Managed-services success depends on knowing which customers will profit most from solutions contracts.

TCS, a Dallas-based solution provider, has found success using a model that turns the cost-plus approach on its head. TCS’s philosophy is to resist the traditional approach of quoting a base price for a printer or multifunction product (MFP) that tacks on a typical margin of four to 10 points.

Instead, TCS evaluates what the customer is currently spending on printing and imaging resources, including copier leases. If TCS decides it can provide additional capabilities or new services at the current budget amount, it will make a pitch that emphasizes managed print services. “And in doing so, our margins go up tremendously,” says Gregg Mader, senior vice president of sales.

The strategy relies on some of the same solutions-selling elements that other printing practices throughout the country profit from. “Obviously, we would like to have a long-term relationship with customers by getting away from the commodity approach of just selling boxes,” says TCS CEO Jeff Odom. “That requires bringing services into the picture.”

But the solutions approach isn’t for every customer. “There are plenty of customers that don’t need consulting; they just need a simple solution for business problems that are not nearly as complex as what some other companies may experience,” Odom says.

The best solution-contract prospects are those that face challenges created by regulations, such as healthcare’s HIPAA laws, or experience inherent complexities in their organizational structure, such as a large number of geographically dispersed divisions.

In these cases, TCS looks for an opportunity to sell a comprehensive contract that includes everything from equipment to supplies and service. Contracts typically range from 36 to 60 months. “If you can integrate hardware and services to resolve a problem or improve the customer’s business, then you’ve got a value opportunity that you can talk about with the client,” Odom adds.

Mader says the key to making the model work is a commitment by the solution provider to revisit the customer each quarter to review how its business model may have changed and how alterations in the printing and imaging environment can support those changes.

Among the data points TCS studies in its quarterly reviews are how many pages the client produced in the period and whether quantifiable savings have materialized thanks to the solutions approach. For example, one mortgage-lending customer that generated reams of paperwork among its network of national divisions had been spending tens of thousands of dollars each year to a third-party offsite storage company to manage paper records. Thanks to a solutions contract with secure electronic archives, the customer eliminated the need for several thousand square feet of expensive physical storage space.

Before-and-after evaluations like this become the core of managed-services relationships. “We support the customer’s strategic vision,” Odom says. “It’s not just about completing a transaction and saying ‘I’ll see you again in three years.’ We are a partner in the business, and that’s an ongoing relationship.”