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TomCallinanStrategyDevelopment

www.strategydevelopment.com

•! FoundedPhillydealership,Copifax,1987•! INC500,1992:SoldtoIKON1997•! CFO/VPOpsMAD(98–99,oneyear)

•! PresidentIKONNYCMarketplace(99–01)

•! PresidentSoutheastRegion(01‐02)•! VP/GMNortheastRegion(02–03)

•! VP/GMEastRegion(03–05)

•! StrategyDevelopment,20062

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•! AllofyourcompetitorstalkaboutMPS

–! Themostcommon“MPS”approachisservicewithcartridgesorusingMFDstodisplaceprinters

–! BiggerMPSplayersarecallingstrategicallyonmid‐marketaccounts

–! EveryindustryplayerhasanMPSoffering

–! ManycustomersthinktheyunderstandMPSandthatunderstandingisusuallyoneoftwoscenarios:•! Getridoryourprinters(PrintMigration)•! Buycartridgesfromusandweprovideservice

Youcanbeverysuccessfulifyouunderstandthenoiseandsell

intoit!

•! Enterprise–1,000+laserprinters–! RIKON,Xerox,HP,Lexmarkandmanyothers–! Globaldeploymentofdevices–! Notaprimaryfocusforyou!

•! Mid‐Market–50+laserprinters–! Midmarket,serviceledapproach:MPScompaniesand

certaincopiercompanies–! Complexsale,culturalchange,nottransactional–! DedicatedMPSrepswithanalysts–! Quarterlybusinessreviews(QBR’s)promoteoptimization

•! Local–Lessthan25devices–! Commercialaccountswithlessthan6copiers–! Moretransactionalyetstillsolutionbasedsale–! Your“normal”outsidesalesreps

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2007Units 2008Units 2009Units 2010Units07‐10

%Change09‐10

%Change

999,574 896,405 743,429 782,469 ‐21.7% 5.3%

2009 2010 2011 2012 2013 2014CAGR09‐14

TotalBase 4,289,009 3,927,823 3,443,604 2,887,761 2,465,314 2,251,616 ‐12.1%

VolumeBillions 231b 230b 225b 219b 213b 204b ‐2.5%

Installedbaseandprints

InfoTrendsDataSegII‐V

•! Copierunitplacementsaredeclining•! MIFisdecliningrapidly–!Unitsaren’tbeingreplacedduetoconsolidationandshiftofoutputtoprinters

–!Devicesareleased,thereforemustmakedecision

•! Volumesaredecreasingat20%ofMIFdeclinerate–!ShiftupstreamtosegmentIII‐V

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2007Units 2008Units 2009Units 2010Units07‐10%Change

09‐10%Change

4,960,621 4,757,377 3,776,926 4,242,698 ‐14.5% 12.3%

2009 2010 2011 2012 2013 2014CAGR09‐14

Base 25,311,671 25,592,972 25,962,865 26,347,338 26,664,140 27,030,762 1.3%AnnualPrintsBillions 621b 633b 640b 641b 640b 634b 0.4%

Installedbaseandprints

InfoTrendsData

•! UnitsaredecliningbutMIFisincreasing–!Unitsarepurchasedsonodecisionpointtotakeoutofservice

•! Printvolumeisincreasing,albeititseemstopeakedin2013–!Communicationmethodsmakeprintersthecorrectoutputdevice

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2010 TOTALUNITS IMPRESSIONS

COPIERS(4.9kAMV)

782k 3.9m 230b

PRINTERS(2.0kAMV)

4.2m 25.6m 633b

•!Officeprintersproducealmost3Xthevolumeofcopiers•!Printeroutputis2Xretailofcopieroutput($0.016vs$0.008)•!Printeroutputrepresents6Xrevenueopportunityofcopieroutput

•! Officeprinteraftermarketis6Xofficecopieraftermarket–! Ifyourealize$5Mincopieraftermarketanequivalentmarketshareofprintersis$25M‐$30M

•! Isyourprinteraftermarket6Xyourcopieraftermarket?–!Equaltoyourcopieraftermarket?

•! Shouldequipmentrevenueremaintheprimarydeterminationofsalessuccess?

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•! ThemeanGPofS&P500is39.3%–! Doyouhonestlybelievethatacompanyspends15%oftheirtotal

revenueonoutput?10%?•! Wecansafelyassumeeveryknowledgeworkerinacompanyhasa

copyofMicrosoftOffice,yettheaverageuserusestheapplicationsminutesaday –! Whynothaveonecomputerinthemiddleoftheofficetheycanuse

whentheyneedanapplication•! Howmanysoftwarelicensesarenotbeingused•! Googlehasapproximately20,000employees

–! At$1,000peremployeeperyear$20,000,000onoutput–! JustbuiltanewdatacenterinNC:Cost$600,000,000(theyhaveover

20worldwide)•! GEhas300Kemployeesandrevenuesof$150B

–! At$1Kperemployeeoutputis0.2%ofrevenue($300M)–! Interestexpensewas$16B;provisionforA/Rlosses$7B

•! SavingmoneyshouldnotbetheprimarygoalofMPS

•! PrinterportionofMPSrevenuedissected–!Cartridgesareapproximately60%(20+years)–!Serviceisapproximately25%(20+years)–!Equipmentisapproximately14%(20+years)–!Softwareisapproximately1%(new)

•! 99%oftherevenuehasbeenpurchasedfor20+years…theyareprettydarngoodatdrivingdowntheprice

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•! Reduceyourmarginonacommodityitemthattheyhavebeenbuyingfor20+years(GoodluckwiththatstrategyandyourG&A)

•! Youhavetoconsolidatedevices–!Requiresculturalchangetobesupportedbyhighestlevelinorganization

–!Howlogicalisit?

•! Thehighertherisk,thehigherupintheorganizationthedecisionismade–! Ifyouaresellingintoanetnewcustomeryouneedtobeatleastonelevelaboveincumbent

•! Atthecorporatelevel,ITistheprimarypurchaserofMPS–!Purchasingbuyscartridgesbutcartridgesarecommodity

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•! Initialmeeting:Valueproposition–!Goalistodetermineifabusinesscaseexists

•! Assessment–!Goalistoidentifyvolume,expensesandoperationalprocesses

•! Strategyreview–!Goalistogainagreementfromprojectchampion

•! Proposal–!Goalistoaddressbusinesscaseandjustifyfinancially

•! Quarterlybusinessreview(QBR)–!Goalistogainshareofwalletandchangethecontract

•! Don’tmakesavingmoneythefoundationofyourprogram

•! Don’tconductassessmentwithoutbusinesscase–! Ifnobusinesscasesavingmoneyistheonlymotivation(20+years…..)

•! Conductathoroughassessmentwithafocustogettingtherequiredfinancialinformationaswellasaddressingthebusinesscase

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•! Savingmoneyisnotabusinesscase•! Notknowingthemake‐upoftheirdevicepopulationisnotabusinesscase

•! NothavingtimetodealwithprinterissuesisonefoundationofaMPSbusinesscase–! Behindinprojects;payingovertime

•! Usingmultipleoutsidevendors—andhavingdifficultymanagingthem—isafoundationofaMPSbusinesscase

•! KnowingthattheycoulddeployabetteroutputapproachisafoundationofaMPSbusinesscase

•! Youneedtodeployspecialist–!Definedashighlevelsalesprofessionalsthatcalldirectlyonaccounts:Notoverlay

–!Overlayisagoodapproachtocoveryourownbase•! Youneedtocallintocompanieswith50+printers–!Mostofyourcompetitorsarenotmakingtheinvestmenttocrackthissegment

•! Getthecontract:Itallstartsoncetheyareyourcustomer–!QBRswillprovideyouopportunitytoexpandwalletandchangethecontract

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•! Inmid‐marketaccounts,onceyouhavethecontractthesellingbegins!

•! ThreegoalsofQuarterlybusinessreview(QBR)–! Showvalue–!Gainshareofwallet–! Changethecontract

•! QBRisnot–!Datadump–! Templated–!Administrativeevent

11copiers,70printersCanonXXXXon5yearleasesigned03/08includes5,000printsoveragesat$0.012 $208.00Lastthreequarteraveraged16,450 $6.00CanonXXXXon5yearleasesigned06/08included10,000printsoveragesat$0.012 $295.00Lastthreequartersaveraged37,814 $31.00RicohXXXXon5yearleasesigned06/09included5,000colorprintscoloroverageat$0.07mono$0.014 $705.00Lastthreequartersaveraged12,750colorand2,300mono $11.008CanonXXXXon5yearleasesigned08/10includes80,000monoprintsoverageat$0.012colorat$0.065 $2,000.00Lastthreequartersaverage72,500monoand4,000color $260.0060HPprintersaveraging150,000printspermonth(seeanalysis) $2,216.00

$5,732.00

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Location Model MonthlyPrints TonerCost Yieldat90% TonerCostServiceat$0.0025 Total

Mailroom HP4100 4,335 $44 9,000 $21.19 $10.84

EA HP4100 1,875 $44 9,000 $9.17 $4.69

Admin HP4100 3,670 $44 9,000 $17.94 $9.18

Jim'shall HP9000 2,425 $92 27,000 $8.26 $6.06

Admin HP4350 5,460 $61 18,000 $18.50 $13.65

Warehouse HP4350 4,095 $61 18,000 $13.88 $10.24

Prezoffice HP1000 250 $35 3,150 $2.78 $0.63

Salesmgr HP1000 1,350 $35 3,150 $15.00 $3.38

Salesbullpen HP3005 2,240 $65 11,700 $12.44 $5.60

Reception HP1015 750 $33 1,800 $13.75 $1.88

Otherprinters 123,550 $600.00 $308.88

150,000 $732.92 $375.00 $1,107.92

RetiredandprintsdirectedtoMFD Profit 1,107.92

ReplacedwithnewMFDplacement Total $2,215.84

RetiredandreplacedwithHP3005,3005backfilledwith4250fromAdmin CPP $0.0148

Costw/Access GP Quantity Total Lease.0198 Prints Rate

MonthlyTotalCPP

Totaleqandprints

MFPA $4,000 $1,500 3 $16,500 $326.70 29,643 $0.0085 $251.97 $578.67

PaymentMonthsremain Total Lease

BuyoutfirstCanonXXXX $208 16 $3,328 $65.89BuyoutsecondCanonXXXX $295 19 $5,605 $110.98

Currentequipment

RicohXXXXand8Canon $2,705.00

MonthlymonoprintsonRicohandcoloronCanon $269.20

Location ModelMonthlyPrints TonerCost Yieldat90% TonerCost Service 50%GP

Mailroom HP4100 4,335 $44 10,000 9,000 $21.19 $10.84 $64.06

EA HP4100 1,875 $44 10,000 9,000 $9.17 $4.69 $27.71

Warehouse HP4350 4,095 $61 20,000 18,000 $13.88 $10.24 $48.23

Prezoffice HP1000 250 $35 3,500 3,150 $2.78 $0.63 $6.81

Salesmgr HP1000 1,350 $35 3,500 3,150 $15.00 $3.38 $36.75Salesbullpen HP4350 2,240 $61 20,000 18,000 $7.59 $5.60 $26.38

Reception HP3005 750 $65 13,000 11,700 $4.17 $1.88 $12.08

Remaining60printers 123,500 600.00 308.75 1,817.50

138,395 $673.77 $2,039.52 $5,769.26

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•! WesoldthreeMFDsanddisplacedthreeprinters–! Itsimplyfitinthissituation:CouldhavebeenopportunitytoplaceSFPsothinkbalanceddeployment

–!Wearenowtheir“copier”dealeraswell•! Weareset‐uptorefreshremaining4100s,4350sand1000stostandardizefleet

•! WecouldnotcostjustifytheRicohreplacementbutwecaninsixmonths–!Wedon’talertthemthattheyarepayingforprintstheyaren’treceiving

•! Weextendedthecontractout

•! Youareinalocalaccountwith70employees–! 10outsidesalesthattravelUS–! 4executiveswithextensiveUStravel

•! TheyareonanMPSagreementbecausetheyhavenointernalITemployees–! Overthelastyearyouhaverewrittentheagreementtwiceanddemonstratedabilitytoimproveinfrastructure

•! Outsideofprinters,theirITinfrastructureconsistsof–! 5servers–! 70desktops–! 16laptops–! 32smartphones–! 6pads

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•! AllemployeehaveMicrosoftOffice•! MicrosoftDynamicsbackofficeandSalesforce.comasSFAapplication

•! Nodisasterrecoveryplan;automatedtapeback‐upofDynamicsandfileserverswithnoverification,storedinfireproofbox–!Desktopandlaptopdevicesnotbacked‐upunlessfilessavedtoserver

•! Patchesandupgradesperformedbyenduserswhennotifiedbysoftwareprovider

•! Istheirdataactuallybacked‐up?–!Theirlocalstorageabsolutelyisnot–!Whattypeofdatacanbelost

•! Whoispatchingtheirsecuritysoftware–!Aretheyvulnerabletointrusions?Virus?Malware?

•! Howaretheirdevicesperforming•! Whatwouldtheydoiftheyhadacatastrophicfailure?–!TheirfileorDynamicsservercrashed?

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•! YouneedtoidentifywhattheyarespendingtomaintaintheirITinfrastructure

•! Canyouidentifypain:Failuresthathaveoccurredoverlastyear(Absolutely…findthem)

•! Youneedtobeset‐upwithNOCandhelpdesk–!SDislaunchingJan2012!

•! YoucanaddtheMStoyourMPSagreement

•! Atthispointyoualmosthavetofindrevenueoutsidethecopierindustryifyouwanttogrow–! Ifyouhavelowshareofcopiermarketandyou’vebeeninbusinessfor10+yearswhy?•! Iflifestylecompanyunderstandthatandmakeallfuturedecisionsthroughthatlens

•! MPSisthemostlogicalgrowtharea–!Marksonpaper,toner,service,CPPbilling

•! MNSishighlycompetitivebutsolidsmallcompanygrowtharea–!MostMSPsaretechnicalnotsalesfocused

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•! Consulting–!12monthprogramincludesonsitetime,classroomtraining,and100hoursofconsulting

–!MOM,Perry,GFI,FloTech,FlexPrint

–!Lessexpensivethenonefailedsalesrep•! Training–!MultipleoptionsthroughBTAatdiscount–!Gotowww.strategydevelopement.comfordescription