Lexmark Takes a Step Toward Hardware as a Service

Printer repair companies may have been among the earliest service providers in business IT.

They were also among the earliest practitioners of hardware leasing (not accounting for Bell Operating Companies).

So it's no surprise that the first significant attempt at hardware as part of a managed service would come from the printing industry.

Document management vendor Lexmark and managed services platform providers N-able Technologies and Level Platforms revealed this week at IT distributor Ingram Micro's VentureTech Network Spring reseller meeting a managed services offering that allows VARs and MSPs (managed service providers) to monitor and maintain a business' printers and copiers remotely and to charge based on impressions, or usage. With the help of GE Capital, the fee includes the equipment, which the provider refreshes at the end of the life cycle.

Several document management vendors are offering "hardware as a service," including Dell, Xerox and Hewlett-Packard, but the programs are essentially leases, Lexmark officials said. Lexmark is the first vendor to roll the offering into a managed services contract with remote monitoring and maintenance.

"I would call it a first step toward hardware as a service," said Christine L. Redshaw, president of FutureVision, of Raleigh, N.C., a partner of Lexmark, N-able and Level Platforms. "This could be a seed for an MSP. There are a lot of providers out there trying it on their own. They're buying the equipment and leasing it to customers on their own and doing very well at it. But it is a huge investment."

For small, family-run practices like FutureVision, which has just 7 employees and did $3.4 million in business last year, that investment may be out of reach.

Under Lexmark's Document Management managed service offering the equipment would be delivered as part of the monthly contract through an arrangement with GE Capital, which will finance up to three-year contracts and bill the customer directly. GE will also pay the provider.

The program sounds like a lease, admitted Jim Webb, Lexmark's director of channel solutions, but it differs because it is delivered as part of the managed service SLA (service-level agreement) that charges based on the impressions, or cost per page, and not an aggregation of the equipment cost over a period of time.

Pay-per-impressions, Webb said, allows customers to own more of the solution for less and VARs to take advantage of consumables spending.

"It's no secret, supplies are how we vendors are staying in business," Webb said. "There is no reason why VARs shouldn't participate in that bonanza rather then the office superstores. Supplies are where the profit and revenue [lay]."

By participating in supplies procurement, where margins are deeper, VARs could see revenue rise 3 to 4 times and profits increase 4 to 5 times, according to Lexmark simulations of the MSP arrangement based on a customer with five devices.

With N-able and Level Platforms' remote managing solution, MSPs may monitor usage, arming them with knowledge about the equipment and supplies and enabling the provider to deliver maintenance and supplies before outages and shortages occur. The inside view would lead to improved customer service, Redshaw said.

"No one thinks of their printer as anything but a commodity, until it goes down. No one thinks of print cartridges as critical to business, until they are out of them. Then we get frantic calls and the best we can do is ship one overnight. That doesn't help the business 'today,'" she said.

"The customer isn't paying you to fix the solution when it breaks," said Derik Belair, vice president of business development at N-able. "They're paying you for the service to be up and running."

Lexmark envisions the offering as a step into managed services for VARs interested in the process. The vendor has developed a road map for VARs and MSPs to locate their position and progress toward true managed services. The map includes Selling Value, which enables customers to optimize their equipment; Consulting, which guides businesses in the use of equipment; Workflow Solutions, which designs procedures to improve document management use in a business; and Managed Services, which manages the document solution.

Lexmark's Document Needs Assessment tool enables VARs to use account managers as document management consultants. Armed with nothing more than a camera and a list of questions, a salesperson can return with a "picture" of a customer's document management situation and, with the help of Lexmark field associates, return a comprehensive consultative recommendation within 24 hours. "That leaves them saying 'these guys know what they're talking about,'" Webb said. "That's a piece of the sales collateral that makes you look like an expert."