Charting a Course Around Copier Lease Agreements
While it might not seem too difficult on the surface — choose a brand, set up a contract, install the equipment — the reality is that managed print networks are complex, and challenges start long before the printers and copiers are in place. Negotiating the right copier lease agreement, for the right pricing structure, with the right technology is one area where many in-plants struggle.
With that in mind, here are a few things to consider before negotiating the next contract.
1. Timing the Terms
It might seem like the brand is the place to start when looking at copier or multifunction device (MFD) contracts, but the reality is that before even getting to that point, the in-plant first needs to think about time —
specifically, how much time is left on current contracts, and how long the next contract should be.
Technology moves fast; every year updates are introduced that improve productivity. For those who lock themselves into long lease terms, however, the technology may be so old by the end of their lease it will be nearly obsolete, and could cause problems with integration down the line.
Having a copier lease that needs to be frequently examined and renegotiated can also be a burden on in-plant management and might not bring any meaningful upgrades. Therefore, a balance must be found.
At the University of Regina, in Regina, Saskatchewan, Ray Konecsni, director of IS Customer Support Services for the university’s Information Services unit, manages a fleet of more than 290 devices across the campus. He has found that a five-year contract seems to work best in terms of keeping up with technology, without burdening his staff or users.
“We’ve been with [Lexmark, through a local dealer] for 10 years now,” says Konecsni. “It was initially a five-year contract, and we went through a process with the vendor at that time and opted to renew. And now the second [renegotiation] has come due, and we have to fish or cut bait.”
Dwayne Magee, director of Messiah College Press & Postal Services, in Mechanicsburg, Pa., has also found that five years is the sweet spot when it comes to finding that balance. He notes that five years ago, he made the decision to go from purchasing the units outright and “running them into the ground” to a managed contract, saving around $50,000 per year, he estimates.
“A lot of our old equipment was outdated and couldn’t be networked,” says Magee. “Putting us into a lease saved a lot of money since I don’t need capital to replace them — we can just sign a new lease every five to six years. We originally signed for a five-year program, and last year we signed for another five years.”
Tip for Negotiation: Do not allow any vendor or dealer to add an auto-renewal clause to the contract. No matter what the time frame is, you will want to examine the contract, how it worked, what could be done differently, and whether or not the technology and services truly met expectations before rolling into a new contract. An auto-renewal clause could trap the in-plant into a copier lease that doesn’t serve the needs or the mission of the organization long-term.
2. Structuring the Request for Proposal
Once a reasonable time frame has been decided upon, the next step isn’t choosing a vendor or dealer — it is putting together a request for proposal (RFP).
Ideally, a minimum of three competing technologies and dealers will be invited to submit proposals for the managed print services, and more should be considered if feasible. That is true if the in-plant is renewing a contract or is looking to move to managed print for the first time. The reality is, needs change and organizations evolve; just because one brand or dealer has worked well in the past doesn’t mean it will continue to do so in the future.
Konecsni notes that he spent between four and six months just developing the RFP, despite being happy with how the Lexmark technology has performed, and with the relationship he has built with both the OEM and dealer.
It took that long to develop his RFP, he notes, because “of all the things you want to put into a contract. This process eliminates some of the options, so we don’t have to assess umpteen million proposals, and then go through the whole response process, waiting process, testing different manufacturers and dealers, etc.”
He is also looking to leverage the buying power he could tap into by entering into a contract alongside a sister university. While he notes they haven’t “signed on the dotted line” for that setup yet, he looked at their master services agreement, which has similar terms to what he was looking for in his own.
“Say I agree to the basics,” explains Konecsni, “I can say ‘here is the number of devices we need.’ The other university had a choice of three manufacturers, where I only contracted with Lexmark. So theoretically, I could tailor our fleet and deploy the best of breed to suit a specific need. I’m not sure that we will do that, but if we go this route, it would enable us to do it.”
One essential part of any contract, notes Magee, is a non-solicitation agreement. “Most vendors don’t just deal with copiers, but want to come in and do production work,” he warns. Make sure there is a structure in place to handle that, so the in-plant doesn’t find itself pushed aside. He notes that as a member of IPMA, he downloaded a non-solicitation agreement the organization keeps on file, and required the vendor to sign it as part of the negotiation process.
Tip for Negotiation: While it might seem like a lot of work, take the time well before the end of a current copier lease to examine the needs of the organization. Is more integration required? How do users access the equipment, and is another method needed? Does it need to tie into a broader workflow, or is the managed print kept separate? The better you understand exactly what your ideal managed print operation looks like, the more detailed your RFP will be, and the better ultimate contract you will be able to negotiate.
3. Structuring the Costs
Perhaps the single biggest element of a managed print contract isn’t the technology but how the copies are billed. Is it a flat rate? A cost-per-page? What happens if the organization exceeds the expected amount of print? What happens if there is less than expected? These are all questions that need to be explicitly laid out in the contract before it gets signed.
Konecsni notes that copier lease agreements can include a lot of hidden costs. “For a dealer or manufacturer,” he notes, “the cost per copy is where the money is made — they are not making any money on the device purchase. So, they will add the cost per page, and then things like administrative overhead for the billing cycle, or a component for replacing service fleet vehicles. They could add deployment costs, project management costs, etc. A potential customer should ask for a thorough breakout of all the costs, not just the toner and parts.”
Part of that process also needs to be getting a firm answer as to whether or not there are minimums the organization must meet each month — if it will be billed for that much print whether it is actually used or not — and what the rates are if the organization exceeds print volume expectations. Do the costs scale? Do the rates go up, or alternatively do they go down on a cost-per-print basis with a greater volume? Are there different rates for color and black-and-white copies?
Also, if rate increase allowances cannot be completely removed from the contract outright, negotiate to keep them as small as possible, and explicitly spelled out. These provisions allow the vendor or dealer to increase the agreed-upon rates without re-negotiation, and could lead to a situation where the lowest-cost contract suddenly becomes one of the highest. Understand up front exactly when and how rate increases can happen, by how much, and whether or not there are automatic timed increases, or if they are based on factors such as usage or volume.
Tip for Negotiation: Most vendors and dealers would much prefer to present a single, flat pricing structure, with perhaps only a few major elements broken out, such as maintenance fees and consumables. Do not accept that contract. Insist on seeing a full itemized breakdown of exactly what the organization will be paying for, and don’t be afraid to negotiate individual elements of the fee structure, rather than just the overall cost-per-piece price.
4. Determine the Necessary Access
“The biggest mistake when we moved into a networked environment where students could print to cloud and then walk up to copier and release,” says Magee, “was that we had Toshiba technology for the black-and-white ePrinters that were a certain size, but for the desktops it was a Lexmark. So, we had different brands of copiers deployed during that first agreement, and had I known that, it would have been a red flag.”
He explains that while staff and students enjoyed being able to send a job to the cloud, and then retrieve it from any device on the network, having multiple brands meant having multiple print drivers, which in turn required that they specify up front which specific machine it would be released from.
“It wasn’t a ‘print anywhere’ situation like we hoped,” he notes. “It was a ‘you have to know where to use it’ situation, which we have since fixed. That was our biggest mistake in the first round.”
His experience highlights the need to determine what kind of access will be required long before choosing a technology. The equipment itself can be fantastic, producing beautiful prints for low costs, but if it is difficult for users to access and use, it will just lead to frustration on all sides. Not only that, but make sure the equipment — and the software driving it — integrates with other systems the organization uses.
For example, will users access print individually, using an ID code? A keycard with an RFID chip? Will the system be department-based, rather than for individual users? Can a job be moved around the system, or only accessed at certain devices based on where it was sent from? Can print jobs be created from mobile devices such as phones or tablets, or must they come from a computer on the organization’s network? Can users with computers off the network, such as in a home office, send jobs to the copier network? Can devices such as USB sticks be used to send jobs to the machines? An argument can be made for — or against — all of these types of access, so knowing up front what the ideal situation would look like is key to ensuring the copier lease truly serves the best interest of the organization.
Tip for Negotiation: Don’t just ask questions about how the job will be sent and accessed by users, but also how those jobs will integrate into the in-plant’s own workflow systems. Even if the managed print operations are kept separate from production print jobs, the ability to track usage on a department, device, and user basis is a critical tool to ensuring the organization’s contract is working as expected. This is the type of information that can be used when the time comes for the next round of negotiation to fine-tune the RFP and better meet the needs of the users. Don’t just rely on a report from a dealer or vendor on volume, uptime, or usage.
5. Choose the Technology
Finally, once all other considerations have been examined and negotiated, it’s time to choose the final product. In most markets, a vendor only has one authorized dealer for the in-plant to go through, which is why this should be the final consideration, not the first. While there are differences between the major brands, the reality is that all of them work in very similar ways, with many of the same options, upgrades, and services available. Locking the organization to a single dealer or technology might mean getting a less favorable contract than could have been obtained elsewhere.
Tip for Negotiation: Some of the larger brands — such as Xerox or Ricoh — will be more expensive, but will also provide much more robust service and maintenance. On the flip side, the lesser-known or smaller brands will have equitable technology, but will likely have service that will be slower, or less comprehensive, though they may be far cheaper overall. While cost is absolutely a major determining factor when all other variables are equal, don’t be afraid to send out RFPs to both the large and small brands. If nothing else, this allows you to stay on top of the trends and pricing structures across the board, which can put you in a better negotiating position on whichever technology you ultimately decide will work best for your organization.
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