January 6, 2011 - Konica Minolta Business Solutions U.S.A. announced they have acquired All Covered, Inc., an IT services company that focuses on small and medium size businesses (SMB) across the U.S. All Covered is a 12-year old IT services company with locations in over 20 cities and boasts over 200 engineers. Konica Minolta would not disclose the purchase price during the press call that took place before the public announcement.
All Covered has been on an aggressive growth plan and while the word "organic" was used several times during the call, a great deal of their growth has been through acquisitions. Based on messaging found on their website, they seem to be on an aggressive acquisition path and are actively looking to add additional locations.
So what does this mean for our industry? While Xerox and HP are leveraging acquisitions to support Enterprise customers, Konica Minolta has acquired an IT company that focuses on the SMB market - a market where the majority of customers outsource their IT requirements. While All Covered had not been actively selling hardware in the past, you can be sure that they will be referring their customers to the local KMBS branches in the future, and eventually, working hand in hand with the printer/MFP sales rep.
As far as the KMBS branches are concerned, this is an huge move as they can now offer customers management of their documents, whether electronic or hardcopy as well as the ability to service and support the customer's network, applications, security, etc. Changing IT companies is often much more difficult and daunting compared to changing your brand of copiers when the lease expires so this strategy could lock customers in long-term. Rather than push the hardware, Konica Minolta is hoping the All Covered acquisition will pull it into accounts. And, the MPS opportunity with this acquisition probably has Konica Minolta executives drooling.
According to Konica Minolta Senior Executive and Chief Operating Officer Rick Taylor, "...we intend to deliver unmatched value to our end users and channel partners." Personally, I can see the value to the end user. Most small businesses rely on outsourced IT from companies like All Covered. In fact, we here at IA, Inc. outsource the IT at our headquarters in Rochester NY and from what I understand, when customers like me need a new printer, they often buy what the IT person recommends (although we are fortunate not to have to do this).
But what does this mean for the Konica Minolta dealer? Will they utilize this exciting new service? There is no doubt that there is great potential for this new service Konica Minolta will offer. The big boys currently waging war for Enterprise customers have largely ignored the SMB market and it's ripe for the picking. However, to say dealers are a protective of their customer base is an understatement. In our research, we have found that most dealers are very cautious about identifying their customers to their MFP supplier, particularly with companies that have substantial direct sales operations such as Konica Minolta. In many cases, they just don't trust them. Although Konica Minolta seems to be handling the "rules of engagement" issue better than some competitors, primarily due to the outstanding job Taylor has done in fixing what was once a huge problem, I think they may find their dealers viewing this new service with some hesitation.
The handling of the rules of engagement should prove to Konica Minolta dealers that their accounts will be safe and they are all playing for the same team but in reality, strategies and management change from time to time and once All Covered is in the account, the dealer may find they don't want to share the account. What if they are dual line dealers and want to place non-Konica Minolta equipment? What if they drop the Konica Minolta brand altogether? Dealers could potentially have to battle their own incumbent brand and that's when things can get messy.
Another speed bump in this marriage is the fact that Konica Minolta, in our opinion, does not have as strong an A4 portfolio as many competitors. This will eventually change but for the immediate future, I'd wager that Konica Minolta might sell more HP printers through All Covered than they do bizhubs.
Without considering the amount Konica Minolta had to pay for this company, the bottom line is that this is a great acquisition. Konica Minolta has an extensive branch channel and All Covered appears positioned for considerable growth to new markets. This could lead to a nice boost in bizhub sales, for both A3 (console) and A4 (desktop) products and with the loss of Océ, Konica Minolta had likely felt the need to replace that channel.
Key areas that need to be addressed are; filling in the A4 portfolio and creating a business model where the dealers feel comfortable using this valuable service. Konica Minolta's dealer council will likely have a strong role in making this work for the dealer channel but until that occurs, dealers will likely take a wait and see approach. There is a lot of potential here but at the moment, Konica Minolta has a lot of work to do to make this a success.
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