Tuesday, March 8, 2011

Facts and Opinions about the LINK deal (Thomas Repro, NRI, Callprint and SepiaLine)

Yesterday, I posted an article on the blog to “break the news” (to those who did not already know the news) that Thomas Repro, NRI, and Callprint have joined together to form a new company, “LINK”, to, together, pursue national (and international) FM/MPS deals. Based on the number of e-mails I received yesterday and last night about the “LINK” deal, there is evidently a lot of “discussion” going on, in and around the reprographics community, about this deal. (LINK is actually "LINK DSG", but I'm only going to refer to LINK as LINK.)

I don’t know if I’ve mentioned this before in a previous article, but publishing “press releases” is not the primary purpose of this blog. The primary purpose of this blog is to give my blog readers insights into the “story behind the news.” If all you are interested in are the press releases, and are not interested in the “story behind the news”, then it would probably be best for you to visit irga.com and wide-formatimaging.com to access press releases. Wide-formatimaging.com has significant research resources behind it, allowing it to keep up, on a daily basis, with the myriad of press releases that are issued by companies involved in the reprographics industry and business (including suppliers and equipment companies); Reprographics 101, on the other hand, has limited resources, and there is no way that Reprographics 101 could possibly keep up with the significant flow of press releases that are issued in the industry on a daily basis; not that I’d even want to do that, even if I could. (Quite frankly, I find press releases about new equipment, new software and new supplies to be ultra-boring, with occasional exceptions.)

As to the “story behind the news”, some of the commentary I write on the blog is based strictly on my own personal opinions and observations. But, some of the commentary is based on feedback I get from the parties involved and from blog-readers who take the time to share their insights and opinions with me.

Now that I’ve prefaced the following with the foregoing, let me share with you certain “facts”, as well as several opinions, about the “LINK” deal. First, I’d like to start with “the facts.”

1. Fact: NRI, Thomas Repro and Callprint have not “merged”. They will continue to operate as separate companies.

2. Fact: LINK is an individual company in its own right. One set up (by the participant companies) to pursue national (and international) FM/MPS deals.

3. Fact: Although LINK acquired SepiaLine, SepiaLine will continue to operate as a separate company. It is my understanding that SepiaLine’s management team will continue to manage and operate SepiaLine.

4. Fact: SepiaLine will continue to work with, and will continue to support, resellers of the SepiaLine product line. (Both current resellers and future resellers).

Three “cost-recovery” software program products, taken altogether, probably have 90% market share in the A/E/C industry. Those three software program products are owned by:

· Technesis – Technesis is sold directly by Technesis and is also sold through, and by, Technesis resellers. Technesis’ shareholders are not in the reprographics services business.

· SepiaLine – SepiaLine is sold directly by SepiaLine and is also sold through, and by, SepiaLine resellers. The company, LINK, that now owns SepiaLine is (or I guess I should say, will be) in the business of providing FM/MPS services.

· Abacus PCR – is owned by American Reprographics Co (ARC), the world’s largest reprographics services company. It is my understanding that ARC developed Abacus so that ARC would not be reliant on an outside company (either Technesis or SepiaLine) for the cost-recovery software ARC uses. ARC sells Abacus PCR directly to end-user customers. ARC extensively uses Abacus PCR in its FM operations. It is my understanding that independent reprographers can purchase Abacus PCR. I do not know if ARC has a ‘reseller’ program for Abacus PCR.

Although there are a few other “cost-recovery” software program products on the market, Technesis, SepiaLine and Abacus PCR, on a combined basis, probably have around 90% market share of the A/E/C Industry cost-recovery software market.

My first company, Rowley-Scher Reprographics, had an extensive FM program business. However, we did not use any “cost-recovery” software to support our FM business. And, that’s because “digital” had not yet happened. All “cost-recovery” methods and procedures were manual.

My second company, NGI, started out using Technesis to support FM deals; later on, we moved most of our cost-recovery software needs to SepiaLine. (I personally have no idea or comment on which product, Technesis or SepiaLine, works best for FM cost-recovery; I am not a techie guy and hate to waste time on that kind of thing; fortunately, NGI had a very strong C.T.O. (Mr . Craig Bell) and I.T. team, and they were experts in working with both SepiaLine and Technesis, so I did not have to worry about that, all I had to focus on was “selling” FM deals. Whenever we opened a sales-cycle for a prospective FM deal (or for the renewal of an existing FM deal), our I.T. team provided an “internal consult” as to which cost-recovery software program we would be best off incorporating in our proposal(s.) Our I.T. team was an invaluable resource for our sales and business development team! We did not use Abacus PCR at NGI. ARC acquired NGI in December 2007, and it is my understanding that, subsequent to the acquisition, many, if not all, of the Technesis and SepiaLine products NGI was using prior to NGI’s acquisition by ARC, were replaced by Abacus PCR.

If anyone were to ask me, “Joel, what’s the best cost-recovery software program on the market for A/E/C-type FM/MPS deals?”, I wouldn’t have a clue how to respond to that question.

Before I go on, I don’t want to forget to mention this …. both Technesis and SepiaLine use the term “resellers.” The “simple” definition of a “reseller” is “someone who resells the product.” Not all “resellers” actually resell. Some “resellers” (such as was the case with most of the cost-recovery software NGI purchased) are, themselves, the “customer” for the software. For example, if we were proposing to do, and, later, were successful with our proposal for a staffed or unstaffed FM service program, we (NG) would purchase the cost-recovery software and then install it at our customer’s site as a part of the FM deal. Our customer did not pay us for the software. Our customer paid us for output (per copy, per print, per sq ft, etc.), all costs included, including the cost of the cost-recovery software. However, having just said that, I am aware that some “resellers” actually do “resell” the software.

Given the very sharp downturn in business that firms in the A/E/C industry have experienced - and the resulting downturn in business that most reprographers have experienced - the past three to four years, I think it’s safe to assume that Technesis’ and SepiaLine’s sales have been off the past three to four years. On the other hand, it is my observation [this based on comments Suri (CEO of ARC) made during a recent “earnings call” with analysts who follow ARC) that placements of Abacus PCR have grown substantially since ARC first released Abacus PCR a few years ago. However, that may well be mostly because ARC converted its SepiaLine and Technesis installations to Abacus PCR.

Now, I’d like to share with you my opinions about the “LINK” deal, based on my knowledge of the players involved in the deal and based on my knowledge of the reprographics industry and business “in general.” But, first, let me share with you some comments made by friends who are in the reprographics industry.

Yesterday afternoon, shortly after the news about LINK was released, I received an e-mail from an industry friend (his company uses SepiaLine in its FM deals), and he said this:

“So Sepialine is now owned by my competitor.”

And, last night, I received an e-mail from another industry friend (his company is a SepiaLine reseller) and he said this:

“Regarding Sepialine … how is this going to impact a company like ours, I wonder, which happens to be a Peir Group member but has Sepialine installs? I wonder if the name of the product will change and then what position could that put our company in as a reseller? Wow. Will a reseller (sort of competitor depending on region) be able to get Sepialine in the future?”

Okay, now that I’ve shared those two e-mails with you (and, there were a few others like these), let me get on with my opinions.

1. I don’t think that LINK is going to direct SepiaLine to change SepiaLine’s business in any way shape or form. While I’m positive that LINK will, itself, use SepiaLine cost-recovery software products when LINK does FM/MPS deals, there is, in my mind, no good reason for LINK to direct SepiaLine to discontinue what it has been doing for years. SepiaLine’s cost-recovery software products have, for years, been acquired by reprographers for FM deals those reprographers did and SepiaLine’s cost-recovery software products have been, for years, sold to resellers who, themselves, sell SepiaLine to their end-user A/E/C customers. I think it would be ludicrous to assume that LINK is going to change SepiaLine’s business model. Just a guess, but I would imagine that LINK paid a fairly heft price to acquire SepiaLine (the company), and to think that LINK, the new owner, would want to do anything that would adversely impact SepiaLine’s sales, or stifle SepiaLine’s ability to sell and distribute SepiaLine product, would be a stretch of the imagination.

2. I don’t think that LINK, itself, or LINK’s owners (Thomas Repro, NRI and Callprint), will do anything to compromise the business that SepiaLine’s reprographer-customers do with SepiaLine or to compromise the business that SepiaLine’s customers or resellers do with their end-user A/E/C customers. Some of you (older people) may remember that Xerox, who we all used to get our “Xerox” equipment from, used to operate “Xerox Reproduction Centers” (who competed for our reprographics customers and revenues.) I had discussions about this “potential problem” with management members on Xerox’s service/tech team – my concern was that Xerox’s repair guys would come into my shops to service my Xerox equipment and write down the names of my customers and then give that information to Xerox’s sales reps, who would then go out and try to take away my customers. Never once did that happen. The same thing could be said about OCE and KIP; they both have “direct” sales team members (who will sell to our end-user A/E/C customers, if they can) and they both sell to resellers. They know who our customers are, but never once, in my many years in business, did OCE or KIP take advantage of the knowledge they had about my customers. In Bryan Thomas (Thomas Repro) and Doug Magid (NRI) (and, I suspect this could also be said about Steve Cheek of Callprint), these are two gentlemen of the highest integrity. To think that they would stoop to looking at SepiaLine’s customer base (or prospect database) to find customers to sell FM’s and MPS deals to would be a total stretch of the imagination. If either of these two young men asked me for a personal loan, I would loan them money on a hand-shake. They are totally honest and above board people. They are just like their fathers. To go further, if you are currently a SepiaLine customer or reseller and have concerns, I would urge you to speak directly to Bryan or Doug (or Steve) about your concerns. If you are currently a SepiaLine user or reseller, I don’t see any change, at all, forthcoming in your relationship with SepiaLine. Come to think of it, Thomas and NRI are both very strong financially. To have that behind SepiaLine seems a big plus to me.

3. I don’t think that ReproMAX (the organization or its members) is going to be adversely affected, in any way, by the LINK deal. Just to the opposite, I think the LINK deal strengthens ReproMAX’s position in the marketplace. I would imagine that, if LINK pursues a “national” (or International) FM or MPS deal that requires the participation of non-LINK partners, that ReproMAX’s non-LINK members would be invited to participate in the deal. But, going just a bit further on this line of reasoning, I think that LINK might also consider, when deemed necessary and/or essential, partnering with reprographers who are not ReproMAX members, if that’s what it takes to put together the best deal for a large customer. Here, I’m speaking about independent reprographers who may or may not belong to RSA and/or The PEiR Group.

4. The LINK deal adds another large player (LINK) to the short list of reprographers who have the ability and wherewithal to pursue “national” (and international) FM/MPS deals. ARC has tremendous reach, given the size of ARC and the number of locations ARC operates. ABC has grown its locations to the point where it can compete with ARC for national deals (and I would add that, given the press releases ABC Imaging has released during the past 18 months or so about its successful national FM deals, ABC Imaging has presented significant competition for ARC.) Service Point Solutions has the ability and wherewithal to compete for “national” (and International) FM/MPS deals, but SPS’ geographic reach in the U.S., pales in comparison to the geographic reach of ARC, ABC or LINK. So, the decision by Thomas Repro, NRI and Callprint to form a new company, LINK, to pursue national (and international) FM/MPS deals was, I think, strategic in nature. One of my European-reprographer friends e-mailed me last night (about the LINK deal) to say, It will be interesting to see if any steak will be served with the sizzle :)”

Announcing a deal is one thing; only time will tell if LINK proves to be successful competing for larger FM/MPS deals.

If you have any comments about this article, please either post them in the comments section or e-mail your comments to me (joel.salus@mac.com).

I especially invite comments from any of the parties involved in LINK and from ARC, ABC Imaging and Service Point Solutions.

Thank you for bearing with me – this was a long-winded post for sure.

1 comment:

  1. Joel

    Thanks for sharing your interpretation of the LINK DSG announcement.

    Keep coming up with the provocative stuff!

    By the way PEiR members have access to AbacusPCR software at a discount; which helps keep the FM costs competitive.