The state of the channel
In many ways the document systems channel is no different from the high-technology channel in general. Companies come and go. Profits are often stretched. Huge bluebird or windfall contracts can inject new life in an old practice, and technology trends frequently isolate integrators and resellers on the path of self-destruction. The business can become a treadmill with the cliff at the end firmly in sight, and no way to get off.
Yet despite the wild swings and chaotic trend lines, the computer services sector (SIC code 737) is a thriving and powerful part of the national economy accounting for more than $100 billion in high-technology goods and services. In short, it is statistically easier to find a technology integrator than a supermarket.
Obviously the national trends affecting the computer services economy also affect the world of document systems resellers and integrators. There are, however, some important differences. First and foremost, the learning curve to get into this industry is steep--not because of the technical issues involved in document systems (which, of course, are fundamentally different from other technologies), but because success in document systems requires a fundamental rethink of the integrator and reseller business paradigm. You need to learn a whole new set of tricks.
That is good news for companies that have built a successful practice. They rest comfortably in the knowledge that competitors aren't as common as supermarkets. That allows many successful integrators to work on a national basis, rather than strictly in their immediate geography. A Los Angeles-based integrator like Hershey Business Systems (www.hershey.com) can bring its experience and know-how to bear in Virginia.
There are basically three classes: integrators, resellers and new entrants. While we use the words "reseller" and "integrator" interchangeably, they actually refer to two different breeds of animal. In the document systems market, there really is no such thing as a reseller, also called a manufacturer's representative. To survive and grow, integrators in document systems have had to develop a range of expertise in consulting, technical integration and solutions design that in many ways mimic the Big Six, sans their dollars and deepness of the bench.
The document systems channel really consists of only integrators and new entrants. Integrators come in two flavors--those with a network of contacts, inside rails and good old boy networks extending right into the boardroom, and those who have to work for a living. The irony is that many smaller integrators have the expertise to handle a complex system in a large multinational organization, but they don't have the resources or the connections to get the deal or manage a business on that scale. Obviously, big and small integrators view each other with equal levels of disdain. The big guys like to call the little guys polyester-suited "resellers" in white patent leather shoes (schleppers in Yiddish), and the little guys like to call the big guys Armani "empty-suited" crooks (pimps in Yiddish).
The number of new entrants has slowed to nothing more than a trickle. In the Rheinner Group's opinion, that is largely because manufacturers in our industry know little about business-to-business relationships. The fact that it takes two to tango is lost on much of the management of document systems manufacturers. It's my way or the highway as the saying goes. Equally to blame, however, are integrators who view the manufacturer as a source of infinite nourishment, money and resources. In short, both sides have unrealistic expectations of the other.
The fact that so many have built successful business, achieved profitable growth and developed a comprehensive knowledge base also increases the potential of consolidation. Because the multimillion-dollar deals are still only within the reach of the big guys, some of the smaller guys have made the logical business decision that they need to acquire other smaller guys to make themselves bigger and smarter. Judge Group (www.judge.com), of course, is noteworthy in that regard (and many others). On the other side of the coin, businesses that have already done that in the past and are now giants are doing the same thing in this industry. IKON (www.ikon.com) is noteworthy here.
In summary, competition is minimal and growth has achieved a steady pace (15% to 20% per annum). Unfortunately the breakthrough to higher growth rates has not been achieved, but is not an entirely elusive goal. The ability to manage documents as the brain trust of the corporate knowledge psyche is still a no-brainer application, and will always be a no-brainer. The underpinnings of adoption depend firmly on the consumer's ability to technically, operationally and confidently adopt this set of technologies. Unfortunately the vast majority has none of those abilities. Customers are still fundamentally unprepared to tackle the entire genre of information processing. The fundamental truth is that managing documents is not the same as managing data. Just as an airplane mechanic lacks the tools and the knowledge to fix a car, much of the technical infrastructure of technology consumers lacks the tools and knowledge to manage documents. Until the industry provides some real tools for evaluation, assessment, education and measuring success, the barriers to adoption will stay firmly in place.