Betting On A New Product
VARs should think long and hard before offering some new products. PMI Imaging, Inc. had to ante up $500,000 to handle Optika Imaging Systems' new eMedia product. The integrator is now ready to make its bet pay off.
Carrying Optika Imaging Systems' new product, eMedia, was a costly decision for integrator PMI Imaging, Inc. However, PMI Imaging President Gary Schwartz knew that going in. For Schwartz's company to carry Optika's new enterprise-wide document management software, the integrator needed to train his existing personnel. He needed to hire several new employees and train them, as well. And PMI Imaging needed to upgrade its internal network. In all, Schwartz estimates the company spent $500,000 in preparing to sell eMedia.
"They say you can't be a little bit pregnant," says Schwartz. "That saying holds true for the document management industry as well. When you take on a new product, you have to be totally committed to making it work. You have to be willing to invest a lot of time and money."
PMI Imaging currently offers document and image management solutions ranging from stand-alone imaging systems to service bureau conversions. The company is headquartered in Mount Laurel, NJ, and has sales offices scattered throughout the East Coast. Despite the half-million-dollar investment in gearing up for eMedia, PMI Imaging is still projecting $22 million in gross sales in 1998. That figure is a $5 million increase from the previous year.
The decision to handle the eMedia product affected almost every one of the 175 employees at PMI Imaging. Taking on the new product required months of research and planning. The decision to tap into a market by offering a new product should not be taken lightly, says Schwartz. You have to know what is expected from your company, and what you can expect from a vendor.
Explore All Your Options
PMI Imaging has been one of Optika's top resellers for the past five years. However, the decision to choose Optika's new eMedia product was not based on loyalty. In fact, Schwartz and Mike Chumley, director of the advanced systems group at PMI Imaging, researched several vendors' products before deciding on Optika. Schwartz recalls demoing two products from Optika competitors, while some of his personnel were simultaneously being trained on eMedia at Optika's headquarters.
"We flew representatives in from two companies to show us their products. Then we spent some time taking their software apart and examining it closely," states Schwartz. "We were getting trained on eMedia and researching other products at the same time. This practice allowed us to make a very informed decision."
According to Schwartz, getting to know the executives of a prospective vendor and feeling comfortable with them is almost as important as the product itself. As a long-time Optika reseller, PMI Imaging had already established a good relationship with the key players at Optika. If he were to take on a new product, he had to "feel good" about the new vendor he would be working with. "There were two vendors I felt very comfortable with and I thought I could work with them. I liked their management team, company direction, and the goals they set for themselves and us," comments Schwartz. In the end, Schwartz determined that he could work, personally and professionally, with Optika and two other companies. At that point, it would come down to which product he determined was best for his company.
Getting The Most From Vendors
As one of Optika's top resellers, PMI Imaging was wooed by several vendors when it decided to carry a new product line. In fact, Optika first announced its plan to develop eMedia; then came an announcement that Optika would no longer support its stand-alone imaging system called FilePower (Optika will stop supporting FilePower in the next 18 to 24 months). That announcement opened the door for competing vendors to recruit some of Optika's resellers. According to Schwartz, luring away Optika resellers has been a main strategy for some vendors.
In the midst of evaluating potential products, several vendors made enticing pitches to PMI Imaging. One vendor offered dedicated personnel to work with PMI Imaging and promised to open a branch office near the integrator. Another vendor promised exclusive-territory rights and exclusive leads for PMI Imaging. Every vendor offered large amounts of co-op money for marketing. "We had vendors make all sorts of promises to us, but not many would put those promises in writing. It would all be done on a handshake basis," recalls Schwartz. "People come and go in a company. The promises get forgotten and what do you have left?" Without a written agreement detailing all promises made by a vendor, PMI Imaging felt Optika was the best choice. The integrator knew what to expect from Optika in terms of support and marketing money. It knew what demands it could place on the vendor, and vice-versa.
Schwartz was clear on what his company wanted from Optika if it were to carry the eMedia product. First, PMI Imaging is expanding its customer base geographically. Schwartz wanted more support as his company grew. Secondly, Optika had to provide PMI Imaging with more quality leads. To explore these leads, PMI Imaging has an employee dedicated to processing Optika leads within 24 hours of receiving that lead from Optika. Lastly, PMI Imaging was able to get increased marketing efforts from Optika.
Optika responded by letting major PMI Imaging customers visit eMedia beta-site installations. The integrator was also able to work alongside Optika technicians at eMedia beta-site installations. Additionally, Optika technicians will work with PMI Imaging technicians on the integrator's first few installations. "Optika did everything it could to make sure we understood the product and could sell and install it," says Mike Chumley. "That's all we wanted. But with some vendors, you don't always get what you want."
Making The Most Of Your Training Dollars
There is more to taking on a new product than just signing on the dotted line with a vendor. PMI Imaging has about 20 technicians who all had to be trained on Optika's new product. The vendor had several two-week training classes that ran throughout 1998.
To upgrade the skills of his technical people, Schwartz sent technicians to the training seminars in groups of two or three. While a couple of technicians were at Colorado Springs, CO, (Optika headquarters), the technicians at PMI Imaging had to pick up extra assignments. PMI Imaging had to pay for the transportation, room, and board for its technicians to attend training classes. In all, the company spent about $75,000 to have its technicians trained.
PMI Imaging learned a valuable lesson from attending the training classes: the first training class was not nearly as effective as the last training class. The training got better each time a new PMI Imaging team attended, according to Chumley. "The initial training was basic. The Optika people didn't know the product that well themselves. We would have been better off waiting until the end of their training classes as opposed to sending our people out for the early sessions," comments Chumley. It was clear to Chumley that each PMI Imaging group learned more than the preceding group. To compensate for this, after each training seminar, PMI Imaging staff would meet and download what they had learned. By sharing the information, all of the PMI staff had the same information.
Handling A New Product Internally
In addition to upgrading its staff, PMI Imaging also had to upgrade its company network to handle eMedia. In fact, PMI Imaging is installing a whole new network just for the new product it will carry. "We're putting in new servers and cabling," says Chumley. "We will be able to use this new network for internal purposes like training, trouble shooting, technical support and in-house demos." The company also wants to have the ability to dial into its network and perform demos from customer sites. To accomplish this, PMI Imaging became its own ISP (Internet service provider). In all, the price tag to upgrade its internal systems was about $50,000.
The Total Cost Of Offering A New Product
Taking on a new product line should not be entered into lightly. Optika believed that only half of its resellers could successfully carry its new product. The other half will not even be trained on eMedia. "When we took this on, we understood that it would be a serious commitment and take a lot of time away from things we were currently working on," states Schwartz. "We had to be able to justify an investment of $500,000. If I were an Optika reseller in South Dakota, my decision might have been different. In that case, I don't know if I could secure enough work to justify the investment."
PMI Imaging has already worked with Optika technicians at two beta sites to successfully install eMedia at two major financial companies, GMAC (PA) and CIT Financial Group (NJ). The integrator budgeted for $9 million in Optika sales this year, but that number was off by 30% at the end of the third quarter. "A lot of our clients are sitting on the fence, waiting to see what eMedia will look like when its done," says Schwartz. Optika released eMedia on September 22, 1998 - only one week behind schedule.
Despite the drop-off in Optika sales, PMI Imaging is still projecting to increase its gross sales by almost 25% in 1998. The company managed this by offering a range of document management services. "Because the eMedia was announced way before the product was completed, we knew that Optika sales would be shaky this year," comments Schwartz. "So, we really geared up to increase sales in all of our other divisions to pick up the slack." Now, eMedia has been released. And PMI Imaging is anxious to start selling the new product. The company laid a lot of money on the table, and it is time to see if it will pay off.