The Doyle Report: Konica-Minolta Charts Bold Course for its All Covered Services Arm and Dealer Division

After making five acquisitions since 2009, Atlanta-based MSP Altuscio announced in September that it would sell to another company. The suitor? Konica Minolta, which has made a series of strategic moves in recent years to strengthen its position in key customer segments, geographic regions and vertical markets. Under the arm of Konica Minolta, Altuscio founder and CEO Ben Silliman believes he can achieve greater success than what he could have otherwise attained on his own. Why?

Like a lot of MSPs and industry pundits including Penton Xpert Jim Lippie, Silliman believes the MSP market is undergoing significant consolidation. Though a proven entrepreneur who built his MSP business from a sole proprietorship into a thriving operation that employs 55 people, Silliman recognizes that a consolidated market will be increasingly dominated by organizations that boast greater scale and efficiency. Though he was courted by others, Konica Minolta and the All Covered division that it acquired in 2011 felt like the best fit for him. After all, All Covered has scale, focus and a proven track record, which is something that other venture capitalists who simply want a presence in this market lack, Silliman says.

Amid this backdrop, MSPmentor reached out to Konica Minolta and its All Covered division to get an update on the company’s business. Our first interview was with Nick Pegley, All Covered’s well-known vice president of marketing. He walked us through some of the basics on Konica Minolta, which generates roughly half its U.S. business through its 300 or so affiliated dealers and its All Covered services arm. Significantly, Pegley notes, the indirect proportion of the company’s business is growing as a percent of overall revenue. That’s not chump change when you consider that of the $8 billion that Konica Minolta does in worldwide revenue, approximately $2.5 billion is generated here in North America.

Under a previous management team a decade or so ago, Konica Minolta experienced significant conflict with its channel. But since the appointment of Rick Taylor to the position of president and CEO of Konica Minolta Business Solutions USA, relations have greatly improved. He prohibited direct salespeople from under-cutting dealers on pricing, among other things. He is also the visionary who pushed Konica Minolta deeper into the managed service market, which ultimately led to acquisition of All Covered. At the time of the deal, All Covered was one of the largest and most influential MSPs in the nation, boasting a presence in 20 cities nationwide.

Like Altuscio, All Covered was more interested in acquiring other MSPs when Konica Minolta came calling. But after hearing the company out, All Covered agreed to be an acquiree. Since then, the All Covered division has grown from 215 employees to more than 1,000. The organization has also completed 22 different acquisitions. The deals provided it a footprint in Detroit and other cities while bolstering its expertise in healthcare, education and other vertical markets.

Today, Todd Croteau serves as the President of the All Covered business unit. In addition to Pegley, he provided key insights on the company and the market as a whole for this article. Their vision for the company: continue with select acquisitions, develop new cloud services and improve the integration with the Konica Minolta imaging business, which is looking for new growth areas as its core customers reduce the number of images they print in the course of their everyday business. While others pin their hopes on 3D printing and other innovations, Konica Minolta is prioritizing services as much as devices.

In the U.S. alone, the market for such services is huge. Consider what Croteau presented at a recent dealer meeting in Aspen, Colo. There, he said that the total market opportunity for services in North America for Konica Minolta, its affiliated copier dealers and the All Covered division, was $410 billion. In contrast, the total addressable market for multi-function printers was just $14 billion. Services, he said, are the future. But how and where to deliver them requires new thinking and capabilities. Which is why the company is looking to make strategic acquisitions such as Altuscio where possible, offer outsourced managed and cloud services to its copier dealers, and invest in new capabilities internally.

Since making it known that All Covered is looking to acquire successful service-oriented technology providers, Croteau says he typically gets up to five inquiries per day from MSPs looking to sell. This includes offers from brokers and business owners directly. In fact, the pace of consolidation is at the highest level he’s ever seen. It’s unfortunately created outsized expectations among MSP business owners who believe their operations are more valuable than they really are. The strength of their revenue is what drives valuation, Croteau said. And that strength is determined by three different criteria: how much revenue is recurring, how much is concentrated among a few clients and how much is tied to cloud computing.

In addition to growing through acquisition, Croteau believes there is significant upside for All Covered in selling services though its copier dealers, which cater to a staggering number of small business customers nationwide. Just a few years ago, dealers generally steered clear of services. But 73 percent of those today say services are “very important” to their businesses. Croteau’s advice to them: start small.

“Resell our security and network assessments, and our web site development capabilities. Then move up and sell our core support for servers, PCs and users,” Croteau told dealers in Aspen. “After, grow into more sophisticated solutions like All Covered Workspaces, our cloud servers and develop a specialty in a key vertical like education or legal.”

To help its dealers increase their penetration in key customer segments, the company is developing complete solutions that dealers and All Covered can sell. All Covered, for one, is helping schools improve learning outcomes and student engagement through the “Digital Learning Ecosystem,” which combines Promethean ActivPanels and ActivTables, managed Wi-Fi services, 3D Printing, lesson delivery and mobile device management support for laptops and tablets. To bolster its capabilities in education and other verticals, the company has hired professionals from these markets, including former teachers who work as consultants helping fellow educators get the most out of their digital investments.

In addition to developing more exacting vertical market capabilities, All Covered is investing in ways to offer more value to customers. In August, for example, the company introduced “All Covered Advanced Security Services,” which build on the current All Covered Security services portfolio to provide customers with robust Security Information Event Monitoring and Active Directory Security Event Management. All Covered Advanced Security Services include 24/7 monitoring by a dedicated team of IT security experts among other things. Going forward, the company wants to move higher up the stack in terms of technological capabilities and become more involved in the business outcomes of their customers. This means getting more aggressive in customer resource management, sales force automation, security and other technologies.

“Where do you bring value to customers today? You bring value to them by improving their ability to service customers, acquire new accounts and to leverage information to make better decisions,” says Croteau. “This requires a different combination of skills, including more analytical capabilities, more business acumen, etc., than what we have traditionally provided.”

Helping All Covered in this realm is the work that the Konica Minolta Business Innovation Center (BIC) has undertaken. Among other things, it’s working with Internet of Things innovations and other technologies well beyond printing and copying. “Why must we innovate? People are printing less and are going digital,” says Ekta Sahasi, vice president at the BIC. “In the market, we are the beacons and satellites. We experiment and learn by taking small but meaningful steps.”

One of the steps that BIC has taken is to partner with Sigsense Technologies, a big data analytics company that provides intelligent equipment management for service organizations.

Sigsense has agreed to provide “a remote monitoring and analytics platform for Konica Minolta’s current multifunction products and other future assets.” The platform utilizes sensors to collect data on equipment condition and performance, while offering access to real-time analytics through mobile devices and web dashboards. With Sigsense’s technology, Konica Minolta believes it can develop a service model that can anticipate maintenance issues on all kids of devices.

While it’s not the kind of thing that you’d expect from a copier company, it is the kid of thing you can expect from Konica Minolta and All Covered.