A New Breed Of AIDC Companies?
There is a feeling in my gut that change is brewing in the AIDC (automatic identification and data collection) world. Yes, recent acquisitions and mergers are some of the obvious signs of this change, but there's more to it than that. The U.S. economy is a factor. So is growth in the economies of countries such as India, where more people are employed now and requesting more Western-made goods, which in turn, requires more manufacturing. When the economy is weak, companies look to tighten their processes by employing more AIDC technologies. And, when more manufacturing plants are being built worldwide, the need for data collection technologies increases. Hence, change is brewing.
My gut feeling only got stronger after I attended the recent Zebra global partner conference. Just the fact that this was the printer company's first global partner conference in 10 years was an indication of something out of the ordinary. I suppose you could argue that after a decade, a conference of this type was overdue. But according to Juliann Larimer, VP of North American partner sales and marketing, it was much more than that. "In the last year, we not only added our first new CEO in many years [former CEO Ed Kaplan retired in 2007 after 37 years with the company], we acquired four companies. Because of all of that change, we felt any message about the future of our company should be delivered personally by our executive management team rather than by a partner's territory manager," she explained.
The four companies Larimer referenced are WhereNet, a provider of active RFID (radio frequency identification); Navis, a provider of logistics solutions for marine terminals (i.e. ports); proveo, a developer of GPS- and Wi-Fi-based RTLS (real-time location system) solutions for airports; and Multispectral Solutions, Inc. (MSSI), a provider of ultra wideband (UWB) RTLS solutions. Independently, most of these acquisitions wouldn't seem to mesh with the bar code printer company's core competency. However, when you look at the acquisitions sequentially, starting with WhereNet, you can see the logic. Zebra already offered passive RFID solutions, so active RFID could be seen as the next step in that line card's evolution. However, the next acquisition of Navis may have seemed the most unusual of the four. After all, how many Zebra VARs work with marine terminals? But, warehouse management systems and asset visibility are part of Navis' expertise, and many of the Navis solutions could be applied in similar verticals such as transportation. Navis' clients also could use the bar code products Zebra VARs are accustomed to selling, and perhaps some Zebra VARs' clients would be good leads for Navis solutions. The GPS and Wi-Fi solutions from proveo and the UWB MSSI products only further extend the asset tracking solutions Zebra can offer, and with all of these instances, opportunities for two-way lead generation exist.
"The Next Step In The Evolution Of Our Resellers"
Essentially, Zebra is creating a cadre of complementary technologies, which is changing the way the company views itself, as well as how the typical Zebra VAR may look in the future. "It's scary today to look back and realize that 10 years ago it was common to have a reseller whose business model was composed of 80% hardware sales and 20% services," said Mike Terzich, Zebra's senior VP of global sales and marketing for specialty printing solutions. "We knew over time those companies wouldn't be able to sustain that model." Terzich went on to tell me that many of Zebra's most successful VARs (some of whom I spoke with at the conference) have made the migration from hardware-focused sales to a model that is 25% to 30% hardware sales with the remainder made up of software sales and professional services. "I think the next step in the evolution of our resellers will be those companies that embrace selling complementary technologies like wireless and RFID, so they can continue to grow sales and not become stagnant," he added.New CEO Anders Gustafsson told me that Zebra's acquisition strategy was started six months prior to him joining the company. "The acquisitions are natural extensions of our core competencies, particularly from the application perspective," he said. "We've spent $300 million on these acquisitions — so we're committed to this [complementary technologies] strategy. We have a chance to reshape how the industry views us and how we view ourselves. If we had held this meeting a year or two ago, our message would have been that we are a specialty printer company. But today, we are becoming more than just a bar code printer company."
Of course, after such a statement, I was curious as to how much more. For instance, could their next acquisition be that of a handheld manufacturer? "A handheld company would fit within the scope of what we have been doing, but that is a tough business to be in regarding profits, and the market is so mature. So, coming in and having a small market share wouldn't make the handheld market an attractive business for us to get into. Rest assured, we are not about to venture into the data capture side of the industry," stated Gustafsson.
On the surface, this evolution to a complementary technology provider seems logical. In fact, it's the same business model Business Solutions has touted for years. It's also not an entirely new concept to the AIDC industry. You can see shades of this in past mergers and acquisitions such as Motorola and Symbol, Datalogic and PSC, and, most recently, Honeywell and Metrologic. So is this transition into providing more than just one specific AIDC technology a trend Gustafsson sees his competitors following? "Like us, all of our competitors have their own challenges, but I think we all have to evolve in this industry [to continue to be successful]. If we are successful with this new strategy, I expect that some of our competitors will try to follow our direction. But their success will be determined by how quickly they can respond."
Next Steps: Integrate, Streamline
Terzich was quick to note that Zebra's priority in 2008 is to integrate the recent acquisitions into one cohesive business unit. The company recently underwent a similar exercise when it integrated the sales and marketing departments of its Bar Code and Card Printing Divisions three months ago. Gustafsson explained to me that the two primary reasons for this integration were:- The company wanted to accelerate growth in its card
printing business, but that Card Printing Division was a smaller
organization with sparse representation outside of the United States.
The
bar coding business had a larger global footprint, so by combining the
two
divisions, the card printing side would benefit from the bar code
side's
existing infrastructure.
- The company's PartnerFirst bar code printing channel program was more robust, so the success of that program could be used to help boost Zebra's card printer VAR sales.
Dan Schell is a Senior Editor for Business Solutions magazine. He can be reached at dans@corrypub.com or at (814) 868-9935 x284.
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