement, and workflow solutions. Trimble reports PSG's biggest revenue source, however, is being derived from what he considers to be an untapped market opportunity — full imaging system conversion services which include both a content management database (i.e. Oracle, FileBound) and the actual image files and metadata stored on a server.

In recent years, the reseller has encountered many customers struggling with legacy content management systems. According to Trimble, this can include early imaging adopters with outdated technology, companies inheriting a system through consolidation or acquisition, or, even more commonly, when several disparate systems have been deployed across an enterprise as rogue, departmental solutions. "Often the discovery of a system conversion opportunity starts as an obstruction to an imaging sale," says Trimble. "A customer will tell us that they were going to move ahead with an imaging system purchase, but a new requirement would surface to incorporate all the information from the old system." Regardless of the drivers behind system conversion, the fact remains that the legacy system contains images, documents, and metadata that need to be extracted, converted, and loaded into a new system. As a document imaging reseller, learning how to perform back end system conversions was a matter of self-defense, according to Trimble. "What was worrisome to us was that if we couldn't figure out a way to do these conversions, the customer wouldn't go ahead with the imaging purchase, and we would lose these sales altogether."

Cultivate Your Internal (Human) Resources
Despite the obvious need for system conversion services, the team at PSG has not run into much competition in the market. Angela Childs, director of professional services at IOS, says that even within professional associations such as AIIM (Association for Information and Image Management), IIMDA (Independent Information Management Dealer Association), and ARMA (Association of Records Managers and Administrators), there is not an abundant source of system conversion expertise to draw on. That is not to say that there aren't other resellers doing this, just that IOS is seeing an extremely small percentage of VARs capitalizing on the opportunity.

Rather than relying on partnership opportunities, PSG was determined to tackle system conversion on its own. The first challenge was to cultivate a staff that could handle the complicated programming tasks. "For many resellers, this can be the make-or-break issue in terms of developing a specialty for system conversion," says Trimble. "As an example, if we had to go out and hire somebody who had the programming skills to accomplish this, that salary could easily be in the six-figure range." At the time, IOS could not afford to do this for PSG. Trimble's advice? Don't ignore your most valuable assets — the people you already have.

Childs and a team recruited from within PSG began to analyze the structure of content management systems, initially working with two of the products they were already selling — EMC ApplicationXtender and Optika FPMulti (now known as Stellant/Oracle). IOS was intimately familiar with the user interfaces of each, but to address conversion issues, the key was to dig into the database and understand how the information was structured and connected behind that interface. "It was literally a back and forth between interface and database to answer the question, 'Can I figure out where all this stuff is?'" says Childs. "By looking at this database, can I figure out exactly where the images are on the server, what the path to the image is, where I will find the index values, what the associated metadata is, and so on." Since each system handled the data, images, and metadata in distinct ways, the reseller was able to learn the principles that would apply to most other content management systems they could encounter. To date, PSG has had experience with approximately 14 different document and content management systems, such as DocuWare, ImageAble, LaserFiche, OnBase, and more. Of these, only one or two have not followed the variations revealed by PSG's experience with Oracle and EMC. Now Childs and her team can accomplish conversion services without needing to know anything about the user interface of the software in the legacy system. In addition, the experience of dissecting content management systems provided valuable hands-on training that enabled PSG to cultivate its own specialized programming talent without the six-figure payroll investment. 

"By learning these skills on your own, you really build your body of knowledge quickly," says Childs. "We just keep layering on. There are things we can do today that we couldn't do just two years ago." Homegrown experience has enabled PSG to develop conversion solutions that are not document-centric, but data-centric. For example, in a healthcare setting, PSG is able to convert the data collected by an EMR (electronic medical records) system into PDF documents. It is the opposite process of extracting data from a document and routing it to a database using specific index values and metadata. Instead, PSG is extracting the data that has been keyed in to the EMR database — personal information, physician information, lab results, notes, etc. — and populating that data into PDF templates for a patient's visit by identifying key index values and metadata within the EMR system. The capability is already uncovering further revenue opportunities for PSG, as several other customers in the healthcare vertical have expressed interest in this EMR application.

Read For another look at how project management can make a difference, go to BSMinfo.com/jp/3344.

Define Document Imaging Responsibilities
Once PSG understood the programming requirements involved in system conversion, it needed to focus on managing these projects. As part of the process, PSG develops a detailed scope of work document to guarantee that all parties involved in a system conversion project understand exactly what each is responsible for and the time frame for task completion. This document details the task requirements not only of the team at PSG, but those of the customer as well. "You can never truly be done with a project if you don't have a very specific checklist of what services are to be provided and what is included," says Childs. Without a detailed scope document, a reseller may provide a solution they think has everything the customer was asking for. In reality, a simple misunderstanding could result in that reseller missing the mark and providing free services in order to make everything right with the customer after the sale.

At IOS, Childs holds the responsibility of creating all scope of work documents for PSG. One of the reasons this is done is to maintain the control and consistency of the process. The bigger reason, however, lies in the fact that Childs maintains the certification of Project Management Professional (see sidebar page 38). Having a staff member with this certification provides PSG with the ability to speak in project management terminology, such as scope control, cost control, and quality. On more than one occasion, this has given the reseller an edge when working with larger corporations and enterprises, where often there is a certified project manager on staff or, at the very least, an established project management office.

Just as important as creating the scope document is sitting with the customer for a formal review of that document. Meeting for a final review provides the reseller with an opportunity to manage the customer's expectations, discuss milestones and timelines, and uncover any potential last-minute complications that could impact the success of the project. "It's pretty simple, yet pretty important," says Childs. "That meeting gives us one last chance to ask, 'Has anything changed?' so we may react appropriately."

Much like IOS, resellers need to identify more ways to avoid the threat of commoditization. The efforts have paid off for IOS. Beyond maintaining the average growth rate of 30% to 40%, system conversions now account for 50% of the division's annual revenue. Focusing on only selling products can leave you selling your way into extinction. The increasing similarity of available document imaging hardware means that VARs must even relinquish their reliance on a sales pitch focused on the strength of one specific vendor over another. Now is the time for VARs to carve out a new value proposition, often in the form of some type of professional services.