Managed Print Services! A 59-Billion-Dollar Business by 2025!!! Is MPS still a BAD INVESTMENT?

 

It seems like those who benefit from convincing resellers of the glories regarding Managed Print Services. Keep raising the outlook. Are people really buying this nonsense? Well, we do hear the testimonials from those who invest or have temporarily invested in the channel's future, putting a whole lot of faith. In what I describe, as the delusion of MPS 2025.

I recently attended an event for resellers, and yes, there was a Managed Print Services presentation. The presenter seemed to validate my thoughts regarding the absolute failure of MPS in most of SMB customer space. At the bottom of every slide was the word "Return," followed by "To MPS"

My question is, what are we returning too? If MPS is so beneficial to the market's end-users, why would we need to return to the propaganda required to sell it? Wouldn't end-users be demanding an MPS agreement?

"Return to MPS" is still a hope to some, I question the investments in the MPS deliverable based on the fantasy that aftermarket supplies are the winning ingredient in today's MPS marketplace. 

I believe the investments in the channel should be about change, innovation, and diversification. Why are the investors doubling down on what isn't working? Yes, my friends, the industry's leaders, or analyst refuse to ask these questions. So, I thought I would ask and share some thoughts for all those who are obsessed with the fantasies of MPS 2025.

It's time to change the game. Who else agrees?

I do believe that there are customers who will buy remanufactured toner cartridges. However, I don't think the glory days of that industry are coming back. The investors who do should read the thoughts of yesterday's investors and then proceed with caution.  

Who remembers this quote from an investment firm who bought into the MPS dream in 2018?

Turnspire Managing Partner Ilya Koffman said, "We are delighted to partner with Gary Willert and the Willert family on the LMI investment. LMI is a perfect fit with our strategy of investing in market-leading industrial companies that can benefit from our hands-on operationally focused approach. Gary and the management team have built an incredible company that has become the go-to supplier for MPS dealers, and an engine to drive their growth. We intend to continue building LMI, both organically, and through select acquisitions. We look forward to what we can accomplish together with the talented management and employees of LMI."

"Here's a link to the full article.

 https://www.prnewswire.com/new...tions-300700837.html

One-year later, here's what LMI explained regarding their receivership and why Turnspire walks away from their investment made a year earlier, As reported by RT Media. 

"Those providing the finance were obviously concerned about a phone call on June 12, 2019, where LMI advised its financial partners that continuing operations "may not be sustainable. They cited the June 2019 business relationship between Xerox Corporation and HP Inc, "whereby dealers in the Xerox Business Solutions network would be mandated to use only HP Products. Members of the Xerox business network included Chicago Office Technologies Group, [LMI's] single largest customer."

"Here's a link to the rest of the article https://www.rtmworld.com/news/...ond-to-receivership/ 

In 2019 Bloomberg published a report regarding Clover, the world's largest cartridge re-manufacturer; here's a quote from that report. 

"The company told debt holders it expects reduced business from two customers, one from wireless and one from imaging, and that pricing for imaging has become more competitive. 4L Technologies also cut the range of its annual earnings forecast to between $87 million and $96 million, from $135 million to $145 million back in March, Here's a link to the article in full."

 https://www.bloomberg.com/news...-as-contracts-shrink

Well, it seems Clover got its bailout and will continue as an entity, of course, no real numbers were explained, or the reality of losses were not discussed. 

However, as we have all heard before, we hear again. Here's an excerpt from Clover announcing their new investment partners. Provided in part by yet another Private Equity firm NEP (Norwest Equity Partners.)The Imaging Channel published the article. 

Tim DeVries, NEP Managing Partner, stated, "We are excited about our investment partnership with Clover Imaging Group — it is a well-run business with a highly experienced, nimble management team that knows how to innovate and execute. We look forward to collaborating with them to leverage the company's strong position in the marketplace and put our capital and resources to work to further expand and grow the business."

 Here's a link to the full article found in The Imaging Channel's publication.  https://www.theimagingchannel....artners-acquire-cig/

Both LMI and Clover said they were brought to financial stress because of the loss of key customers. Both Clover and LMI sited the agreement between HP and Xerox regarding Xerox using OEM supplies rather than Remanufactured cost them significantly. 

So, here's a question. 

Does anyone in the remanufacturing business believe that HP is going to change its course and allow the remanufacturing industry to take back that business? Especially now, as we see, Xerox and HP will likely become one organization. 

The remanufacturing industry will continue facing challenges from the OEMs as they continue fighting to keep all components of the deliverable as the industry continues declining. The new build industry is also causing pain to the remanufacturers.

The Clover business model of yesterday was the Walmart of the remanufacturing industry, and the new model will be much smaller. It seems as downsizing and cost adjustments will create a whole new environment for its leaders. A question for Clover is, without the revenues and profits from all they once had how will its leaders adjust as they realign, Clover with the realities of a declining marketplace, aggressive competition from new build players and OEM's all fighting for every dollar of the deliverable?

The best suited to capitalize on the remanufacturing business in a declining market are those smaller but stable remanufacturers that have much more control over their cost and can grow to demand rather than decline to demand as Clover must do. We have heard Clover speak many times to the fact they collect more cartridges than they remanufacture. The numbers of sold and collected are included in the report from The Imaging Channel. In that report, it says. 

"On a monthly basis, Clover Imaging collects and recycles over 3.5 million cartridges and manufactures over 1.4 million cartridges."

It seems like the cost to collect and then properly dispose of twice as many cartridges as they remanufacture would add significant cost to their deliverable. Well, time will tell on the results of this new investment bailing out the old investment. I would hope a year from now; we don't see a repeat of the LMI story. I, for one, am not confident things will be different.

If the industry continues believing that somehow MPS will save current investments or create new ones, I fear there will be many saying wow what just happen. Soon the swapping of investments will have more security. Until then, I would suggest the potential investors in the glories of MPS listen to the Latin saying. "Caveat Emptor."

The investments should be in delivering the future to the present, not saving a past that appears to need saving consistently.

In Closing: The MPS story is one of great hope to a declining market. I think the industry should stop chasing what they want and rather deliver what the customer wants and how they want it. The investments in yesterday's model should scare investors. The channel should be investing in the future not saving the past. The channel should be investing in E-Commerce, investing in delivering A4 instead of overselling A3, Investing in human capital from outside the industry to help reinvent and realign to today's market realities. 

"A Company goes obsolete when they focus on delivering the past to the future instead of delivering the future to the present." 

"Status Quo is the Killer of all that will be Invented." Investors don't get stuck in Status Quo.

Ray Stasieczko

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