Real VARs Don't Sell Copiers - Do They?

In the past year or so, we've seen a number of production scanner vendors either bring new products to the workgroup level or solidify a base they had already built there. Simultaneously, scanning hardware prices are coming down even as functions like color and duplex processing are more common in the workgroup and departmental environments. However, production scanner vendors aren't the only ones realizing the opportunities in the low-volume marketplace. Once dismissed as office products, MFPs (multifunction peripherals) are making inroads in workgroup environments. In a December 2001 report, Gartner Dataquest, Inc. (Stamford, CT) forecasted that unit sales for MFPs will increase more than 30% in 2002. Gartner says corporate end users see financial advantages in replacing three or four products with one unit with just one set of associated maintenance and supply costs.

MFPs combine printing, faxing, and scanning (to network or e-mail) in a single device, and many of the familiar faces in production scanning such as Xerox, Canon, Panasonic, and Ricoh offer MFPs. What has changed over the last several years is the level of functionality they offer. "The products in the MFP market are becoming much more attractive to integrators because they now have a full complement of features and easy integration," says Mark Burris, product manager, Xerox' Document Centre Group (Rochester, NY). "The best analogy is to compare the development of MFPs to that of desktops. If you look at how quickly PCs have evolved in the past four years, that's an indication of the tremendous strides made by network peripherals."

But Will There Be Applications?
After an MFP is connected to the network, then what? According to the Gartner report, scanning is currently the most underutilized function in an MFP and holds the most potential. Don Dixon, a senior analyst at Dataquest, bases that prediction on increasing popularity of scan-to-e-mail applications, digitization of legacy documents, and document management solutions.

"On an MFP platform, scanning is just one piece of a complete document distribution and management equation," says Dennis Amorosano, director of marketing for Canon U.S.A.'s Copier and Networked Office Division (Lake Success, NY). "Inexpensive departmental scanners today offer one opportunity for VARs to capture revenue and profit. However, due to their expanded role in managing and moving corporate information, MFPs offer a much greater opportunity for software customization, integration, network support, application development, and other traditional VAR service offerings."

Enterprise software vendors are obviously taking notice of this trend, too. In December, Kofax Image Products, Inc. (Irvine, CA) announced the availability of Ricochet Coversheet, a free Ascent Capture utility enabling distributed scanning via an MFP. A full-blown Ricochet Capture product, also aimed at MFPs, was debuted at AIIM 2002. Other products focused on scanning to document repositories are available from companies like eCopy, Inc. (Nashua, NH) and Xerox.

While Kofax is viewing the introduction of MFPs as a boon for distributed scanning (hence, imaging VARs), Panasonic's marketing seems to be focused on networking VARs. "Many VARs make their money by going in and setting up the network," says Mike Masuric, assistant general manager for product and marketing at Panasonic Document Imaging Company (Secaucus, NJ). "Then someone else comes in and sets up a group of small printers with no connectivity in a room at the end of the hallway. Having one printer on the network dramatically reduces maintenance costs and gives the network VAR an opportunity to offer a complete solution."

Burris agrees that distributed scanning is probably the strongest trend driving the adoption of MFPs. Companies that were enduring the time and expense associated with shipping documents to a central location realize the efficiencies to be gained. He believes that MFPs could ease the introduction of workflow into low-volume scanning environments in which the individual products are probably standard equipment. "When we show customers the scan to e-mail, that is an application they see the value of immediately. It's a feature they hadn't even been asking for, but they see immediate uses for it. Ease of use is the critical component though. Even if they see the value, if it's too hard, they will turn around and go back to the tried and true."

How much easier could MFPs be to use? For one thing, they may not have the speed end users are accustomed to. At a recent ISV (independent software vendor) show, one vendor who is in the browser-based capture market was sharing the tale of his own recent MFP purchase. The hardware dealer reportedly told him that the average office worker is accustomed to the speed of a traditional copier. Compiling a digital image takes much longer than a standard copy. While that wait time is still measured in seconds, the vendor felt that MFP vendors would have to increase speed to accommodate the expectations of end users.

The Channel Gets Muddied
There are a lot of unanswered question about how the hybrid positioning of MFPs is going to affect the relationship among VARs, dealers, and vendors. Many of the players in the MFP space already have separate and distinct identities with a VAR channel in the production market and a dealer channel in the office products market. Some even have a direct sales force. If VARs begin installing MFPs, will they be buying hardware from distributors or dealers? Is this going to squeeze already tight margins on hardware sales?

These vendors admit it will take a strong channel strategy to avoid war. "In areas where there's no coverage, there may be a distribution agreement, but this [Panasonic's new UF-890] will always be a dealer product," says Kevin Reidy, Panasonic Document Imaging Company's manager of national sales. "As the business is evolving, some dealers have established relationships with VARs based on their own agreements to provide support functions. We're looking at what we can do to help that relationship."

Where Will The Service Revenue Be?
Chances are, I'm not the only person who's been advised not to buy a TV/VCR combo or some other dual-function product because of the inherent difficulties in obtaining service if one should break. For VARs who are thinking about MFP installations, there may be a similar concern, especially since the fax and printing aspects may not be within their usual area of expertise. "What we're seeing is that VARs and dealers are teaming up," says Reidy. "VARs make their money up front advising the client. Dealers make their money at the back end with support and maintenance."

The introduction of additional hardware may be an incentive for some VARs to enhance their repair capabilities. Amorosano notes, "From a technical perspective, if a VAR has an infrastructure in place that can handle break-fix requirements, then [service and support] will not present an issue. The ability to handle hardware service is typically a line of delineation between most traditional MFP dealers and VARs. It is our expectation that more VARs will take on this capability as they migrate their solution portfolios toward the deliveries of MFPs."

Overall, vendors dismiss the notion that MFPs pose a maintenance issue. Most, if not all, are built so the functions, while interoperable, run independently. If the scanner goes down, the fax and printer should operate normally. Some units have a modular design, which allows the individual hardware components to be swapped out for replacement or upgrade. However, will customers be willing to accept the fact that when the unit is actually being repaired, they will not have access to fax or printing? "We've tried to address that with designs in which the key components that were the Achilles heel of earlier copier products can be replaced by customers," says Burris. "It's important to address uptime strategies for any hardware purchase."