For resellers, document imaging systems are typically thought of as one-time deals that produce a large amount of revenue up front. However, with today’s increasing demand by customers for cloud applications purchased through subscription models, document imaging is starting to offer more opportunity for recurring revenue. Even before subscription sales came into vogue, there was (and still is) opportunity for VARs to earn recurring revenue on hardware service and software maintenance contracts sold in conjunction with document imaging systems.
Hardware service contracts include multiple components and options such as advanced unit exchange, on-site service, parts replacement, and help desk support. A typical price for a service contract is about 20 percent of the cost of a scanner. There are two options for VARs offering service contracts: reselling vendor services and offering their own service and support.
Although offering their own service and support was a popular option for VARs in the early days of document imaging, recently some leading vendors have stopped offering training and certification for VARs, therefore highly encouraging VARs to sell their service. VARs earn a percentage of the cost of the service contracts, while the vendor provides the support. The vendors offer a nationwide footprint, as well as easy access to parts and supplies. Parts that typically need replacing include lamps, rollers, pads, and, sometimes, glass, although technological developments in recent years have reduced the risk of scratching and extended the life of lamps.
For VARs looking for a service offering, that can cover scanner devices from multiple vendors, Fujitsu can assist. Call your Ingram sales rep for more information on this.
Hardware service contracts are typically most relevant when dealing with production scanners. Production scanners can start at around $4,000 with rated speeds of 60 ppm, and go all the way up to several hundred thousand dollars and several hundred pages per per minute. Distributed scanners, which are lower-volume and less-expensive models, typically come with one- to three-year manufacturer warranties. Extended warranties can be sold in conjunction with them, but it’s a harder sale and less lucrative due to the lower prices of the distributed scanners. Service contracts for production scanners, however, remain a healthy market for resellers.
Software maintenance contracts are also typically about 20 percent of the cost of a software license purchase. They include support as well as any updates that are made to the program to keep it compatible with newer operating systems, for example. If software is being utilized for a mission-critical application, as document imaging typically is, maintenance contracts are practically mandatory. Margins for VARs on software maintenance contracts can be relatively high.
Tips for Maximizing Potential Revenue from Maintenance and Service Contracts
Stay in contact with your customers: Nobody likes to feel ignored, except when a bill comes due. Check in with your customers often, whether through emails, social media, or even phone calls. Ask them how their systems are running. Who knows: They may tell you something minor that could prevent a bigger problem down the road. A newsletter or some other sort of correspondence detailing the latest features in a software update can also be helpful. A customer that is getting the most out of software is going to be less likely to discontinue utilizing it.
Track and automate your billing as much as possible: Normalizing your billing for customers (so they only have to pay one service and maintenance bill per year) makes things easier on both you and them. There are specialized billing systems that can handle this as well as make sure all your bills are sent out in a timely fashion. Don’t miss out on revenue because you are forgetting to bill people.
Offer subscription/MPS pricing models: Basically, this amounts to customers renting hardware and software for a monthly fee that includes maintenance and service. It’s a fairly common practice in the MFP industry, packaged as managed print services (MPS). (Related to this, look for a new MPS program: Managed Print Complete, coming from Ingram in Q4). Document scanners are not typically sold this way unless they are bundled with a document imaging-SaaS package. As we mentioned, there is increasing demand for document imaging delivered through an SaaS model. Because it enables users to account for document imaging as an operational, rather than capital, expenditure, many users are willing to pay a premium for subscription licensing, and if you can keep them renewing, this will pay off for you in the long run.