Annual maintenance contracts dovetail with hardware-leasing models

What's the profit potential for solution providers that push beyond hardware sales to deliver complete hardware and software solutions? The payoff can be significant when it comes to electronic document-management solutions, says Dan Lucarini, senior director of marketing for Captaris, a maker of applications for document workflow and lifecycle management.

The profit margins that solution providers typically receive for the initial software sales are higher than what's available when selling either the associated hardware or consumables, he says. Just as significantly, software has the benefit of an "annuity" that offers longer-term revenues for solution providers.

"The nice thing about software is that every year customers need to renew the associated maintenance contract," Lucarini says. "This fits nicely with business models that sell the equipment on leases. [Solution providers] can add revenues and profits on top of what they are already selling."

What do solutions providers need to do to prepare for this new document-management solutions business? Start with the sales staff. Analyze the available software and solutions expertise of sales reps and be prepared to budget some time and money for any additional training. This is especially likely if the solution provider's culture is predominately hardware oriented.

In some cases training may not be enough, Lucarini points out. Solution providers may choose to jump start software efforts by hiring a new person experienced in document-management software sales, he says. "Then, as the hardware guys sell the devices, they can tell the customer, 'You ought to check out the software solutions we have,' and the software specialist comes in to close the deal."

Next, make similar upgrades to the technical support staff. "Just as the hardware side needs technical people who understand how to do installs, software implementations have their own set of installation requirements," Lucarini says.

Software vendors can be a resource for understanding where customizations by solution providers may be needed to integrate the document-management system within a particular customer's business environment. "We can show [solution providers] how to go in and sell a half a day's installation service, which gives them extra profit," Lucarini says.

Although document-management software vendors can guide solution providers on going rates for professional services, the final profit margins will depend on business choices resellers make. For example, Lucarini advises solution providers to match the right technical person to each job. A relatively simple implementation at a small- or medium-sized company may only require the expertise of a junior technician, whose relatively lower salary would maximize the project's profit potential. Save the heftier salaries of senior technical people for larger, more complex assignments, he says.