Attention Private Equity and Print Industry Investors!
With the failed transition to Managed IT Services, there are rumors that new investors are being solicited to bail out old investors.
It seems the next crazy investment strategy for print dealers is buying Managed IT Services Companies! But unfortunately, the odds are that the companies they will buy are not in a position to help dealers deliver the right profitable strategy.
Investors Run! or, Pay Attention! Before you attempt to pay the bills!
Print dealers purchasing small IT services companies with little business discipline and no means to deliver upstream to organizations willing to pay for five-figure assessments and 10k in minimum monthly recurring services fees will be investing in a disaster.
Instead, investing in the right human capital leaders who understand the technology and compliance needs regarding the higher end of the end-user base you seek makes more sense.
The last 15 years of the industry's attempts at managed services should have proved to all investors that low-end customers are not a scalable, profitable model. It's time the industry's actors write a business plan based on the marketplace reality.
The low end of the Managed IT Services sector is heading into its own significant disruption as major competitive organizations deliver cheaper, faster, and more secure services to those end-users who do not need the help navigating through the complexity and compliance that the higher-end service providers possess.
Those chasing IT services revenue through acquisitions will end up in a most unprofitable place. Cleaning up someone else's mess is more costly than organically building the right deliverable.
Orlando Bravo, the most significant P/E investor in the world, recently said. "Growth at all costs is over." It is time to shift momentum to the fundamentals of profit. Orlando is spot on!
Print dealers buying print dealers is one thing. They can whip out all the costs and push out some profitability. However, dealers buying IT service companies with low-value contracts are buying a mess, not a profitability momentum.
The investors looking to do this should demand that the dealer share why it has yet to work. For example, why is buying an IT services company beneficial over organically building a clearly defined profitable deliverable?
You will find no shortcut through an acquisition process. Those dealers who defined the upper segment of the end-user marketplace would, by default, eliminate the notion of buying an existing MSP with incapable assets and a customer base not acceptable to the upper segment plan.
All investors already or entering the print industry must pay attention to the words of Orlando Bravo. "Growth at all costs is over." It's time to focus on profit.
In 2023, the momentum must be on profitability.
Status quo is the killer of all that will be invented
Ray Stasieczko
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