More than just a managed service provider
The announcement that Superstat’s managed services offering Cadabra will cease operations has captured the news this week. They don’t think that outsourcing or managed services is a sustainable model in the OP industry. Even though Office Power is much more than just a managed service provider, we don’t agree that the model doesn’t work and here’s why:
They said:
“The economies of scale associated with back office services such as credit control and customer service are simply not significant enough to provide the benefits for an office supplies dealer”
We think:
- It’s difficult to carve out the unit economics required if the managed service provider is just licensing or re-licensing 3rd party technology. That’s why at Office Power we’ve made a significant investment in developing and building our bespoke technology in-house.
- Without really significant scale the cost efficiencies of centralised services are not great enough if you don’t use really good technology to help create those efficiencies. Our technology comes with over 15 years of continuous optimisation which enables us create those efficiencies.
They said:
“Managed services isn’t a solution that caters effectively for the demands of the dealer in such a challenging industry”
We think:
- It’s not easy! You need to do it to understand it. We believe that the right level of investment as well as the right trading and service experience can help with some of the current challenges in our industry. Office Power is a combination of market leading technology and experienced support team that comes from being one of the largest independent dealers in the market.
They said:
“Superstat will now focus on putting extended investment and resource into its new INsight CRM and email marketing system.”
We think:
- Investment in good web systems and real-time CRM as well as focus on commercial and marketing strategies that sustain loyal and profitable relationships with your customers are really important as long as dealers have the time to manage and implement those. Outsourcing non-specialist functions and using the right technology will free up their time to focus on those.
Partnering, outsourcing and focusing on what you are good at are all key characteristics of successful businesses. Those that hang onto legacy, yesteryear parts of their business models are those most at risk across all industries. Business strategy books are stuffed full of examples of big businesses that fail spectacularly because they don’t modernise or understand changing consumption patterns, such as HMV, Kodak, Blockbuster and many others.
As for Office Power, the significant advantages in terms of buying power, technology and business processes means that dealers who have joined forces with us are enjoying great results:
- 41% Gross Margin on average
- 25% Net Contribution – after all fulfillment, financial and system costs
- 31% of their time released, on average
If you don’t believe us, ask our dealers’ customers. We do so every week and ask them how satisfied they are with their experience. The average customer satisfaction score across all our dealer partners is 92%.
It looks like a sustainable model to us!
P.S. we’re currently conducting research on dealer groups in order to produce a detailed report. If you’re a dealer, please fill in our survey here and we’ll send you a complimentary copy of the report in December.
